8.Income taxes

United States and foreign income (loss) before income taxes was as follows (in thousands):

 

The provision for income taxes was as follows (in thousands):

 

The tax provision for the noncontrolling interest was $0 in 2015; therefore, no tax benefit or expense was allocated to the net loss attributable to noncontrolling interest.

The reconciliations of the U.S. federal statutory tax expense to the combined effective tax provision are as follows:

Significant components of the Company’s net deferred tax assets at December 31, 2017 and 2016 are as follows (in thousands):

Based on the weight of available evidence, management has established a valuation allowance for all of the deferred tax assets, with the exception of known refundable federal credits, as it is more likely than not that the deferred tax assets will not be realized. The net change in the valuation allowance was $(6.6) million in 2017.

At December 31, 2017, the Company had approximately $125.7 million, $94.2 million and $18.0 million of net operating loss carryforwards for federal, state and foreign purposes, respectively, available to offset future taxable income. The federal and state net operating loss carryforwards begin to expire in 2018 and 2028, respectively. The tax losses in foreign jurisdictions, if not utilized sooner, will begin to expire no earlier than 2023.

At December 31, 2017, the Company had federal and state research and development credit carryforwards of $7.5 million and $7.0 million, respectively, which begin to expire in 2021 for federal purposes and carry over indefinitely for state purposes.

Utilization of the net operating loss and tax credit carryforwards will be subject to annual limitations under Sections 382 and 383 of the Internal Revenue Code of 1986 and similar state provisions due to several ownership changes that have occurred previously or that could occur in the future. These ownership changes will limit the amount of net operating loss and tax credit carryforwards and other deferred tax assets that can be utilized to offset future taxable income and tax. In general, all ownership changes as defined by IRC Section 382 result from transactions increasing ownership of certain stockholders in the stock of the Company by more than 50 percentage points over a three‑year period. An analysis was performed by the Company which indicated that several ownership changes have occurred in previous years which created annual limitations on the Company’s ability to utilize net operating loss and tax credit carryforwards. Such limitations will result in approximately $0.1 million of tax benefits related to net operating loss and tax credit carryforwards that will expire unused. Accordingly, the related net operating loss and tax credit carryforwards have been removed from deferred tax assets accompanied by a corresponding reduction in the valuation allowance. The Company has not, however, conducted a IRC Section 382 study for any periods subsequent to December 31, 2009 and as such, the Company cannot provide any assurance that a change in ownership within the meaning of IRC has not occurred since that date.  Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company’s effective tax rate.

The Company considers all earnings and profits of its foreign subsidiaries to be indefinitely reinvested. Due to losses incurred, there are no unrecorded income taxes associated with unrepatriated foreign earnings as of December 31, 2017.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for 2017, 2016 and 2015, excluding interest and penalties, is as follows (in thousands):

As of December 31, 2017, there would be no impact on the effective tax rate if the uncertain tax benefits were recognized.

The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. There was no accrued interest and penalties associated with uncertain tax positions as of December 31, 2017, 2016 and 2015. It is not anticipated that there will be a significant change in the unrecognized tax benefits over the next 12 months.

Due to the Company’s net operating loss carryforwards, its federal, state and foreign income tax returns are open to examination by the Internal Revenue Service and state jurisdictions for all years since inception.

The Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. Among other changes, the Act reduces the US federal corporate tax rate from 34 percent to 21 percent. In accordance with Staff Accounting Bulletin 118, as of December 31, 2017, the Company has not completed the accounting for the tax effects of enactment of the Act; however, in certain cases, as described below, the Company has made a reasonable estimate of the effects on the existing deferred tax balances. In all cases, the Company will continue to make and refine calculations as additional analysis is completed. In addition, estimates may also be affected as the Company gains a more thorough understanding of the Act.

The Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, the Company is still analyzing certain aspects of the Act and refining calculations, which could potentially affect the measurement of these balances or give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of the deferred tax balance was $25.2 million, which was fully offset by a decrease in the valuation allowance.

Due to uncertainties which currently exist in the interpretation of the provisions of the Act regarding Internal Revenue Code Section 162(m), the Company has not evaluated the potential impacts of IRC Section 162(m) as amended by the Act in its consolidated financial statements.