Entity information:
Income Taxes
Our loss before income taxes consists of the following:
 
Years Ended December 31,
 
2017
 
2016
 
2015
(Loss) income before income taxes:
 
 
 
 
 
United States
$
(8,963
)
 
$
(74,130
)
 
$
(24,105
)
Foreign
1,759

 
808

 
420

 
$
(7,204
)
 
$
(73,322
)
 
$
(23,685
)

The components of the provision for income taxes are as follows:
 
Years Ended December 31,
 
2017
 
2016
 
2015
Current:
 
 
 
 
 
Federal
$
—

 
$
—

 
$
—

State
40

 
103

 
103

Foreign
711

 
330

 
210

Total current
751

 
433

 
313

Deferred:
 
 
 
 
 
Federal
(34
)
 
15

 
17

State
3

 
—

 
—

Foreign
(294
)
 
155

 
(63
)
Total deferred
(325
)
 
170

 
(46
)
Total provision
$
426

 
$
603

 
$
267


A reconciliation of the U.S. federal statutory rate to our effective income tax rate is shown in the table below:
 
Years Ended December 31,
 
2017
 
2016
 
2015
 
Amount
 
Percent
 
Amount
 
Percent
 
Amount
 
Percent
U.S. federal statutory tax rate
$
(2,521
)
 
35.0
 %
 
$
(25,663
)
 
35.0
 %
 
$
(8,290
)
 
35.0
 %
Valuation allowance
(30,938
)
 
429.5
 %
 
23,184

 
(31.6
)%
 
3,821

 
(16.0
)%
Foreign income taxes
(179
)
 
2.5
 %
 
338

 
(0.5
)%
 
86

 
(0.5
)%
State income taxes
90

 
(1.2
)%
 
100

 
(0.2
)%
 
92

 
(0.5
)%
Non-deductible expenses
149

 
(2.1
)%
 
323

 
(0.4
)%
 
552

 
(2.0
)%
Uncertain tax positions
(20
)
 
0.3
 %
 
(136
)
 
0.2
 %
 
(86
)
 
—
 %
Non-deductible officer compensation
638

 
(8.9
)%
 
—

 
—
 %
 
—

 
—
 %
Share-based compensation
873

 
(12.1
)%
 
2,439

 
(3.3
)%
 
4,064

 
(17.0
)%
Federal rate change impact
32,415

 
(450.0
)%
 
—

 
—
 %
 
—

 
—
 %
Other
(81
)
 
1.1
 %
 
18

 
—
 %
 
28

 
—
 %
Provision for income taxes
$
426

 
(5.9
)%
 
$
603

 
(0.8
)%
 
$
267

 
(1.0
)%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purpose. Significant components of our deferred tax assets and liabilities are as follows:
 
December 31,
 
2017
 
2016
Deferred tax assets:
 
 
 
Share-based compensation
$
6,047

 
$
10,463

Net operating loss and tax credit carry-forwards
43,543

 
52,798

Legal settlement
6,738

 
17,151

Deferred revenue
1,084

 
878

Accounts receivable reserves
224

 
235

Fixed assets
2,222

 
3,317

Other
311

 
771

Total deferred tax assets
60,169

 
85,613

Deferred tax liabilities:
 
 
 
Prepaid expenses
(81
)
 
(112
)
Other
(8
)
 
(323
)
Total deferred tax liabilities
(89
)
 
(435
)
Valuation allowance
(58,718
)
 
(84,226
)
Net deferred tax assets
$
1,362

 
$
952


In addition to the deferred tax assets listed in the table above, we have unrecorded tax benefits of $13,860 at December 31, 2016 primarily attributable to the difference between the amount of the financial statement expense and the allowable tax deduction associated with employee stock options and RSUs. As a result of net operating loss (NOL) carryforwards, we were not able to recognize the excess tax benefits of stock option deductions prior to the adoption of ASU 2016-09 on January 1, 2017 because the deductions did not reduce income tax payable. Although not recognized for financial reporting purposes prior to January 1, 2017, this unrecorded tax benefit is available to reduce future income and is incorporated into the disclosed amounts of our federal and state NOL carryforwards, discussed below.
The federal and state NOL carryforwards relate to prior years’ NOLs, which may be used to reduce tax liabilities in future years. At December 31, 2017, we had $176,000 federal and $115,500 state NOL carryforwards, including the NOLs discussed in the preceding paragraph. Our federal NOL will begin to expire in 2027 and the state NOL carryforwards will begin to expire in 2019. Pursuant to Sections 382 and 383 of the Internal Revenue Code, the utilization of NOLs and other tax attributes may be subject to substantial limitations if certain ownership changes occur during a three-year testing period (as defined by the Internal Revenue Code). We did not have any state tax credit carryforwards as of December 31, 2017.
We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the evidence available, it is more-likely-than-not that such assets will not be realized. In making the assessment under the more-likely-than-not standard, appropriate consideration must be given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods by jurisdiction, unitary versus stand-alone state tax filings, our experience with loss carryforwards not expiring unutilized, and all tax planning alternatives that may be available.
A valuation allowance has been recorded against our deferred tax assets, with the exception of deferred tax assets at certain foreign subsidiaries as management cannot conclude that it is more-likely-than-not that these assets will be realized. As of December 31, 2017, no valuation allowance was provided on $1,600 of deferred tax assets associated with certain NOLs because it was believed that they will be used to offset our liabilities relating to our uncertain tax positions.
Estimated liabilities for unrecognized tax benefits are included in “other liabilities” on the consolidated balance sheet. These contingent liabilities relate to various tax matters that result from uncertainties in the application of complex income tax regulations in the numerous jurisdictions in which we operate. As of December 31, 2017, unrecognized tax benefits were $1,817, of which approximately $220, if recognized, would favorably impact the effective tax rate and the remaining balance would be substantially offset by valuation allowances.
A summary of the activities associated with our reserve for unrecognized tax benefits, interest and penalties follow:
 
Unrecognized
Tax Benefits
Balance at January 1, 2016
$
1,968

Additions for tax positions related to current year
—

Additions for tax positions related to prior years
—

Settlements
—

Adjustment related to foreign currency translation
(7
)
Reductions related to the lapse of applicable statute of limitations
(131
)
Reduction for tax positions of prior years
—

Balance at December 31, 2016
1,830

Additions for tax positions related to current year
—

Additions for tax positions related to prior years
26

Settlements
—

Adjustment related to foreign currency translation
3

Reductions related to the lapse of applicable statute of limitations
(42
)
Reduction for tax positions of prior years
—

Balance at December 31, 2017
$
1,817


We recognize interest and penalties related to unrecognized tax benefits in our tax provision. As of December 31, 2017, we had an interest and penalties accrual related to unrecognized tax benefits of $12, which decreased during 2017 by $4. We anticipate our unrecognized tax benefits may increase or decrease within twelve months of the reporting date, as audits or reviews are initiated or settled and as a result of settled potential tax liabilities in certain foreign jurisdictions. It is not currently reasonably possible to estimate the range of change.
We file income tax returns in jurisdictions with varying statues of limitations. Tax years 2014 through 2016 remain subject to examination by federal tax authorities. Tax years 2013 through 2016 generally remain subject to examination by state tax authorities. As of December 31, 2017, we are not under any federal or state income tax examinations.
On December 22, 2017, the Tax Cuts and Jobs Act (the Tax Act) significantly revised the U.S. corporate income tax law, by among other things, reducing the corporate income tax rate to 21% for tax years beginning in 2018, implementing a modified territorial system that includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries and creating new taxes on certain foreign sourced earnings.
Also on December 22, 2017, The Securities and Exchange Commission staff issued Staff Accounting Bulletin (SAB) 118 to provide guidance for companies that are not able to complete their accounting for the income tax effects of the Tax Act in the period of enactment. SAB 118 provides for a measurement period of up to one year from the date of enactment. During the measurement period, companies need to reflect adjustments to any provisional amounts if it obtains, prepares or analyzes additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts.
At December 31, 2017 we have not yet completed our analysis of the Tax Act; however, in certain circumstances, as described below, we have made a reasonable estimate of the effects of the Tax Act.
Provisional Amounts
Income tax expense for the year ending December 31, 2017 includes a $41 tax benefit related to the re-measurement of a deferred tax liability on a long-lived asset. The remaining impact from the re-measurement of our net U.S. deferred tax asset at the lower 21% rate was offset by the valuation allowance.
The one-time transition tax is based on our total post-1986 earnings and profits (E&P) that we previously deferred from U.S. income taxes. We recorded a provisional amount for our one-time transition tax liability for all of our foreign subsidiaries. The transition tax that we calculated resulted in an immaterial amount of additional federal taxable income. The additional taxable income from the transition tax was offset by NOLs and did not result in cash taxes payable.
No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis differences inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed earnings not subject to the transition tax and additional outside basis difference in these entities (i.e. basis difference in excess of that subject to the one-time transition tax) is not practicable.
The tax provision incorporates assumptions made based upon the Company’s current interpretation of the Tax Act, and may change as we receive additional clarification and implementation guidance and as the interpretation of the Tax Act evolves over time.
The Tax Act contains several base broadening provisions that became effective on January 1, 2018 that we do not expect to have a material impact on future earnings due to our NOL and valuation allowance position. Also effective for 2018 is a new Global Intangible Low-Taxed Income inclusion (GILTI). We do not expect the GILTI to have a material impact on future earnings due to our NOL and valuation allowance position. We will account for the effects of the GILTI in the period we become subject to its provisions.