v3.10.0.1

Income taxes | 12 Months Ended
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Dec. 31, 2018
Income taxes |
Income taxes | 14. Income taxes The income tax (benefit) expense by jurisdiction recorded as part of continuing operations consists of the following for the years ended December 31:
|  | 2018 |  | 2017 |  | 2016
U.S. federal: |  |  |  |  |  |  |  |  |
Current |  | $ | 18 |  | $ | (6) |  | $ | 55
Deferred |  |  | (4,569) |  |  | (2,787) |  |  | 345
Total U.S. federal |  | $ | (4,551) |  | $ | (2,793) |  | $ | 400
U.S. state and local: |  |  |  |  |  |  |  |  |
Current |  | $ | 285 |  | $ | 503 |  | $ | 69
Deferred |  |  | (1,048) |  |  | 212 |  |  | (42)
Total U.S. state and local |  | $ | (763) |  | $ | 715 |  | $ | 27
Foreign: |  |  |  |  |  |  |  |  |
Current |  | $ | 161 |  | $ | — |  | $ | —
Total foreign |  | $ | 161 |  | $ | — |  | $ | —
In 2018, federal, state and local deferred tax expense of $5,686 related to the equity component of the Convertible Notes was recorded as additional paid-in capital. Income taxes differ from the amounts computed by applying the U.S. federal income tax rate to pretax income before income taxes as a result of the following for the years ended December 31:
|  | 2018 |  | 2017 |  | 2016 |
Federal statutory rate |  | 21.0 | % | 34.0 | % | 34.0 | %
State and local |  | 19.7 |  | 9.6 |  | 2.2 |
Foreign rate differential |  | (0.5) |  | (0.7) |  | (0.4) |
Stock options |  | (47.2) |  | 0.4 |  | (1.5) |
Excess tax benefits from stock-based compensation |  | 106.4 |  | 34.3 |  | 2.8 |
Non-controlling interests |  | 5.5 |  | 1.1 |  | 0.6 |
Valuation allowance |  | (90.7) |  | (83.6) |  | (38.9) |
Uncertain tax positions |  | 2.3 |  | 0.6 |  | (0.2) |
Effect of U.S. tax reform law changes |  | — |  | 14.7 |  | — |
Convertible Notes |  | 94.9 |  | — |  | — |
Other |  | (5.9) |  | (0.4) |  | (0.2) |
Income taxes |  | 105.5 | % | 10.0 | % | (1.6) | %
We have a foreign subsidiary in the United Kingdom, which has generated losses since inception resulting in a $2,022 deferred tax asset with a corresponding valuation allowance as of December 31, 2018. We also have a majority owned foreign subsidiary in Brazil, which has a $521 deferred tax asset with a corresponding valuation allowance as of December 31, 2018 due to historical operating losses. Foreign loss before income taxes was $577, $1,268, and $856 for 2018, 2017, and 2016, respectively. As of December 31, 2018, we had an immaterial amount of unremitted earnings in our subsidiaries located outside of the U.S. for which state taxes have not been paid. Our intention is to indefinitely reinvest these earnings outside the U.S. If we were to remit our foreign earnings, we would be subject to state income taxes or withholding taxes imposed on actual distributions, or currency transaction gains (losses) that would result in taxation upon remittance. However, the amounts of any such tax liabilities resulting from the repatriation of foreign earnings are not material. Deferred income tax reflects the tax effects of temporary differences that gave rise to significant portions of our deferred tax assets and liabilities and consisted of the following for the years ended December 31:
|  | 2018 |  | 2017
Deferred tax assets: |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 34,545 |  | $ | 23,838
Outside basis differences for U.S. partnerships |  |  | 9,558 |  |  | 14,306
Stock options |  |  | 2,396 |  |  | 4,100
Deferred revenue |  |  | 640 |  |  | 748
Deferred compensation |  |  | 120 |  |  | 249
State taxes |  |  | 80 |  |  | 78
Other |  |  | 1,525 |  |  | 1,282
Valuation allowance |  |  | (33,810) |  |  | (34,990)
Net deferred tax assets |  |  | 15,054 |  |  | 9,611
Deferred tax liabilities: |  |  |  |  |  |
Property and equipment |  |  | (7,318) |  |  | (6,983)
Convertible Notes |  |  | (5,470) |  |  | —
Intangible assets |  |  | (3,339) |  |  | (3,632)
Net deferred tax liabilities |  |  | (16,127) |  |  | (10,615)
Net deferred taxes |  | $ | (1,073) |  | $ | (1,004)
In December 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted in the U.S. TCJA amended the Internal Revenue Code of 1986 and included the following key provisions, which are generally effective for tax years beginning after December 31, 2017, that are determined to have a significant impact on our effective tax rate:
| · |  | Reduction of the corporate federal tax rate to 21%;
| · |  | Permanent repeal of the alternative minimum tax regime with refunds of excess carryforwards;
| · |  | For any net operating losses (“NOLs”) generated in tax years beginning after December 31, 2017, repeals carryback ability but permits indefinite carryforward subject to a limitation of utilization to 80% of taxable income;
| · |  | For executive compensation in excess of $1 million, changes covered employees to principal executive officer, principal financial officer, and three other highest paid officers; eliminates the “last day of the tax year” language for determination of a covered employee; removes exceptions for commissions and performance-based compensation; and employees that are covered persons remain covered persons for all future years;
| · |  | Permits 100% bonus depreciation for eligible property placed in-service after September 27, 2017 and before January 1, 2023;
| · |  | Disallows interest expense in excess of 30% of adjusted taxable income, which excludes deductions for depreciation, amortization, or depletion for taxable years beginning after December 31, 2017 and before January 1, 2022 only, but permits indefinite carryforward; and
| · |  | Expands income exclusions and/or deduction limitations for certain fringe benefits that we may offer to our employees.
We completed our assessment of the impact of TCJA on our consolidated financial statements as of December 31, 2017 and recorded the impact of the enactment of TCJA in our consolidated financial statements for the year ended December 31, 2017. In 2017, we recorded a $1,274 income tax benefit resulting from the reduction of the corporate federal tax rate as well as a $1,766 income tax benefit provided by the indefinite carryforward of NOLs, which are expected to be available to recover our deferred tax liabilities that have an indefinite reversal pattern. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2018 and 2017, we had federal net operating loss carryforwards of approximately $124,637 and $82,461, respectively, state net operating loss carryforwards of approximately $121,091 and $73,934, respectively, and foreign net operating loss carryforwards of $11,642 and $10,811, respectively. The federal net operating loss carryforwards will begin to expire in 2025, and our foreign net operating loss carryforwards have an indefinite life. Our state net operating loss carryforwards will begin to expire in 2032. Our ability to utilize certain of our net operating loss carryforwards may be limited in the event that a change in ownership, as defined in the Internal Revenue Code, occurs in the future. The following table sets forth the changes in the valuation allowance, for all periods presented:
|  | Valuation
|  | Allowance
Balance, December 31, 2015 |  | $ | 19,548
Additions charged to operations |  |  | 16,783
Decrease credited to operations |  |  | —
Balance, December 31, 2016 |  |  | 36,331
Additions charged to operations |  |  | 16,527
Effect of U.S. tax reform law changes |  |  | (17,868)
Decrease credited to operations |  |  | —
Balance, December 31, 2017 |  |  | 34,990
Decrease credited to operations |  |  | (1,180)
Balance, December 31, 2018 |  | $ | 33,810
The decreases credited to operations in 2018 were related to the deferred tax liabilities established against the equity component of the Convertible Notes. In reaching the determination of the valuation allowance, we have evaluated all significant available positive and negative evidence including, but not limited to, our three-year cumulative results, trends in our business, expected future results and the character, amount and expiration periods of our net deferred tax assets. The underlying assumptions we used in forecasting future income required significant judgment and took into account our recent performance. We recognized interest and penalties related to income tax matters in income taxes. Interest and penalties were not material during the years ended December 31, 2018, 2017, and 2016. We identify, evaluate and measure all uncertain tax positions taken or to be taken on tax returns and record liabilities for the amount of these positions that may not be sustained, or may only partially be sustained, upon examination by the relevant taxing authorities. Although we believe that our estimates and judgments were reasonable, actual results may differ from these estimates. Some or all of these judgments are subject to review by the taxing authorities. As of December 31, 2018 and 2017, we had $0 in uncertain tax positions. We accrue interest and penalties related to unrecognized tax benefits as a component of income taxes. A reconciliation of our unrecognized tax benefits, excluding interest and penalties, is as follows:
|  | Uncertain Tax Positions
Balance, December 31, 2016 |  | $ | 313
Additions for current period tax positions |  |  | —
Reversals during the period |  |  | (313)
Balance, December 31, 2017 and 2018 |  | $ | —
Our annual income taxes and the determination of the resulting deferred tax assets and liabilities involve a significant amount of judgment. Our judgments, assumptions and estimates relative to current income taxes take into account current tax laws, their interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. We operate within federal, state and international taxing jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues which may require an extended period of time to resolve. We are subject to taxation in the United States and in various states. Our tax years 2015 and forward are subject to examination by the IRS and our tax years 2014 and forward are subject to examination by material state jurisdictions. However, due to prior year loss carryovers, the IRS and state tax authorities may examine any tax years for which the carryovers are used to offset future taxable income. We are currently subject to examination by the IRS for our 2015 tax year. Although the ultimate outcome is unknown, we believe that any adjustments that may result from examination is not likely to have a material adverse effect on our consolidated results of operations, financial position or cash flows.

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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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