Entity information:
Income Taxes
Income or loss before provision for income tax consists of the following (in thousands):
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Domestic
 
$
(8,078
)
 
$
28,536

 
$
65,445

International
 
(50,987
)
 
3,773

 
54

Total income (loss) before provision for income taxes
 
$
(59,065
)
 
$
32,309

 
$
65,499


The components of the provision for income taxes are as follows (in thousands):
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Current:
 
 
 
 
 
 
Federal
 
$
3,886

 
$
(12,400
)
 
$
(23,456
)
State
 
207

 
(4,038
)
 
(2,790
)
Foreign
 
(9,743
)
 
(11,097
)
 
(12,406
)
Total current provision for income taxes
 
(5,650
)
 
(27,535
)
 
(38,652
)
Deferred:
 
 
 
 
 
 
Federal
 
(15,354
)
 
11,596

 
12,022

State
 
238

 
1,097

 
553

Foreign
 
688

 
768

 
—

Total deferred benefit (expense) for income taxes
 
(14,428
)
 
13,461

 
12,575

Total provision for income taxes
 
$
(20,078
)
 
$
(14,074
)
 
$
(26,077
)


Net deferred tax assets consist of the following (in thousands):
 
 
December 31,
 
 
2017
 
2016
Deferred tax assets:
 
 
 
 
Deferred revenue
 
$
2,687

 
$
1,843

Reserves and other
 
4,016

 
6,292

Stock-based compensation
 
2,643

 
5,682

Depreciation and amortization
 
10,516

 
14,050

Net operating loss carryforwards
 
1,768

 
7,246

Foreign tax credits
 
1,095

 
—

Total deferred tax assets
 
22,725

 
35,113

Valuation allowance
 
(2,810
)
 
(875
)
Net deferred tax assets
 
$
19,915

 
$
34,238



The following is a reconciliation of the statutory federal income tax to the Company’s effective tax (in thousands):
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Tax at statutory federal rate
 
$
(20,673
)
 
$
11,307

 
$
22,939

State tax – net of federal benefit
 
(1,649
)
 
1,674

 
1,459

Permanent differences
 
6,138

 
1,000

 
663

Foreign tax
 
27,164

 
8,969

 
12,370

Foreign tax credits
 
(7,571
)
 
(9,191
)
 
(12,370
)
Foreign income not taxed at federal rate
 
—

 
—

 
3

Change in valuation allowance
 
2,944

 
(222
)
 
1,097

Rate differential impact from Tax Cuts and Jobs Act
 
14,557

 
—

 
—

Other
 
(832
)
 
537

 
(84
)
Total provision for income taxes
 
$
20,078

 
$
14,074

 
$
26,077


As of December 31, 2017, the Company had federal and state capital loss carryforwards of $6.5 million available to reduce future taxable income which expire in 2020 if not utilized. As of December 31, 2017, the Company had federal and state net operating loss carryforwards of $18.9 million which will begin to expire in 2023 if not utilized. The utilization of these carryforwards may be limited if there are certain changes in the Company's ownership.

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law. Among other changes is a permanent reduction in the federal corporate income tax rate from 35% to 21% effective January 1, 2018. As a result of the reduction in the corporate income tax rate, the Company was required to remeasure its net deferred tax asset as of December 31, 2017, which resulted in a reduction in the deferred tax asset value of approximately $14.4 million, offset by a change in valuation allowance of $1.0 million, which resulted in a deferred tax expense of $13.4 million.

In transitioning to the new territorial tax system, the Tax Cuts and Jobs Act requires the Company to include certain untaxed foreign earnings of non-U.S. subsidiaries in its taxable income for the year ended December 31, 2017. Such foreign earnings are subject to a one-time transition tax, which was estimated to be $1.1 million as of December 31, 2017, and was recorded within the Company’s provision for income taxes for the year ended December 31, 2017. The Company intends to elect to pay the transition tax over a period of eight years as permitted by the Tax Cuts and Jobs Act.

In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allows the Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Due to the Company’s ongoing analysis and expected guidance and accounting interpretations over the next 12 months, the accounting of the transition tax and net deferred tax asset remeasurements are considered provisional. The Company expects to complete its analysis within the measurement period in accordance with SAB 118.

In assessing the realization of deferred tax assets, the Company considers whether it is more-likely-than-not that some portion or all of deferred assets will not be realized. The ultimate realization of the deferred tax asset is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based on the available objective evidence as of December 31, 2017, the Company believes it is not more-likely-than-not that the net deferred tax asset related to certain capital losses and foreign tax credits will be fully realized. The Company's valuation allowance (excluding the impact of the Tax Cuts and Jobs Act as discussed above) increased by $1.9 million during the year ended December 31, 2017 due to additional capital losses and foreign tax credits in 2017 which the Company does not expect to be realized.

Internal Revenue Code Section 382 places a limitation (the Section 382 Limitation) on the amount of taxable income that can be offset by net operating loss carryforwards after a change in control (generally greater than 50% change in ownership) of a loss corporation. California has similar rules. Generally, after a change in control, a loss corporation cannot deduct operating loss carryforwards in excess of the Section 382 Limitation. The Company has considered the impact of such limitation in determining the utilization of its operating loss carryforwards against taxable income in future periods.

Deferred tax liabilities have not been recognized for undistributed earnings for foreign subsidiaries because it is the Company's intention to indefinitely reinvest such undistributed earnings outside the U.S. Generally, such earnings are subject to potential foreign withholding tax and the U.S. tax upon remittance of dividends and under certain other circumstances. The Company believes that the potential liability would not be material.

Uncertain Tax Positions
As of December 31, 2017, the Company’s total amount of unrecognized tax benefits was $7.7 million, all of which would impact the Company’s effective tax rate, if recognized.
The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):
 
 
2017
 
2016
 
2015
Balance as of January 1,
 
$
8,300

 
$
5,315

 
$
3,707

Gross increase related to current period tax positions
 
597

 
1,567

 
1,606

Gross increase related to prior period tax positions
 
—

 
1,841

 
2

Gross decrease related to prior period tax positions
 
(1,236
)
 
(423
)
 
—

Balance as of December 31,
 
$
7,661

 
$
8,300

 
$
5,315


The Company does not believe it is reasonably possible that its unrecognized tax benefits will materially change within the next twelve months.
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. During the years ended December 31, 2017, 2016 and 2015, the Company recognized $0.1 million, $0.6 million, and $0.4 million, respectively, of interest and penalties associated with unrecognized tax benefits.

The 2013 through 2017 tax periods are open to examination by the Internal Revenue Service and the 2013 through 2017 tax periods remain open to examination by most state tax authorities. The Internal Revenue Service's examination of Inventus's federal income tax return for fiscal year 2013 was closed during the three months ended March 31, 2017 with no material adjustments. The Company's 2015 through 2016 tax periods remain open to examination in the United Kingdom.