Entity information:
Income Taxes
Income tax expense (benefit) from continuing operations for the years ended December 31, 2017, 2016 and 2015 is presented below (in thousands):
Year ended December 31, 2017
 
Current
 
Deferred
 
Total
Federal
 
$
—

 
$
(31
)
 
$
(31
)
State
 
540

 
8

 
548

Foreign
 
942

 
(973
)
 
(31
)
 
 
$
1,482

 
$
(996
)
 
$
486

 
Year ended December 31, 2016
 
Current
 
Deferred
 
Total
Federal
 
$
—

 
$
32

 
$
32

State
 
329

 
5

 
334

Foreign
 
285

 
(43
)
 
242

 
 
$
614

 
$
(6
)
 
$
608

Year ended December 31, 2015
 
Current
 
Deferred
 
Total
Federal
 
$
—

 
$
54

 
$
54

State
 
(202
)
 
7

 
(195
)
Foreign
 
331

 
(95
)
 
236

 
 
129

 
(34
)
 
95


The actual income tax expense (benefit) differs from the expected income tax expense (benefit) computed at the U.S. Federal statutory tax rate of 35% due to the following (in thousands):
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Tax expense (benefit) at federal statutory rate
 
$
(85,445
)
 
$
(67,819
)
 
$
(27,072
)
 
 
 
 
 
 
 
State income tax expense, net of federal benefit
 
(11,432
)
 
(5,225
)
 
(1,424
)
Foreign tax rate differential
 
23,179

 
17,109

 
9,278

Non-deductible equity based compensation expense
 
1,080

 
2,321

 
1,415

Windfall benefits from equity based compensation
 
(24,168
)
 
—

 
—

Change in valuation allowance
 
24,209

 
53,467

 
12,394

Impact of sale of Australian subsidiary
 
—

 
—

 
4,248

Change in tax rate
 
71,919

 
—

 
—

Other
 
1,144

 
755

 
1,256

Net income tax expense
 
$
486

 
$
608

 
$
95


We recorded an income tax expense of $0.5 million, representing an effective tax rate of zero. The effective tax rate differs from the U.S. statutory rate of 35% primarily as a result of the losses generated in the U.S. and certain foreign subsidiaries that have a valuation allowance and therefore cannot be benefited, as well as excess tax deductions related to equity-based compensation and the effects of U.S. Tax Reform.
The components of income before income tax expense (benefit) determined by tax jurisdiction, are as follows (in thousands):
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
U.S.
 
$
(143,800
)
 
$
(118,851
)
 
$
(38,963
)
Foreign
 
(100,328
)
 
(74,916
)
 
(38,385
)
Total
 
$
(244,128
)
 
$
(193,767
)
 
$
(77,348
)

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities for the periods presented are as follows (in thousands):
 
 
December 31
 
 
2017
 
2016
Deferred tax assets:
 
 

 
 

Accounts receivable
 
$
1,814

 
$
1,153

Inventories
 
391

 
543

Operating loss carry-forwards
 
146,666

 
71,558

Equity based compensation expense
 
9,087

 
10,940

Intangibles
 
13,862

 
22,466

Accrued payroll
 
8,582

 
9,379

Accrued expenses and reserves
 
10,933

 
2,840

Charitable contributions
 
284

 
331

Deferred rent
 
48,936

 
51,355

Gross deferred tax assets
 
240,555

 
170,565

Less: Valuation allowance
 
(178,488
)
 
(123,293
)
Net deferred tax assets
 
62,067

 
47,272

Deferred tax liabilities:
 
 

 
 

Prepaid expenses
 
(1,825
)
 
(1,428
)
Capitalized technology
 
(11,339
)
 
(11,151
)
Property and equipment
 
(34,986
)
 
(34,420
)
Goodwill
 
(110
)
 
(133
)
Convertible debt
 
(12,580
)
 
—

Other
 
(12
)
 
(166
)
Total deferred tax liabilities
 
(60,852
)
 
(47,298
)
Net deferred tax assets (liabilities)
 
1,215


(26
)
Non-current net deferred tax assets (liabilities)
 
$
1,215

 
$
(26
)

The valuation allowance increased by $55.2 million during 2017. The increase in valuation allowance is the result of establishing a valuation allowance against the current year operating losses of our U.S. and Irish entities, the adoption of ASU 2016-09 which resulted in an increase to the net operating loss and stock compensation deferred tax assets above, partially offset by a decrease in valuation allowance as a result of the U.S. federal tax rate reduction enacted during the fourth quarter of 2017 and a reduction in valuation allowance associated with the net deferred tax liability recorded related to the Company’s convertible debt issuance.
In determining the need for a valuation allowance, the Company has given consideration to the cumulative book income and loss positions of each of its entities as well as its worldwide cumulative loss position. The Company has assessed, on a jurisdictional basis, the available means of recovering deferred tax assets, including the ability to carry-back net operating losses, the existence of reversing temporary differences, the availability of tax planning strategies and available sources of future taxable income. At December 31, 2017, we maintain a full valuation allowance against the net deferred tax assets of our U.S. and Irish entities. We believe we are able to support the deferred tax assets recognized as of the end of the year in other foreign jurisdictions based on all of the available evidence.
As of December 31, 2017, the Company had federal net operating loss carryforwards available to offset future federal taxable income of $420.5 million.
In addition, the Company had state net operating loss carryforwards available in the amount of $397.2 million which are available to offset future state taxable income.
The federal net operating loss carryforwards begin to expire in the year ending December 31, 2034. The state net operating loss carryforwards begin to expire in the year ending December 31, 2022.
The Company's ability to utilize these federal and state net operating loss carry-forwards may be limited in the future if the Company experiences an ownership change pursuant to Internal Revenue Code Section 382. An ownership change occurs when the ownership percentages of 5% or greater stockholders change by more than 50% over a three-year period.
The Company also had foreign net operating loss carry-forwards available to offset future foreign income of $270.3 million. The foreign net operating loss carryforwards do not expire.

As of January 1, 2017 the Company adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). In accordance with ASU 2016-09, previously unrecognized excess tax benefits are recognized on a modified retrospective basis. On January 1, 2017, the Company recorded a $44.1 million deferred tax asset related to unrecognized excess tax benefits with an offsetting adjustment to valuation allowance. In addition, the Company recorded a $3.3 million increase to its equity based compensation deferred tax asset with an offsetting adjustment to valuation allowance as a result in the impact of accounting for forfeitures as incurred.
As of December 31, 2017, the Company has not provided for U.S. deferred income taxes on undistributed earnings of its foreign subsidiaries of approximately $3.3 million since these earnings are deemed to be indefinitely reinvested. Upon distribution of those earnings in the form of dividends or otherwise, the Company could be subject to income taxes as well as withholding taxes. The amount of taxes attributable to the undistributed earnings is not practicably determinable.
The Company establishes reserves for uncertain tax positions based on management's assessment of exposures associated with tax positions taken on tax return filings. The tax reserves are analyzed periodically and adjustments are made as events occur to warrant adjustment to the reserve. Reserves for uncertain tax positions as of December 31, 2017 and 2016 are not material and would not impact the effective tax rate if recognized as a result of the valuation allowance maintained against our net deferred tax assets.
The Company's policy is to recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. Related to the unrecognized tax benefits noted above, the Company did not accrue any penalties and interest during 2017, 2016, and 2015, respectively, because it believes that such additional interest and penalties would be immaterial.
The Company's tax jurisdictions include the U.S., the UK, Germany, Ireland, Canada and the British Virgin Islands. The statute of limitations with respect to the Company's U.S. federal income taxes has expired for years prior to 2014. The relevant state statutes vary. The statute of limitations with respect to the Company's foreign income taxes varies, but has expired for years prior to 2012. However, preceding years remain open to examination by U.S. federal and state and foreign taxing authorities to the extent of future utilization of net operating losses generated in each preceding year.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "Act") was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative deferred foreign earnings as of December 31, 2017. On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued which directs taxpayers to consider the impact of the Act as "provisional" when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. As of December 31, 2017, the Company had not completed its accounting for the tax effects of enactment of the Act, however, as described below, the Company made provisional estimates of the effects of the Act on its existing deferred tax balances and the one-time transition tax. The Act did not have a significant impact on the Company’s consolidated financial statements for the year ended December 31, 2017 as a result of the valuation allowance maintained against the Company’s U.S. deferred tax assets. However, the Company’s provisional estimate associated with the reduction in the U.S. federal corporate tax rate from 35% to 21% impacted the change in valuation allowance and change in tax rate component of the Company’s effective tax rate reconciliation as well as its ending deferred tax assets, deferred tax liabilities and valuation allowance in the deferred tax footnote disclosure. The Company has an accumulated deficit from its foreign operations and does not have a transition tax associated with deferred foreign earnings related to the Act. The ultimate impact of the Act may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made and additional regulatory guidance that may be issued. The Company’s accounting treatment is expected to be complete in the fourth quarter of 2018.