7. Income Taxes

For income tax purposes, the domestic and foreign components of income (loss) before income tax were as follows (in thousands):

The provision for income taxes consisted of the following (in thousands):

As of December 31, 2017 and 2016, income tax payable was $2.1 million and $0.7 million, respectively, and was recorded in accrued liabilities in the consolidated balance sheets.

The provision for income taxes shown above varied from the “expected” U.S. statutory federal income tax rate for those periods as follows:

The effective tax rate for the year ended December 31, 2017 reflects an income tax benefit for the release of an uncertain tax position.

Deferred income tax assets and liabilities are composed of the following (in thousands):

As of December 31, 2017, the Company estimated $92.8 million, $58.1 million and $49.9 million of federal, state and foreign net operating loss carryforwards, respectively. As of December 31, 2016, the Company estimated $80.0 million, $20.2 million and $57.1 million of federal, state and foreign net operating loss carryforwards, respectively. The federal loss carryforwards will begin to expire in 2028. The state loss carryforwards began expiring at various times in 2017. The foreign loss carryforwards of $30.6 million, in the aggregate, for Trinidad, Chile, Peru and the United Kingdom do not expire. The remaining foreign loss carryforwards will begin to expire in 2018.

Utilization of net operating loss carryforwards may be subject to annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such annual limitations could result in the expiration of the net operating loss carryforwards before their utilization. The events that may cause ownership change include, but are not limited to, a cumulative stock ownership change of greater than 50% over a three‑year period. Also, net operating loss and credit carryforwards of one subsidiary are not currently available to offset income generated by another subsidiary, which will affect the future benefit from and utilization of these carryforwards.

As of December 31, 2017, the Company had approximately $47.6 million of undistributed earnings. These earnings are either (i) not available for distribution due to outstanding payables, which will be paid down first, (ii) indefinitely reinvested to grow the business in the current jurisdiction or (iii) if distributed, will not incur taxes as the earnings are in non-taxing jurisdictions.  If in the future this income is repatriated or if the Company determines that the earnings will be remitted in the foreseeable future, additional tax provisions may be required. Management believes the amount of unrecognized deferred income tax liabilities on the undistributed earnings is immaterial.

On December 22, 2017, the United States enacted tax reform legislation known as the H.R. 1, commonly referred to as the “Tax Cuts and Jobs Act” (“TCJ Act”), resulting in significant modifications to existing law. Among other changes, the TCJ Act permanently lowers the corporate federal income tax rate to 21% from the existing maximum rate of 35% effective for tax years beginning after December 31, 2017. As a result of the reduction of the corporate federal income tax rate, we revalued our net deferred tax assets and recorded an income tax expense of approximately $7.9 million in the affected jurisdictions as of December 31, 2017. In addition, we recorded an $8.0 million income tax benefit for a corresponding reduction in the valuation allowance on the net deferred tax assets that were subject to the revaluation. For the year ended December 31, 2017, the Company recorded an estimated income tax benefit of approximately $0.1 million, subject to adjustment during the measurement period, related to the TCJ Act. The other provisions of the TCJ Act are not expected to have a material impact on the consolidated financial statements.

GAAP requires a valuation allowance to reduce the deferred income tax assets recorded if, based on the weight of the evidence, it is more likely than not, that some portion or all of the deferred income tax assets will not be realized. After consideration of all the evidence, the Company has determined that a valuation allowance of approximately $20.9 million and $19.3 million is necessary at December 31, 2017 and 2016, respectively. The Company recognized a net increase in the valuation allowance, inclusive of the impacts of the TCJ Act as noted preciously, of $1.1 million during the year ended December 31, 2017.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal assessments by tax authorities for years before 2014 and state and local and non-U.S. income tax examinations by tax authorities before 2012. To the extent net operating loss carryforwards are utilized, the tax years in which those net operating loss carryforwards were generated may be subject to adjustment by tax authorities during the examination of a tax return in which those net operating loss carryforwards are utilized.

Uncertain Income Tax Positions

GAAP requires the evaluation of tax positions taken or expected to be taken in the course of preparing tax returns to determine whether the tax positions are “more likely than not” to be sustained by the Company upon challenge by the applicable tax authority. Tax positions not deemed to meet the “more likely than not” threshold and that would result in a tax benefit or expense to the Company would be recorded as a tax benefit or expense in the current period. The Company’s policy on its classification of interest and penalties on any unrecognized tax benefits is to recognize the interest and penalties as a component of income tax expense or benefit. As of December 31, 2017, the amount of unrecognized tax benefit that would impact the effective tax rate, if recognized, is $0.1 million. As of December 31, 2017, the amount of accrued penalties and interest was $0.2 million. As of December 31, 2016 and 2015, management believed that were no uncertain tax positions. The Company does not expect any significant changes to its uncertain tax positions in the next 12 months.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the year ended December 31, 2017 is as follows (in thousands):