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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Taxes |
Income Taxes | Note 6 – Income Taxes On December 22, 2017, U.S. Tax Reform (“Tax Reform”) was enacted including a broad range of complex provisions impacting the taxation of businesses. Effective in 2018, Tax Reform reduces the U.S. statutory tax rate from 35% to 21% and creates new taxes on certain foreign-sourced earnings which are referred to as the global intangible low-taxed income tax (“GILTI”). In addition, in 2017 we were subject to a one-time transition tax on accumulated foreign subsidiary earnings not previously subject to U.S. income tax. Due to the timing of the enactment and the complexity involved in applying the provisions of Tax Reform, we have made reasonable estimates of the effects and recorded provisional amounts in our financial statements as of December 31, 2017. As we collect and prepare necessary data, and interpret Tax Reform and any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially impact our provision for income taxes and effective tax rate in the period in which the adjustments are made. The accounting for the tax effects of Tax Reform will be completed in 2018. Provisional amounts for the following income tax effects of Tax Reform have been recorded as of December 31, 2017 and are subject to change during 2018. Tax Reform provides a taxable one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits through December 31, 2017. Our undistributed earnings and profits of our foreign subsidiaries of approximately $187 million is subject to the repatriation tax. Accordingly, we provided a provisional amount of $18,246 of income tax expense in the fourth quarter ended December 31, 2017. After the utilization of existing tax credits, we expect to pay U.S. federal taxes of approximately $14,436 over eight years related to the repatriation tax. As a result of Tax Reform, earnings of all foreign subsidiaries have been designated as available for distribution. Previously, earnings of certain foreign subsidiaries were deemed permanently reinvested. During the fourth quarter of 2017, we provisionally provided deferred income tax expense of $7,281 for foreign taxes on distributions from foreign subsidiaries previously designated as permanently reinvested. However, we do not have the necessary information gathered, prepared and analyzed to make a reasonable estimate of the impact of any remaining outside basis differences inherent in our foreign subsidiaries. We will gather the information necessary and compute the outside basis differences for those subsidiaries where we are no longer indefinitely reinvested and record any new deferred taxes as reasonable estimates are available. Beginning in 2018, Tax Reform reduces the maximum U.S. corporate income tax rate from 35% to 21%. Accordingly, we have remeasured our deferred taxes as of December 31, 2017 to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized. We recognized a deferred tax expense of $2,339 to reflect the reduced U.S. tax rate of Tax Reform. Although the tax rate reduction is known, we have not collected the necessary data to complete our analysis of the effect of Tax Reform on the underlying deferred taxes and as such, the amounts recorded as of December 31, 2017 are provisional. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company expects that it will be subject to incremental U.S. tax on GILTI income beginning in 2018. FASB Topic 740 allows the company to treat GILTI as either a deferred tax asset or liability or to account for the impacts in the period in which it is incurred. The Company has not yet decided how to account for GILTI tax, and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the year ended December 31, 2017. Income before income taxes was generated in the following jurisdictions:
|  | For the year ended December 31,
|  | 2017 |  | 2016 |  | 2015
Domestic |  | $ | (1,877) |  | $ | (11,170) |  | $ | (5,007)
Foreign |  |  | 10,258 |  |  | 22,547 |  |  | 55,862
Total |  | $ | 8,381 |  | $ | 11,377 |  | $ | 50,855
For the year ended December 31, 2017, 2016, and 2015, domestic income excludes taxable intercompany dividend income of $0, $8,825, and $10,000, respectively. The provision for income taxes consists of the following:
|  | For the year ended December 31,
|  | 2017 |  | 2016 |  | 2015
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | 14,299 |  | $ | (90) |  | $ | —
State |  |  | 141 |  |  | 5 |  |  | 1
Foreign |  |  | 3,287 |  |  | 5,915 |  |  | 9,140
Total current |  |  | 17,727 |  |  | 5,830 |  |  | 9,141
Deferred: |  |  |  |  |  |  |  |  |
Federal |  |  | 6,043 |  |  | (2,985) |  |  | 338
State |  |  | (200) |  |  | 115 |  |  | (135)
Foreign |  |  | 7,210 |  |  | (2,097) |  |  | (640)
Total deferred |  |  | 13,053 |  |  | (4,967) |  |  | (437)
Total |  | $ | 30,780 |  | $ | 863 |  | $ | 8,704
The U.S. federal corporate tax rate varies with taxable income. Our U.S. statutory rate for 2017 was 35%. For 2016 and 2015, our U.S. statutory rate was 34%. The differences between the income tax provisions computed using the statutory federal income tax rate and the provisions for income taxes reported in the consolidated statements of operations are as follows:
|  | For the year ended December 31,
|  | 2017 |  | 2016 |  | 2015
Expected tax at statutory rate |  | $ | 2,933 |  | $ | 3,884 |  | $ | 17,305
Foreign taxes at other rates |  |  | (3,139) |  |  | (7,512) |  |  | (12,487)
US tax on foreign earnings, net of foreign tax credits |  |  | (226) |  |  | (405) |  |  | 1,968
Valuation allowances on NOL carryforwards |  |  | 3,997 |  |  | 3,816 |  |  | 469
US tax reform - deemed repatriation |  |  | 18,472 |  |  | — |  |  | —
US tax reform - changes in indefinite reinvestment assertion |  |  | 7,281 |  |  | — |  |  | —
US tax reform - deferred tax expense from tax rate change |  |  | 2,339 |  |  | — |  |  | —
State income taxes, net of federal benefit |  |  | (59) |  |  | 83 |  |  | 26
Disallowed expenses and other |  |  | (818) |  |  | 997 |  |  | 1,423
Total |  | $ | 30,780 |  | $ | 863 |  | $ | 8,704
Significant components of our deferred tax assets and liabilities are as follows:
|  | As of December 31,
|  | 2017 |  | 2016
Deferred tax assets: |  |  |  |  |  |
U.S. foreign tax credit |  | $ | — |  | $ | 7,027
Stock and long-term compensation plans |  |  | 1,855 |  |  | 2,304
Foreign NOL & other carryforwards |  |  | 20,864 |  |  | 16,340
US state NOL carryforwards |  |  | 823 |  |  | 803
US alternative minimum tax |  |  | — |  |  | 357
Deferred revenue |  |  | 1,278 |  |  | 358
Pension liability, net |  |  | 974 |  |  | 1,038
Reserve for uncertain tax issues |  |  | — |  |  | (445)
Amortization and depreciation |  |  | 753 |  |  | 708
Accrued expenses and other |  |  | 1,246 |  |  | 523
Total gross deferred tax assets |  |  | 27,793 |  |  | 29,013
Less: Valuation allowance |  |  | (12,805) |  |  | (6,274)
Net deferred income tax assets |  | $ | 14,988 |  | $ | 22,739
Deferred tax liabilities: |  |  |  |  |  |
Accruals |  | $ | 506 |  | $ | 691
US tax on unremitted foreign earnings |  |  | — |  |  | 424
Foreign tax on unremitted foreign earnings |  |  | 7,434 |  |  | —
Intangible assets |  |  | 9,341 |  |  | 10,947
Deferred tax liabilities |  | $ | 17,281 |  | $ | 12,062
Net deferred tax assets (liabilities) |  | $ | (2,293) |  | $ | 10,677
Deferred tax assets and liabilities are netted by tax jurisdiction. For the year ended December 31, 2015, a portion of tax benefits related to certain restricted stock and stock options of $318 was credited to additional paid-in capital. Consistent with the adoption of ASU 2016-09, the tax impact for 2017 and 2016 of $46 and $169 was recorded as an increase to the tax provision. At December 31, 2017, we had foreign and state net operating loss (NOL) carryforwards and other foreign deductible carryforwards as shown in the following table:
|  | Carryforward |  | Expiration
NOL Carryforward |  |  |  |  |
Canada |  | $ | 48,622 |  | 2024-2037
Other foreign |  |  | 14,451 |  | None
Canada province |  |  | 46,424 |  | 2024-2037
U.S. states |  |  | 10,960 |  | 2019-2028
|  |  | 120,457 |  |
Other Carryforwards |  |  |  |  |
Canada |  |  | 7,902 |  | None
Canada province |  |  | 22,033 |  | None
Other foreign |  |  | 1,226 |  | 2018
|  |  | 31,161 |  |
|  | $ | 151,618 |  |
The net change in the valuation allowance for the year ended December 31, 2017 was an increase of $6,53 1 and decreases for the years ended December 31, 2016 and 2015 of $7,445 and $11,219, respectively. Valuation allowances are reviewed on a regular basis and adjustments made as appropriate. The increase in the valuation allowance in 2017 reflects NOLs for which the realization is not more likely than not. The change in the valuation allowance also reflects other factors including, but not limited to, changes in our assessment of our ability to use existing NOLs and other deduction carryforwards, changes in currency rates, and adjustments to reflect differences between the actual returns filed and the estimates we made at financial reporting dates. The company expects to generate taxable income to realize deferred tax assets net of valuation allowance in each jurisdiction. Our policy is to record interest and penalties on income taxes as income tax expense. For the year ended December 31, 2017, 2016, and 2015 we provided $0, $51, and $0, respectively. ASC 740, Income Taxes sets a “more likely than not” criterion for recognizing the tax benefit of uncertain tax positions. As of December 31, 2017, 2016, and 2015, we had a reserve of $107, $662, and $560, respectively.
|  | As of year ended December 31,
|  | 2017 |  | 2016 |  | 2015
Reserve at beginning of year |  | $ | 662 |  | $ | 560 |  | $ | 560
Increases related to prior year tax positions |  |  | 7 |  |  | 217 |  |  | —
Lapse of statute of limitations |  |  | (562) |  |  | (115) |  |  | —
Total |  | $ | 107 |  | $ | 662 |  | $ | 560
Based on the possible expiration of the statute of limitations, it is reasonably possible that the liability for uncertain tax positions will change within the next twelve months. The associated tax impact on the effective tax rate is estimated to be a tax benefit of $107. Our primary tax jurisdictions and the earliest tax year subject to audit are presented in the following table.
Australia |  | 2009
Austria |  | 2011
Belgium |  | 2015
Canada |  | 2013
Netherlands |  | 2012
Singapore |  | 2012
Switzerland |  | 2016
United States |  | 2014

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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