Income Taxes

The components of income before income taxes are as follows (in thousands):



	Fiscal Year Ended
	November 30, 2018		November 30, 2017			November 30, 2016
U.S.	$	75,667	$	77,442		$	78,477
Foreign	3,313		(11,855		)	(113,757		)
Total	$	78,980	$	65,587		$	(35,280	)

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



	Fiscal Year Ended
	November 30, 2018			November 30, 2017			November 30, 2016
Current:
Federal	$	8,979		$	23,739		$	12,934
State	1,387			2,461			3,178
Foreign	3,088			1,496			3,027
Total current	13,454			27,696			19,139
Deferred:
Federal	2,738			1,548			6,203
State	515			61			(1,963		)
Foreign	(1,218		)	(1,135		)	(2,933		)
Total deferred	2,035			474			1,307
Total	$	15,489		$	28,170		$	20,446

A reconciliation of the income taxes incurred at the U.S. Federal statutory rate compared to the effective tax rate is as follows (in thousands):



	Fiscal Year Ended
	November 30, 2018			November 30, 2017			November 30, 2016
Tax at U.S. Federal statutory rate	$	17,549		$	22,955		$	(12,348	)
Foreign rate differences	1,042			4,575			7,689
Effects of foreign operations included in U.S. Federal provision	550			(186		)	(1,244		)
State income taxes, net	1,746			1,702			2,977
Research credits	(302		)	(251		)	(838		)
Domestic production activities deduction	(1,283		)	(2,670		)	(1,925		)
Tax-exempt interest	(66		)	(101		)	(76		)
Nondeductible stock-based compensation	502			808			740
Meals and entertainment	192			276			234
Compensation subject to 162(m)	227			208			—
Uncertain tax positions and tax settlements	(1,626		)	429			(1,701		)
Remeasurement of net deferred tax liabilities due to the Act	(1,660		)	—			—
Net excess tax benefit or detriment from stock-based compensation plans	(861		)	—			—
Prior period adjustment	—			—			(2,700		)
Release of valuation allowance on state research and development credits	—			—			(2,748		)
Goodwill Impairment	—			—			32,200
Other	(521		)	425			186
Total	$	15,489		$	28,170		$	20,446

During the preparation of our consolidated financial statements for the three months ended May 31, 2016, we identified an error in our prior year income tax provision whereby income tax expense was overstated for the year ended November 30, 2015 by $2.7 million related to our tax treatment of an intercompany gain. We determined that the error is not material to the prior year financial statements. We also concluded that recording an out-of-period correction would not be material and therefore corrected this error by recording an out-of-period $2.7 million tax benefit in our interim financial statements for the periods ended May 31, 2016, which is included in our fiscal year 2016 results.

During the first quarter of fiscal year 2018, the Tax Cuts and Jobs Act (the "Act") was enacted in the United States. The Act reduced the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018, requires companies to pay a one-time transition tax on earnings (if any) of certain foreign subsidiaries that were previously tax deferred, moves to a territorial tax system and creates new taxes on certain foreign sourced earnings. In December 2017, the SEC issued SAB 118, which directs taxpayers to consider the impact of the U.S. legislation as “provisional” when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. As of November 30, 2018, the accounting for the change in tax law is complete with respect to provisions of the Act that became effective in fiscal year 2018.

During fiscal year 2018, the Company recognized a $1.7 million income tax benefit due to the re-measurement of its net U.S. deferred tax liabilities due to the Act.

The Act provides for a one-time deemed repatriation of post-1986 undistributed foreign subsidiary earnings and profits through December 31, 2017. However, the Company will not incur the one-time deemed repatriation tax due to the Company's foreign subsidiaries being in a net accumulated deficit position.

Other international provisions of the Act become effective in fiscal year 2019 for the Company. The global intangible low-taxed income ("GILTI") provisions require the Company to include in its U.S. income tax base foreign subsidiary earnings in excess of an allowable return of the foreign subsidiary's tangible assets. The Company expects that it will be subject to incremental U.S. tax resulting from GILTI inclusions beginning in fiscal year 2019.

The components of deferred tax assets and liabilities are as follows (in thousands):



	November 30, 2018			November 30, 2017
Deferred tax assets:
Accounts receivable	$	134		$	226
Other assets	—			225
Accrued compensation	1,863			5,456
Accrued liabilities and other	2,106			5,402
Deferred revenue	1,348			1,160
Stock-based compensation	3,166			3,436
Tax credit and loss carryforwards	24,338			31,441
Gross deferred tax assets	32,955			47,346
Valuation allowance	(8,790		)	(1,537		)
Total deferred tax assets	24,165			45,809
Deferred tax liabilities:
Goodwill	(17,966		)	(26,484		)
Unrealized FX gains	—			(644		)
Depreciation and amortization	(7,151		)	(20,367		)
Prepaid expenses	(923		)	—
Total deferred tax liabilities	(26,040		)	(47,495		)
Total	$	(1,875	)	$	(1,686	)

The valuation allowance primarily applies to net operating loss carryforwards and unutilized tax credits in jurisdictions or under conditions where realization is not more likely than not. The $7.3 million increase in the valuation allowance during fiscal year 2018 primarily relates to losses in a foreign subsidiary that are more likely than not going to expire prior to utilization. The $1.7 million and $5.0 million decreases in the valuation allowance during fiscal years 2017 and 2016, respectively, primarily relate to a foreign subsidiary that utilized net operating loss carryforwards in fiscal year 2017 that had a valuation allowance recorded against them and to the release of the valuation allowance on state research and development tax credits in fiscal year 2016.

At November 30, 2018, we have federal and foreign net operating loss carryforwards of $146.5 million expiring on various dates through 2034 and $0.1 million that may be carried forward indefinitely. In addition, we have state net operating loss carryforwards of $4.8 million expiring on various dates through 2022. At November 30, 2018, we have state tax credit carryforwards of approximately $2.9 million expiring on various dates through 2033 and $2.3 million that may be carried forward indefinitely. In addition, we have federal tax credit carryforwards of approximately $0.9 million expiring on various dates through 2036.

It is our intention to indefinitely reinvest the earnings of our non-U.S. subsidiaries. We have not provided for U.S. income taxes on the undistributed earnings of non-U.S. subsidiaries, which totaled $92.2 million as of November 30, 2018, as these earnings have been indefinitely reinvested. It is not practicable to determine the amount of the unrecognized deferred tax liability if the undistributed earnings were to be repatriated. These earnings could be subject to non-U.S. withholding taxes and other federal, state and/or foreign taxes if they were remitted to the U.S. Additional regulatory guidance is intended to be issued that will address certain issues arising from the enactment of the Act that will assist the Company in estimating how much additional taxes might be payable if the undistributed earnings were to be repatriated.

As of November 30, 2018, the total amount of unrecognized tax benefits was $5.8 million, of which $3.6 million was recorded in other noncurrent liabilities on the consolidated balance sheet and $2.2 million of deferred tax assets, principally related to U.S and foreign net operating loss carry-forwards, have not been recorded.

A reconciliation of the balance of our unrecognized tax benefits is as follows (in thousands):



	Fiscal Year Ended
	November 30, 2018			November 30, 2017			November 30, 2016
Balance, beginning of year	$	7,520		$	7,046		$	4,779
Tax positions related to current year	—			785			1,106
Tax positions related to a prior period	(15		)	(120		)	1,638
Settlements with tax authorities	(39		)	(155		)	(21		)
Lapses due to expiration of the statute of limitations	(1,679		)	(36		)	(456		)
Balance, end of year	$	5,787		$	7,520		$	7,046

If recognized, all amounts of unrecognized tax benefits would affect the effective tax rate.

We recognize interest and penalties related to uncertain tax positions as a component of our provision for income taxes. In fiscal year 2018 a net benefit of $0.1 million was recorded to the provision for income taxes related to estimated interest and penalties of $0.2 million offset by a reduction of $0.3 million related to statute expirations. In fiscal year 2017 estimated interest and penalties of $0.2 million were recorded to the provision for income taxes. In fiscal year 2016 there was a minimal amount of estimated interest and penalties recorded in the provision for income taxes. We have accrued $0.4 million and $0.5 million of estimated interest and penalties at November 30, 2018 and 2017, respectively. We do not expect any significant changes to the amount of unrecognized tax benefits in the next twelve months.

Our Federal income tax returns have been examined or are closed by statute for all years prior to fiscal year 2015. State income tax authorities in certain jurisdictions are examining state income tax returns and the Company does not expect the results of these examinations to be material to our consolidated balance sheets, cash flows or statements of income. Our state income tax returns have been examined or are closed by statute for all years prior to fiscal year 2013, and we are no longer subject to audit for those periods.

Tax authorities for certain non-U.S. jurisdictions are also examining tax returns and the Company does not expect the results of these examinations to be material to our consolidated balance sheets, cash flows or statements of income. With some exceptions, we are generally no longer subject to tax examinations in non-U.S. jurisdictions for years prior to fiscal year 2013.