13. Income Taxes

The components of current and deferred income tax expense included in the Consolidated Statement of Operations for years ended December 31, 2016, 2015 and 2014 as determined in accordance with ASC 740, Income Taxes (“ASC 740”), are as follows:


	Year Ended December 31,
	2016			2015			2014
Current:
Federal	$	14,515		$	1,598		$	—
State and local		1,425			2,431			94
Foreign		567			210			—

		16,507			4,239			94

Deferred:
Federal		10,629			46,784			10,739
State and local		2,296			6,233			1,664
Foreign		(25	)		(123	)		—

		12,900			52,894			12,403

Income tax expense from operations	$	29,407		$	57,133		$	12,497

A reconciliation of the statutory federal income tax rate of 35% and the Company’s effective rate is as follows:


	December 31,
	2016			2015			2014
Federal statutory rate		35.00	%		35.00	%		35.00	%
Change in valuation allowance		8.16	%		0.90	%		(27.74	%)
State income tax rate, net of federal benefit		4.17	%		4.11	%		1.55	%
Acquisition expense		4.06	%		0.61	%		—
Goodwill impairment		1.16	%		—			—
Foreign tax differential		0.68	%		0.82	%		0.82	%
Change in effective state rate		0.22	%		(0.06	%)		6.86	%
Other differences, net		(0.52	%)		0.27	%		0.50	%

Effective rate		52.93	%		41.65	%		16.99	%

Net Operating Losses – U.S.

The Company’s pre-tax federal net operating losses for tax purposes (“NOLs”) at December 31, 2016 was $4,195 which expire in 2024. The net operating loss carryforwards have been reduced by the impact of annual limitations described in the Internal Revenue Code Section 382 that arose as a result of an ownership change.

The Company no longer has any NOLs related to vested stock-based compensation awards that were previously unrecognized under GAAP. Such NOLs were utilized during the year ended December 31, 2016 to reduce the Company’s tax liability with a corresponding credit to additional paid-in capital.

Net Operating Losses – International

The Company’s European and Canadian subsidiaries generated NOLs outside the U.S. The following table summarizes the activity for these NOLs for the years ended December 31, 2016, 2015 and 2014, respectively.


	December 31,
	2016			2015			2014
Balance – Beginning of year (pre-tax)	$	10,746		$	4,061		$	—
Foreign subsidiaries tax losses		12,960			6,685			4,061

Balance – End of year (pre-tax)	$	23,706		$	10,746		$	4,061

Tax Rate – Blended		19.2	%		19.1	%		20.1	%

Balance – End of year (tax effected)	$	4,551		$	2,051		$	816

At December 31, 2016, 2015, and 2014, the Company established a full valuation allowance related to these NOLs as it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

Deferred Tax Assets

A summary of the components of the Company’s deferred tax assets at December 31, 2016 and 2015 are as follows:


	December 31,
	2016			2015
Deferred tax assets:
Stock-based compensation	$	5,382		$	4,868
Accrued expenses		4,552			10,197
NOLs – Foreign		4,551			2,051
Deferred rent liability		2,024			2,116
NOLs – U.S.		1,611			1,828
Unrealized losses		101			5
Other		227			82

Deferred tax assets		18,448			21,147

Deferred tax liabilities
Fixed assets		2,405			2,272
Incentive compensation		1,365			2,753
Goodwill and intangible assets		301			—

Deferred tax liabilities		4,071			5,025

Total deferred tax assets less deferred tax liabilities		14,377			16,122
Less: valuation allowance		(4,551	)		(2,051	)

Deferred tax assets, net	$	9,826		$	14,071

Uncertain tax positions

The Company determined that it has no unrecognized tax benefits as of December 31, 2016 and 2015 as defined within ASC 740-10.

Income Tax Examinations

The Company is subject to U.S. federal income tax as well as income tax of multiple state, local and certain foreign jurisdictions. The Company’s 2013 federal income tax return is currently under audit.

Tax returns filed with each jurisdiction generally remain open to examination under the normal three-year statute of limitation. As of December 31, 2016, with few exceptions, the Company was no longer subject to income tax examinations by any taxing authority for years before 2013.

Undistributed Earnings of Foreign Subsidiaries

The Company recognizes deferred tax liabilities associated with outside basis differences on investments in foreign subsidiaries unless the difference is considered essentially permanent in duration. As of December 31, 2016, all of the Company’s undistributed earnings and profits, which are not currently significant, are considered essentially permanent in duration.