Entity information:
Income taxes
On December 22, 2017, H.R.1, informally known as the Tax Cuts and Jobs Act (“Tax Legislation”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a reduction of the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018. The Tax Legislation also imposes a one-time transition tax on previously deferred foreign earnings. For the year ended December 31, 2017, the enactment of the Tax Legislation resulted in a one-time non-cash tax benefit of $11.6 million related to the re-measurement of U.S. deferred tax liabilities at the lower enacted corporate tax rate. The Company is not materially impacted by the one-time transition tax as most of its foreign earnings and profits have already been subject to U.S. taxation in prior years.
The components of income before provision for income taxes are as follows (in thousands):
 
Year ended December 31,
 
2017
 
2016
 
2015
Domestic
$
22,409

 
$
9,677

 
$
8,053

Foreign
60

 
135

 
625

Total
$
22,469

 
$
9,812

 
$
8,678


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

 
 

 
 
U.S. federal
$
(2,058
)
 
$
(9,978
)
 
$
(6,837
)
State
(369
)
 
(2,096
)
 
(1,026
)
Foreign
—

 
—

 
(391
)
Total current
(2,427
)
 
(12,074
)
 
(8,254
)
Deferred:
 

 
 

 
 
U.S. federal
13,246

 
8,384

 
3,710

State
(21
)
 
(773
)
 
201

Foreign
208

 
(36
)
 
22

Total deferred
13,433

 
7,575

 
3,933

Total (provision) benefit for income taxes
$
11,006

 
$
(4,499
)
 
$
(4,321
)

The following table presents a reconciliation of the federal statutory rate to the Company’s effective tax rate:
 
Year ended December 31,
 
2017
 
2016
 
2015
Federal statutory rate
35.0
 %
 
35.0
 %
 
35.0
%
Federal tax deferred rate change
(53.8
)%
 
—
 %
 
—
%
State tax, net of federal benefit
0.6
 %
 
0.7
 %
 
2.2
%
State tax deferred rate change, net of federal benefit
0.9
 %
 
18.7
 %
 
0.3
%
U.S. subpart F income
0.1
 %
 
0.5
 %
 
2.5
%
Nondeductible transaction-related costs
—
 %
 
2.0
 %
 
—
%
Uncertain tax positions
(1.7
)%
 
2.0
 %
 
5.3
%
Stock based compensation
(28.1
)%
 
(16.8
)%
 
0.6
%
Others
(2.0
)%
 
3.8
 %
 
3.9
%
Effective tax rate
(49.0
)%
 
45.9
 %
 
49.8
%

The components of net deferred taxes arising from temporary differences are as follows (in thousands):
 
December 31, 2017
 
December 31, 2016
Deferred tax assets:
 
 
 
Compensation
$
1,056

 
$
1,848

Inventories and receivables
2,965

 
6,905

Accrued expenses
663

 
1,996

Stock compensation
3,497

 
1,967

Net operating losses
210

 
232

Other
925

 
1,304

Deferred tax assets
9,316

 
14,252

Deferred tax liabilities:
 
 
 
Goodwill
2,214

 
2,562

Fixed assets
1,923

 
2,699

Intangible assets
25,962

 
42,587

Other
313

 
579

Deferred tax liabilities
30,412

 
48,427

Net deferred tax liabilities
$
21,096

 
$
34,175


The deferred tax assets and liabilities within the same jurisdiction are reported net in the accompanying balance sheets as follows (in thousands):
 
December 31, 2017
 
December 31, 2016
Deferred tax assets
$
245

 
$
37

Deferred tax liabilities
21,341

 
34,212

Net deferred tax liabilities
$
21,096

 
$
34,175


At December 31, 2017, the Company had gross foreign net operating loss carryforwards of $0.8 million. The foreign net operating loss carryforwards will begin to expire in 2020 and have a carryforward period of 5 years.
At December 31, 2017, the Company had gross state net operating loss carryforwards of $0.2 million. The state net operating loss carryforward will begin to expire in 2036 and have a carryforward period of 20 years.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
 
Year ended December 31,
 
2017
 
2016
 
2015
Balance at beginning of year
$
1,208

 
$
1,256

 
$
607

Increases for prior year tax positions
63

 
438

 
1

Increases for current year tax positions
68

 
103

 
648

Decreases for prior year tax positions
(1
)
 
(589
)
 
—

Decreases due to settlements
(32
)
 
—

 
—

Decreases due to statutes lapsing
(542
)
 
—

 
—

Balance at end of year
$
764

 
$
1,208

 
$
1,256


If all of the Company’s unrecognized tax benefits as of December 31, 2017 and December 31, 2016 were recognized, $0.3 million and $0.7 million of unrecognized tax benefits, respectively, would impact the effective tax rate. The Company believes it is reasonably possible that $0.1 million of unrecognized tax benefits may reverse in the next twelve months.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes. The Company had $0.1 million and $0.2 million of accrued gross interest and penalties as of December 31, 2017 and December 31, 2016, respectively. The Company recognized net interest expense of $17,000, $0.1 million and $20,000 for the years ended December 31, 2017, 2016 and 2015, respectively.
The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of December 31, 2017, with few exceptions, the Company or its subsidiaries are no longer subject to examination prior to tax year 2014. Certain state returns are currently under audit by the state tax authorities. The Company does not expect the results of these audits to have a material impact on the consolidated financial statements.