NOL”) carryforwards, for financial and tax reporting. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than that the asset will be realized.

December 22, 2017,

and carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from the current maximum rate of to for tax years beginning after As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities and the valuation allowance existing as of from the federal rate for Nuvectra in effect through the end of to the new statutory federal rate. As a result of the change in law, the Company recorded a decrease in its deferred tax assets of  million and a corresponding decrease in its valuation allowance.

$72.2

$29.0

ating losses that could be used to offset taxable income in future periods and reduce its income taxes payable in those future periods. In addition, the Company has approximately thousand of federal research and development tax credit carryforwards. Many of these net operating loss carryforwards and the federal research and development tax credits will expire if they are used within certain periods.

’s current and past performance, the market environment in which the Company operates, the utilization of past tax credits, length of carry back and carry forward periods, existing contracts or sales backlog that will result in future profits, as well as other factors, to determine whether, based on the weight of that evidence, a valuation allowance is needed for some portion or all of a net deferred income tax asset. Judgment is used in considering the relative impact of negative and positive evidence. In arriving at these judgments, the weight given to the potential effect of negative and positive evidence is commensurate with the extent to which such evidence can be objectively verified. In evaluating the objective evidence and the need for a valuation allowance, the Company considered the past years of cumulative operating losses.

not

not

As such, the Company has provided a full valuation allowance on the net deferred income tax assets as of and Until an appropriate level of profitability is sustained, the Company expects to continue to record a full valuation allowance on future tax benefits.

December

  the gross amount of unrecognized tax benefits was  thousand, this amount would impact our effective tax rate, if recognized due to the full valuation allowance on our deferred tax assets. Under ASC --- the unrecognized tax benefit is presented in the financial statements as a reduction to a deferred tax asset and liability is recorded. We classify interest and penalties as a component of income tax expense.

December 31, 2017

December 30, 2016,

benefits is as follows (in thousands):

no

Generally, the Company is longer subject to examination for years before

two

ing the date of the spin-off, the Company will be prohibited from (i) causing or permitting to occur any transaction or series of transactions, subject to certain exceptions provided under the U.S. federal income tax rules, in connection with which or more persons would (directly or indirectly) acquire an interest in its capital stock that, when combined with any other acquisition of an interest in its capital stock that occurs after the spin-off, comprises or more of the value or the total combined voting power of all interests that are treated as outstanding equity of Nuvectra for U.S. federal income tax purposes immediately after such transaction or, in the case of a series of related transactions, immediately after any transaction in such series; (ii) transferring, selling or otherwise disposing of or more of its gross assets if such transfer, sale or other disposition would violate the IRS’ rules and regulations; (iii) liquidating its business or (iv) ceasing to maintain its active business. If the Company takes any of these actions and such actions result in tax-related costs for Integer, then the Company would generally be required to indemnify Integer for such costs. On we will longer be prohibited under the terms of the tax matters agreement with Integer from raising additional funds.