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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes We recorded an income tax provision of approximately $2.6 million, $1.4 million and $1.8 million for the years ended December 31, 2019, 2018 and 2017, respectively. The income tax provision for the years ended December 31, 2019, 2018 and 2017 was primarily due to state and foreign income tax expense and federal and state tax expense related to tax amortization of acquired indefinite lived intangible assets. Our income tax provision consisted of the following (in thousands):
| Years Ended December 31,
| 2019 |  | 2018 |  | 2017
Current income taxes: |  |  |  |  |
Federal | $ | (185 | ) |  | $ | (91 | ) |  | $ | (103 | )
State | 264 |  |  | (73 | ) |  | 100 |
Foreign | 2,594 |  |  | 1,374 |  |  | 1,523 |
Total current income taxes | 2,673 |  |  | 1,210 |  |  | 1,520 |
Deferred income taxes: |  |  |  |  |
Federal | (17 | ) |  | 155 |  |  | (992 | )
State | 42 |  |  | 76 |  |  | 75 |
Foreign | (64 | ) |  | (11 | ) |  | 1,199 |
Total deferred income taxes | (39 | ) |  | 220 |  |  | 282 |
Total income tax provision | $ | 2,634 |  |  | $ | 1,430 |  |  | $ | 1,802 |
Loss before provision for income taxes consisted of the following (in thousands):
| Years Ended December 31,
| 2019 |  | 2018 |  | 2017
United States | $ | (12,497 | ) |  | $ | (18,617 | ) |  | $ | (20,983 | )
Foreign | 5,526 |  |  | 5,159 |  |  | 2,502 |
Total | $ | (6,971 | ) |  | $ | (13,458 | ) |  | $ | (18,481 | )
The differences between our income tax provision as presented in the accompanying consolidated statements of operations and the income tax expense computed at the federal statutory rate consists of the items shown in the following table as a percentage of pretax loss (in percentages):
| Years Ended December 31,
| 2019 |  | 2018 |  | 2017
Income tax at U.S. statutory rate | 21.0 | % |  | 21.0 | % |  | 34.0 | %
State, net of federal benefit | (76.3 | ) |  | 14.8 |  |  | 8.3 |
Foreign rate differential | (19.4 | ) |  | (3.0 | ) |  | (3.8 | )
Share-based compensation | 695.4 |  |  | 178.7 |  |  | 38.2 |
Non-deductible expenses | 0.4 |  |  | (4.4 | ) |  | (1.1 | )
Tax credits | 19.3 |  |  | 26.7 |  |  | 7.8 |
Tax Cuts and Jobs Act impact | — |  |  | — |  |  | (220.2 | )
Acquisition related | 31.8 |  |  | 15.2 |  |  | — |
Convertible senior notes | (412.6 | ) |  | (0.3 | ) |  | — |
Other | 27.9 |  |  | (1.8 | ) |  | 0.4 |
Change in valuation allowance | (325.3 | ) |  | (257.5 | ) |  | 126.6 |
Total | (37.8 | )% |  | (10.6 | )% |  | (9.8 | )%
On December 22, 2017, the Tax Cuts and Jobs Act (Tax Act) was signed into law, enacting significant changes to the U.S. Internal Revenue Code. The Tax Act made broad and complex changes to the U.S. tax code. On December 22, 2017, Staff Accounting Bulletin No. 118 (SAB 118) was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. In accordance with SAB 118, as of December 31, 2017, we had not yet completed our accounting for the tax effects of the enactment of the Act. Our provision for income taxes for the year ended December 31, 2017 was based in part on our best estimate of the effects of the transition tax and existing deferred tax balances with our understanding of the Tax Act and guidance available as of the date of filing. The provisional amount related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings which was a benefit of $0.1 million. We also provided withholding tax on the deemed repatriation of foreign earnings of $1.2 million. Under guidance in place at December 31, 2019 and December 31, 2018, no adjustments to our provisional effects of the Tax Act recorded at December 31, 2017 were necessary. As of December 22, 2018 we have completed our accounting for the income tax effects of the Tax Act. The Tax Act also included provisions for the GILTI tax inclusion, wherein taxes on foreign income are imposed in excess of a deemed return on tangible assets of foreign corporations. This income will effectively be taxed at a 10.5% tax rate in general. Under the U.S. generally accepted accounting principles companies are allowed to make an accounting policy election of either (i) account for GILTI as a component of tax expense in the period in which we are subject to the rules (the “period cost method”), or (ii) account for GILTI in our measurement of deferred taxes (the “deferred method”). We are electing the period-cost method for any tax as a result of the GILTI provisions. A summary of our deferred tax assets is as follows (in thousands):
| Years Ended December 31,
| 2019 |  | 2018
Deferred tax assets: |  |  |
Accrued expenses and reserves | $ | 3,978 |  |  | $ | 1,661 |
Share-based compensation | 12,003 |  |  | 13,083 |
Accrued compensation | 997 |  |  | 2,075 |
Net operating loss carryforwards | 162,320 |  |  | 106,659 |
Property and equipment, textbooks and intangibles assets | — |  |  | 3,745 |
Other items | 3,438 |  |  | 2,951 |
Gross deferred tax assets | 182,736 |  |  | 130,174 |
Valuation allowance | (148,519 | ) |  | (125,844 | )
Total deferred tax assets | 34,217 |  |  | 4,330 |
Deferred tax liabilities: |  |  |
Property and equipment, textbooks and intangibles assets | (4,111 | ) |  | — |
Convertible senior notes | (27,065 | ) |  | (46 | )
Other | (4,661 | ) |  | (5,943 | )
Total deferred tax liabilities | (35,837 | ) |  | (5,989 | )
Net deferred tax liability | $ | (1,620 | ) |  | $ | (1,659 | )
At December 31, 2019 and 2018 the deferred tax liability is created by the tax amortization of acquired indefinite lived intangible assets. Under the accounting guidance this deferred tax liability can be used as a source of income for recognition of deferred tax assets when determining the amount of valuation allowance to be recorded. Realization of the deferred tax assets is dependent upon future taxable income, the amount and timing of which are uncertain. Accordingly, the federal and state gross deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by approximately $22.7 million during the year ended December 31, 2019 and increased by $34.7 million during the year ended December 31, 2018. As of December 31, 2019, we had net operating loss carryforwards for federal and state income tax purposes of approximately $591 million and $440 million, respectively, which will begin to expire in years beginning 2028 and 2020, respectively. As of December 31, 2019, we had tax credit carryforwards for federal and state income tax purposes of approximately $14.8 million and $11.9 million, respectively. The federal credits expire in various years beginning in 2030. The state credits do not expire. Utilization of our net operating losses and tax credit carryforwards may be subject to substantial annual limitations due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended (IRC), and similar state provisions. Such annual limitations could result in the expiration of the net operating losses and tax credit carryforwards before utilization. As described above, the Tax Act included a transition tax in 2017 that taxed any previously deferred foreign earnings and profits in 2017 at a reduced tax rate. As a result of this tax and the accrual of associated distribution tax, we have no unrecorded tax liabilities associated with unremitted foreign retained earnings as of December 31, 2017. As of December 31, 2019, we intend to permanently reinvest all 2018 and 2019 earnings from our international subsidiaries. As such we have not provided for any remaining tax effect, if any, of limited outside basis difference of our foreign subsidiaries based upon plans of future reinvestment. As a result of the Tax Act this amount is anticipated to be insignificant. The determination of the future tax consequences of the remittance of these earnings is not practicable. We recognize interest and penalties related to uncertain tax positions as a component of income tax expense. During the years ended December 31, 2019, 2018 and 2017, we recognized an increase of $45 thousand, a decrease of $0.7 million and an increase of $0.2 million of interest and penalties, respectively. Accrued interest and penalties as of December 31, 2019 and 2018 were approximately $0.1 million and $73 thousand, respectively. We file tax returns in U.S. federal, state, and certain foreign jurisdictions with varying statutes of limitations. Due to net operating loss and credit carryforwards, all of the tax years since inception through the 2019 tax year remain subject to examination by the U.S. federal and some state authorities. Foreign jurisdictions remain subject to examination up to approximately seven years from the filing date, depending on the jurisdiction. A reconciliation of the beginning and ending balances of the total amount of unrecognized tax benefits, excluding accrued interest and penalties, is as follows (in thousands):
| Years Ended December 31,
| 2019 |  | 2018 |  | 2017
Beginning balance | $ | 8,771 |  |  | $ | 5,772 |  |  | $ | 4,882 |
Increase in tax positions for prior years | 221 |  |  | 758 |  |  | 280 |
Decrease in tax positions for prior years | (1,550 | ) |  | (569 | ) |  | (101 | )
Decrease in tax positions for prior year settlement | — |  |  | (149 | ) |  | (172 | )
Decrease in tax positions for prior years due to statutes lapsing | (164 | ) |  | (103 | ) |  | (169 | )
Increase in tax positions for current year | 3,722 |  |  | 3,112 |  |  | 978 |
Change due to translation of foreign currencies | (7 | ) |  | (50 | ) |  | 74 |
Ending balance | $ | 10,993 |  |  | $ | 8,771 |  |  | $ | 5,772 |
The amount of unrecognized tax benefits, if recognized, that would affect the effective tax rate is $1.9 million for the year ended December 31, 2019. One or more of these unrecognized tax benefits could be subject to a valuation allowance if, and when recognized in a future period, which could impact the timing of any related effective tax rate benefit. The actual amount of any taxes due could vary significantly depending on the ultimate timing and nature of any settlement. We believe that the amount by which the unrecognized tax benefits may increase or decrease within the next 12 months is not estimable.

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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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