Income Tax Provision/(Benefit). The components of net income before income taxes are as follows (in thousands):

	2018		2017			2016
Domestic	$	80,234	$	89,095		$	98,966
Foreign		6,753		(1,385	)		1,033
Total	$	86,987	$	87,710		$	99,999

	2018			2017		2016
Current:
Federal	$	7,814		$	13,422	$	31,409
State		4,589			1,909		3,819
Foreign		3,541			3,903		4,639
		15,944			19,234		39,867
Deferred:
Federal		4,584			5,582		(2,229	)
State		(619	)		937		276
Foreign		948			593		(797	)
		4,913			7,112		(2,750	)
Total income tax provision	$	20,857		$	26,346	$	37,117

The difference between our income tax provision computed at the statutory Federal income tax rate and our financial statement income tax is summarized as follows (in thousands):

	2018			2017			2016
Provision at Federal rate of 21% for 2018, 35% for 2017 and 2016)	$	18,267		$	30,699		$	35,000
State income taxes, net of Federal impact		2,985			1,850			2,662
Research and experimentation credits		(4,040	)		(2,853	)		(71	)
Stock award vesting		(1,513	)		(7,882	)		—
Tax uncertainties		(122	)		166			(1,597	)
Section 199 manufacturing deduction		168			(962	)		(4,060	)
Section 162(m) compensation limitation		951			273			297
Foreign rate differential		1,238			162			857
Valuation allowance for deferred tax assets		(177	)		2,351			1,287
Other impact of foreign operations		2,755			3,933			2,157
Statutory rate change		(87	)		(2,210	)		—
Other		432			819			585
Total income tax provision	$	20,857		$	26,346		$	37,117

We have undistributed earnings of approximately $40 million from certain foreign subsidiaries. We intend to indefinitely reinvest these foreign earnings; therefore, a provision has not been made for foreign withholding taxes that might be payable upon remittance of such earnings. Determination of the amount of unrecognized deferred tax liability on unremitted foreign earnings is not practicable because of the complexities of the hypothetical calculation. The Tax Cuts and Jobs Act (the “Tax Reform Act”), see further discussion below, effectively eliminates the U.S. tax consequences of unremitted earnings at December 31, 2017 due to inclusion of a deemed repatriation tax on such earnings. In addition, the Tax Reform Act establishes a participation exemption from the taxation of future dividends received from 10% owned foreign subsidiaries.

Deferred Income Taxes. Net deferred income tax assets as of December 31, 2018 and 2017 are as follows (in thousands):

	2018			2017
Deferred income tax assets	$	51,533		$	56,013
Deferred income tax liabilities		(28,837	)		(25,184	)
Valuation allowance		(19,814	)		(21,356	)
Net deferred income tax assets	$	2,882		$	9,473

The components of our net deferred income tax assets (liabilities) as of December 31, 2018 and 2017 are as follows (in thousands):

	2018			2017
Net deferred income tax assets:
Accrued expenses and reserves	$	7,180		$	10,745
Stock-based compensation		3,695			3,312
Software		(3,001	)		(4,364	)
Client contracts and related intangibles		(3,741	)		(5,932	)
Goodwill		(6,635	)		(5,828	)
Net operating loss carryforwards		24,857			29,953
Property and equipment		(8,315	)		1,381
Convertible debt securities		19			(3,639	)
Deferred revenue		2,606			2,225
State taxes		4,520			3,220
Contingent payments		(2,333	)		(1,860	)
Foreign exchange gain/loss		2,048			1,776
R&D credit		1,413			1,560
Other		383			(1,720	)
Total deferred income tax assets		22,696			30,829
Less: valuation allowance		(19,814	)		(21,356	)
Net deferred income tax assets	$	2,882		$	9,473

We regularly assess the likelihood of the future realization of our deferred income tax assets. To the extent we believe that it is more likely than not that a deferred income tax asset will not be realized, a valuation allowance is established. As of December 31, 2018, we believe that between: (i) carryback opportunities to past periods with taxable income; and (ii) sufficient taxable income to be generated in the future, we will realize 100% of the benefit of our U.S. Federal deferred income tax assets, thus no valuation allowance has been established. As of December 31, 2018, we have deferred income tax assets net of federal benefit related to state and foreign income tax jurisdictions of $4.5 million and $28.4 million, respectively, and have established valuation allowances against those deferred income tax assets of $2.5 million and $17.3 million, respectively.

As of December 31, 2018 and 2017, we have an acquired U.S. Federal net operating loss (“NOL”) carryforward of approximately $34 million and $39 million, respectively, which will begin to expire in 2024 and can be utilized through 2030. The acquired U.S. Federal NOL carryforward is attributable to the pre-acquisition periods of acquired subsidiaries. The annual utilization of this U.S. Federal NOL carryforward is limited pursuant to Section 382 of the Internal Revenue Code of 1986, as amended. In addition, as of December 31, 2018 and 2017, we have: (i) state NOL carryforwards of approximately $49 million and $50 million, respectively, which will expire beginning in 2019 and end in 2042; and (ii) foreign subsidiary NOL carryforwards of approximately $97 million and $103 million, respectively, which will expire beginning in 2019, with a portion of the losses available over an indefinite period of time.

Our 2004 Convertible Debt Securities, which we fully extinguished in 2011, were subject to special U.S. Treasury regulations governing contingent payment debt instruments. These regulations allowed us to take a tax deduction for interest expense on our U.S. Federal income tax return at a constant rate of 9.09% (subject to certain adjustments), compounded semi-annually, which represented the estimated yield on comparable non-contingent, non-convertible, fixed-rate debt instruments with terms and conditions otherwise similar to the 2004 Convertible Debt Securities. This interest expense tax deduction was greater than the interest expense reflected in the accompanying Income Statements, thus creating a deferred income tax liability. The extinguishment of the 2004 Convertible Debt Securities resulted in: (i) the holders of the 2004 Convertible Debt Securities not having the ability to achieve the 9.09% target yield, and (ii) a requirement for us to pay an amount equal to the cumulative deferred income tax liability to the U.S. tax authorities (without interest or penalties). During 2011, we paid cash of approximately $6 million related to the deferred income tax liabilities associated with the 2004 Convertible Debt Securities repurchased in 2011. In 2018, 2017 and 2016 we paid cash of $3.4 million, $5.6 million, and $5.6 million, respectively, related to the deferred income tax liabilities associated with the 2004 Convertible Debt Securities repurchased in 2009 and 2010.

Accounting for Uncertainty in Income Taxes. We are required to estimate our income tax liability in each jurisdiction in which we operate, including U.S. Federal, state and foreign income tax jurisdictions. Various judgments and estimates are required in evaluating our tax positions and determining our provisions for income taxes. During the ordinary course of business, there are certain transactions and calculations for which the ultimate income tax determination may be uncertain. In addition, we may be subject to examination of our income tax returns by various tax authorities, which could result in adverse outcomes. For these reasons, we establish a liability associated with unrecognized tax benefits based on estimates of whether additional taxes and interest may be due. This liability is adjusted based upon changing facts and circumstances, such as the closing of a tax audit, the expiration of a statute of limitations or the refinement of an estimate.

A reconciliation of the beginning and ending balances of our liability for unrecognized tax benefits is as follows (in thousands):

	2018			2017			2016
Balance, beginning of year	$	1,915		$	1,891		$	4,079
Additions based on tax positions related to current year		—			136			—
Audit settlements		—			(183	)		(1,893	)
Lapse of statute of limitations		(226	)		(174	)		(122	)
Additions for tax positions of prior years		85			257			370
Reductions for tax positions of prior years		(106	)		(12	)		(543	)
Balance, end of year	$	1,668		$	1,915		$	1,891

We recognize interest and penalty expense associated with our liability for unrecognized tax benefits as a component of income tax expense in our Income Statements. In addition to the $1.7 million, $1.9 million, and $1.9 million of liability for unrecognized tax benefits as of December 31, 2018, 2017, and 2016, we had $0.6 million, $0.5 million, and $0.4 million, respectively, of income tax-related accrued interest, net of any federal benefit of deduction. If recognized, the $1.7 million of unrecognized tax benefits as of December 31, 2018, would favorably impact our effective tax rate in future periods.

We file income tax returns in the U.S. Federal jurisdiction, various U.S. state and local jurisdictions, and many foreign jurisdictions. The U.S., U.K., and Australia are the main taxing jurisdictions in which we operate. The years open for audit vary depending on the taxing jurisdiction. During 2016, the U.S. Internal Revenue Service (“IRS”) completed its audits of our 2010 through 2012 tax years and in December 2016 we made an additional payment of approximately $8 million and entered into an agreement with the IRS closing the audits for those tax years. We estimate that it is reasonably possible that the amount of gross unrecognized tax benefits will decrease by up to $0.4 million over the next twelve months due to completion of audits and the expiration of statute of limitations.

We adopted ASU 2016-09, Compensation – Stock Compensation (Topic 718) in the first quarter of 2017. This ASU requires a change in the recognition of excess tax benefits and tax deficiencies, related to share-based payment transactions, which were recorded in equity, and now are recorded discrete to the quarter incurred as a component of income tax expense in the income statement. The adoption of this ASU provided an approximately $1 million and $3 million benefit to the income tax provision for 2018 and 2017, respectively.

U.S. Tax Cuts and Job Act. On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was passed into legislation. The Tax Reform Act amends the Internal Revenue Code, reducing the corporate income tax rate, changing or eliminating certain income tax deductions and credits and provides sweeping change to how U.S. companies are taxed on their international operations. The Tax Reform Act is generally effective for tax years beginning after December 31, 2017; however, certain provisions of the Tax Reform Act have effective dates beginning in 2017.

The Tax Reform Act reduced the U.S. maximum rate of income taxation from 35% to 21% applicable to taxable years beginning after December 31, 2017. In the fourth quarter of 2017, we recorded an estimated benefit of $2.3 million from revaluation of our U.S.-based net deferred income tax liabilities in accordance with ASC Topic 740. In the fourth quarter of 2017 we recorded provisional amounts for the tax effects of the tax law change for which the accounting was not complete, but for which a reasonable estimate could be determined. In the fourth quarter of 2018 we completed the accounting for the tax effects of the tax law change with no additional adjustments recorded.