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Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2018
Income Taxes |
Income Taxes | 10. Income Taxes Income tax benefit from continuing operations and effective income tax rates consist of the following:
|  | December 31,
|  | 2018 |  | 2017 |
Current taxes: |  |  |  |  |  |  |
Domestic |  | $ | 2,558 |  | $ | (7,369) |
Foreign |  |  | — |  |  | — |
|  |  | 2,558 |  |  | (7,369) |
Deferred taxes: |  |  |  |  |  |  |
Domestic |  |  | (6,897) |  |  | (9,167) |
Foreign |  |  | — |  |  | — |
|  |  | (6,897) |  |  | (9,167) |
Income tax benefit |  | $ | (4,339) |  | $ | (16,536) |
Loss before income taxes |  |  |  |  |  |  |
Domestic |  | $ | (18,383) |  | $ | (36,985) |
Foreign |  |  | (755) |  |  | (2,636) |
Total |  | $ | (19,138) |  | $ | (39,621) |
Effective income tax rate |  |  | 22.7 | % |  | 41.7 | %
The effective income tax rate differs from the U.S. federal statutory income tax rate as follows:
|  | December 31,
|  | 2018 |  | 2017 |
Tax at federal statutory rate |  | 21.0 | % | 35.0 | %
State income taxes |  | 4.0 |  | 0.5 |
Foreign taxes |  | (0.1) |  | (0.1) |
Tax benefit for U.K. sale |  | 17.5 |  | — |
Valuation allowance |  | (13.5) |  | (1.5) |
Unrecognized tax benefits |  | (4.8) |  | (3.2) |
Tax credits |  | 2.5 |  | 10.8 |
Deferred tax impact of enacted tax rate and law changes |  | (0.7) |  | 18.4 |
Goodwill impairments |  | — |  | (17.4) |
Other |  | (3.2) |  | (0.8) |
Effective income tax rate |  | 22.7 | % | 41.7 | %
The components of the deferred tax assets and liabilities are as follows:
|  | December 31, |
|  | 2018 |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |
Accrued expense |  | $ | 2,553 |  | $ | 744 |
Unrealized foreign exchange loss |  |  | — |  |  | 647 |
Net operating loss carryforward |  |  | 5,589 |  |  | 2,156 |
Deferred financing costs |  |  | 553 |  |  | 707 |
Stock compensation |  |  | 861 |  |  | 679 |
Tax credit carryforward |  |  | 1,118 |  |  | 420 |
Interest limitation |  |  | 4,412 |  |  | — |
Other |  |  | 927 |  |  | 753 |
Total gross deferred tax assets |  |  | 16,013 |  |  | 6,106 |
Valuation allowance |  |  | (6,823) |  |  | (4,617) |
Net deferred tax assets |  |  | 9,190 |  |  | 1,489 |
Deferred tax liabilities: |  |  |  |  |  |  |
Plant, equipment and leasehold improvements |  |  | (3,851) |  |  | (2,819) |
Intangible assets |  |  | (9,311) |  |  | (9,912) |
Prepaid expenses and other |  |  | (1,777) |  |  | (926) |
Total gross deferred tax liabilities |  |  | (14,939) |  |  | (13,657) |
Net deferred tax liabilities |  | $ | (5,749) |  | $ | (12,168) |
The net change in the valuation allowance during the year ended December 31, 2018 was an increase of $2,206 and related to the limitation on the deductibility of interest expense, changes in net operating losses of foreign locations, the interest limitation related to section 163(j) of tax reform legislation that is not expected to be realized, and state research and development credits carried forward. The Company has potential tax benefits associated with $10,791 of gross foreign operating loss carryforwards, which expire at various dates from 2024 through 2038. Due to the uncertainty of being able to recognize these loss carryforwards, the Company has provided a valuation allowance of 100% of the tax benefit. Additionally, the Company has potential tax benefits associated with $9,156 of gross domestic operating loss carryforwards, which do not expire. The Company also has various state and local operating loss carryforwards which will expire at various dates from 2033 to 2038. The Company does expect to be able to utilize these losses prior to expiration. The Company has potential tax benefits associated with state research and development tax credit carryforwards as of December 31, 2018 of $778, which will expire at various dates between 2029 and 2033. Due to the uncertainty of being able to recognize these credit carryforwards, the Company has provided a valuation allowance of 100% of the tax benefit. Additionally, the Company has potential tax benefits associated with federal research and development tax credit carryforwards as of December 31, 2018 of $3 40, which will expire in 2038. Due to the uncertainty of the research and development credit the Company has provided a 100% valuation allowance. At December 31, 2018, no provision has been made for U.S. federal and state taxes on cumulative foreign earnings as there are no current or cumulative earnings of foreign operations. The Company recorded a current tax benefit in 2018 related to the sale of the U.K. Limited segment of $3,332. 2017 Tax Reform On December 22, 2017, the U.S. government enacted comprehensive tax reform legislation that includes significant changes to taxation of business entities. These changes include, among others, (i) a permanent reduction to the corporate income tax rate, (ii) a partial limitation on the deductibility of business interest expense, (iii) elimination of deduction for income attributable to domestic production activities and (iv) a partial shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a territorial system (along with a transitional rule that taxes certain historic foreign accumulated earnings and certain rules that aim to prevent erosion of U.S. income tax base). In conjunction with tax reform and the reduction of the U.S. federal tax rate from 35.0% to 21.0%, the Company accrued a $7,057 tax benefit during the year ended December 31, 2017 related to the net change in deferred tax liabilities. Unrecognized Tax Benefits Unrecognized tax benefits represent the aggregate tax effect of differences between the tax return positions and the amounts otherwise recognized in the Company’s consolidated financial statements, and are reflected in “Other long term liabilities” and “Deferred income taxes” in the Company’s consolidated balance sheets. The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax provision only when based upon the technical merits, it is “more-likely-than-not” that the tax position will be sustained upon examination.
Balance as of December 31, 2017 |  | $ | 1,212
Increase related to current year tax position |  |  | 506
Increase related to prior year tax position |  |  | 871
Decrease related to settlements with tax authorities, net of federal benefit |  |  | (545)
Lapse of statute of limitations |  |  | —
Balance as of December 31, 2018 |  | $ | 2,044
The Company recognizes interest and penalties with respect to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest and penalties related to unrecognized tax benefits as of and for the year ended December 31, 2018 was $221 and not material for the year ended December 31, 2017. The Company is generally subject to potential federal and state examinations for the tax years on and after December 31, 2015 for federal purposes and December 31, 2013 for state purposes. The Company’s locations in the United Kingdom and Canada are subject to examinations for tax years on and after December 31, 2018 and December 31, 2014, respectively. The Company’s U.K. Limited segment which was sold on August 3, 2018, is subject to examinations for tax years on and after December 31, 2017.

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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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