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INCOME TAXES | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES | 15. INCOME TAXES The components of (loss) income before (benefit) provision from income taxes are:
(in thousands) | 2018 |  | 2017 |  | 2016
Domestic | $ | (27,494 | ) |  | $ | 57,493 |  |  | $ | 39,559 |
Foreign | 15,951 |  |  | 28,742 |  |  | 15,776 |
(Loss) income before (benefit) provision from income taxes | $ | (11,543 | ) |  | $ | 86,235 |  |  | $ | 55,335 |
The components of the provision for income taxes are:
(in thousands) | 2018 |  | 2017 |  | 2016
Current: |  |  |  |  |
Federal | $ | (1,862 | ) |  | $ | (18,109 | ) |  | $ | 7,389 |
State | 287 |  |  | 97 |  |  | 3,081 |
Foreign | 10,313 |  |  | 8,479 |  |  | 4,248 |
Total current provision (benefit) | 8,738 |  |  | (9,533 | ) |  | 14,718 |
Deferred: |  |  |  |  |
Federal | (18,939 | ) |  | (2,049 | ) |  | (1,125 | )
State | (3,702 | ) |  | (214 | ) |  | (466 | )
Foreign | (8,257 | ) |  | (517 | ) |  | (2,807 | )
Total deferred benefit | (30,898 | ) |  | (2,780 | ) |  | (4,398 | )
(Benefit) provision from income taxes | $ | (22,160 | ) |  | $ | (12,313 | ) |  | $ | 10,320 |
The effective income tax rate differed from the statutory federal income tax rate due to the following (1):
| 2018 |  | 2017 |  | 2016
Statutory federal income tax rate | 21.0 | % |  | 35.0 | % |  | 35.0 | %
Valuation allowance | (4.4 | )% |  | 0.5 | % |  | 0.2 | %
Transaction costs | — | % |  | — | % |  | 0.7 | %
State income taxes, net of federal benefit and tax credits | 28.9 | % |  | (0.5 | )% |  | 2.5 | %
Permanent differences | (11.2 | )% |  | 1.1 | % |  | 1.4 | %
GILTI, FDII, and BEAT | (3.5 | )% |  | — | % |  | — | %
Federal research and experimentation credits | 60.6 | % |  | (3.9 | )% |  | (1.5 | )%
Tax effects of foreign activities | 3.5 | % |  | (0.9 | )% |  | (5.6 | )%
Tax-exempt income | 1.2 | % |  | (0.1 | )% |  | (0.2 | )%
Provision to return adjustments | (2.2 | )% |  | (2.1 | )% |  | — | %
Non-deductible compensation | (8.9 | )% |  | 2.1 | % |  | 4.0 | %
Expiration of statutes and changes in estimates | 4.5 | % |  | 0.3 | % |  | (1.2 | )%
Excess tax benefits related to share-based compensation | 117.3 | % |  | (28.4 | )% |  | (12.8 | )%
Domestic Production Activities | — | % |  | — | % |  | (2.0 | )%
Deferred tax asset adjustment | (14.2 | )% |  | (17.9 | )% |  | (0.3 | )%
Other | (0.6 | )% |  | 0.5 | % |  | (1.5 | )%
Effective income tax rate | 192.0 | % |  | (14.3 | )% |  | 18.7 | %
(1) In periods of loss before incomes taxes, income tax benefits are reflected as a positive in this table. Tax Reform Act On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Tax Reform Act”). The Tax Reform Act makes significant changes in the U.S. tax code including the following:
• | reduction of the corporate federal income tax rate from 35% to 21%;
• | repeal of the domestic manufacturing deduction;
• | repeal of the corporate alternative minimum tax;
• | a one-time transition tax on accumulated foreign earnings (if any);
• | a move to a territorial tax system; and
• | acceleration of business asset expensing.
The Tax Reform Act provided for a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits through December 31, 2017. The Company has concluded that it is not be subject to the one-time transition tax due to our foreign subsidiaries being in a net accumulated deficit position. The Company completed its accounting for the tax effects of enactment of the Tax Reform Act recording a final net benefit amount of $14.2 million pertaining to the enactment of the Tax Reform Act and the impact of the reduction of the tax rates on our deferred tax attributes; all of which was recorded in 2017 as a component of tax expense. Beginning in 2018, the Company was subject to immaterial incremental U.S. tax resulting from global intangible low taxed income (“GILTI”) inclusions. Companies must make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI in the year the tax is incurred as a period cost. Deferred income taxes Significant components of net deferred tax assets and liabilities are:
| December 31,
(in thousands) | 2018 |  | 2017
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 40,736 |  |  | $ | 52,311 |
Accruals and reserves | 17,576 |  |  | 14,668 |
Software revenue | — |  |  | — |
Depreciation | 2,874 |  |  | 2,558 |
Tax credit carryforwards | 14,896 |  |  | 13,056 |
Other | 176 |  |  | 52 |
Total deferred tax assets | 76,258 |  |  | 82,645 |
Valuation allowances | (27,954 | ) |  | (27,994 | )
Total net deferred tax assets | 48,304 |  |  | 54,651 |
Deferred tax liabilities: |  |  |
Software revenue | (36,510 | ) |  | (70,347 | )
Intangibles | (5,748 | ) |  | (8,527 | )
Total deferred tax liabilities | (42,258 | ) |  | (78,874 | )
Deferred income taxes | $ | 6,046 |  |  | $ | (24,223 | )
The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. This determination requires significant judgment, including assumptions about future taxable income that are based on historical and projected information. In 2018, there was no material change in the valuation allowance. At December 31, 2018 the Company’s net operating losses and credit carryforwards are:
(in thousands) | Federal |  | State
Net operating losses (1) | $ | 81,206 |  |  | $ | 2,210 |
Net operating losses due to acquisitions | $ | 81,206 |  |  | $ | 665 |
Credit carryforwards (2) | $ | 7,480 |  |  | $ | 1,937 |
Credit carryforwards due to acquisitions | $ | 640 |  |  | $ | 324 |
(1) Excludes federal and state net operating losses of $60.2 million and $0.8 million, respectively, and federal and state tax credits of $0.1 million and $7.4 million, respectively, that the Company expects will expire unutilized, (2) Carryforward losses and credits expire between 2019 and 2037 except for $0.9 million of state credits that have an unlimited carryforward period. At December 31, 2018, the Company had foreign net operating losses of $46.1 million, all of which the Company expects will expire unutilized. The Company’s India subsidiary is a development center in an area designated as a Special Economic Zone (“SEZ”) and is entitled to a tax holiday in India. The tax holiday reduces or eliminates income tax in India. The tax holiday in the Hyderabad SEZ expired in March of 2018 and the tax holiday in the Bangalore SEZ is scheduled to expire in 2022. For 2017 and 2016, the effect of the income tax holiday was to reduce the Company’s provision for income taxes by approximately $1.3 million, and $1 million, respectively. Uncertain tax benefits and other considerations A rollforward of the Company’s gross unrecognized tax benefits is:
(in thousands) | 2018 |  | 2017 |  | 2016
Balance as of January 1, | $ | 19,150 |  |  | $ | 22,671 |  |  | $ | 23,972 |
Additions based on tax positions related to the current year | 978 |  |  | 452 |  |  | 80 |
Additions for tax positions of prior years | 174 |  |  | 238 |  |  | 110 |
Additions for acquired uncertain tax benefits | — |  |  | — |  |  | 387 |
Reductions for change in U.S. federal tax rate | — |  |  | (2,424 | ) |  | — |
Reductions for tax positions of prior years | (2,145 | ) |  | (1,500 | ) |  | (1,541 | )
Reductions for a lapse of the applicable statute of limitations | — |  |  | (287 | ) |  | (337 | )
Balance as of December 31, | $ | 18,157 |  |  | $ | 19,150 |  |  | $ | 22,671 |
As of December 31, 2018, the Company had approximately $18.2 million of total unrecognized tax benefits, which would decrease the Company’s effective tax rate if recognized. The $2.1 million reduction for tax positions of prior years primarily relate to the settlement of a foreign uncertain tax position. The Company expects that the changes in the unrecognized benefits within the next twelve months will be approximately $0.5 million due to a lapse of applicable statute of limitations. The Company files income tax returns in the U.S. and in foreign jurisdictions. The Company has no tax returns under examination by the Internal Revenue Service or state taxing authorities as of December 31, 2018. However, certain foreign jurisdictions are auditing the Company’s income tax returns for periods ranging from 2010 through 2014. The Company does not expect the results of these audits to have a material effect on the Company’s financial condition, results of operations, or cash flows. With few exceptions, the statute of limitations remains open in all jurisdictions for the tax years 2014 to the present.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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