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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2018

The sources of pre-tax operating income are as follows (in thousands):


	Year Ended December 31,
	2018		2017		2016
Domestic	$	(13,926)	$	10,909	$	(6,216)
Foreign		70,164		77,978		56,514
Total	$	56,238	$	88,887	$	50,298

Components of Income Tax Expense (Benefit)

The United States recently enacted comprehensive tax reform legislation known as the Tax Cuts and Jobs Act (the "2017 Tax Act") that, among other things, reduces the U.S. federal corporate income tax rate from 35% to 21% and implements a territorial tax system, but imposes an alternative “base erosion and anti-abuse tax” (“BEAT”), and an incremental tax on global intangible low taxed foreign income (“GILTI”) effective January 1, 2018. In addition, the law imposes a one-time mandatory repatriation tax on accumulated post-1986 foreign earnings on domestic corporations effective for the 2017 tax year. As of December 31, 2018, the Company has completed its analysis of the impacts of the 2017 Tax Act within the measurement period in accordance with SAB 118, and no material adjustment was recorded to the 2017 estimate.

The significant components of this expense include (i) the remeasurement of net deferred tax assets at the lower enacted U.S. federal corporate tax rate, (ii) the deemed repatriation tax on unremitted non-U.S. earnings and profits that were previously tax deferred and (iii) other miscellaneous tax impacts.

While the Company’s accounting for the recorded impact of the 2017 Tax Act is deemed to be complete, these amounts are based on prevailing regulations and currently available information, and any additional guidance issued by the Internal Revenue Service (“IRS”) could impact the Company’s recorded amounts in future periods.

The Company’s selection of an accounting policy with respect to both the new GILTI and BEAT rules is to compute the related taxes in the period the entity becomes subject to either. A reasonable estimate of the effects of these provisions has been included in the 2018 annual financial statements.

No changes in indefinite reinvestment assertion were made during the year. The Company has completed its analysis in regard to the full tax impact related to prior changes in indefinite reinvestment reassertion and any related taxes have been recorded. No additional income taxes have been provided for any remaining outside basis difference inherent in the Company’s foreign subsidiaries as these amounts continue to be indefinitely reinvested in foreign operations. Determination of any unrecognized deferred tax liability related to the outside basis difference in investments in foreign subsidiaries is not practicable due to the inherent complexity of the multi-national tax environment in which the Company operates.

The components of the Company’s Provision for (benefit from) income taxes are as follows (in thousands):


	Year Ended December 31,
	2018		2017		2016
Current provision for (benefit from)
Federal	$	2,771	$	48,556	$	(373)
State		2,754		99		372
Foreign		18,933		12,643		14,447
Total current provision for (benefit from)		24,458		61,298		14,446
Deferred provision for (benefit from)
Federal		(943)		14,441		(2,390)
State		(138)		707		103
Foreign		(6,894)		1,629		704
Total deferred provision for (benefit from)		(7,975)		16,777		(1,583)
Total provision for (benefit from) income taxes	$	16,483	$	78,075	$	12,863

Effective Income Tax Rate Reconciliation Table

The following reconciles the Company’s effective tax rate to the federal statutory rate (in thousands):


	Year Ended December 31,
	2018		2017		2016
Income tax per U.S. federal statutory rate (21%, 35%, 35%)	$	11,810	$	31,110	$	17,605
State income taxes, net of federal deduction		2,003		460		(158)
Change in valuation allowances		2,191		(924)		(129)
Foreign income taxes at different rates than the U.S.		(3,758)		(14,417)		(10,206)
Foreign withholding taxes		785		323		590
Losses in international markets without tax benefits		(68)		1,098		2,474
Nondeductible compensation under Section 162(m)		615		647		104
Liabilities for uncertain tax positions		1,105		1,607		(133)
Permanent difference related to foreign exchange gains		136		142		388
(Income) losses of foreign branch operations		475		(824)		(635)
Non-taxable earnings of noncontrolling interest		(594)		(1,030)		(1,128)
Foreign dividend less foreign tax credits		(1,748)		(4,798)		(4,646)
Decrease (increase) to deferred tax asset - change in tax rate		(1,944)		1,101		443
State income tax credits		19		207		100
Foreign earnings taxed currently in U.S.		3,976		3,143		3,673
Taxes related to prior year filings		(1,659)		(865)		2,554
Taxes related to acquisition accounting		2,110		—		—
Transition tax		—		61,569		—
Other		1,029		(474)		1,967
Income tax per effective tax rate	$	16,483	$	78,075	$	12,863

Schedule of Deferred Tax Assets and Liabilities

The Company’s deferred income tax assets and liabilities are summarized as follows (in thousands):


	Year Ended December 31,
	2018		2017
Deferred tax assets, gross
Accrued workers compensation, deferred compensation and employee benefits	$	8,724	$	8,597
Allowance for doubtful accounts, insurance and other accruals		3,301		2,197
Amortization of deferred rent liabilities		2,614		2,352
Net operating losses		18,475		17,887
Equity compensation		1,348		1,481
Customer acquisition and deferred revenue accruals		13,894		7,026
Federal and state tax credits, net		549		50
Unrealized losses on derivatives		2,035		3,137
Impairment of equity investment		4,221		—
Other		1,001		1,557
Total deferred tax assets, gross		56,162		44,284
Valuation allowances		(10,867)		(9,526)
Total deferred tax assets, net		45,295		34,758
Deferred tax liabilities
Depreciation and amortization		(15,547)		(12,850)
Contract acquisition costs		(8,519)		(5,331)
Intangible assets		(15,890)		(15,405)
Other		(187)		(446)
Total deferred tax liabilities		(40,143)		(34,032)
Net deferred tax assets	$	5,152	$	726

Valuation Allowance Rollforward

Activity in the Company’s valuation allowance accounts consists of the following (in thousands):


	Year Ended December 31,
	2018		2017		2016
Beginning balance	$	9,526	$	9,949	$	10,139
Additions of deferred income tax expense		2,913		2,044		1,914
Reductions of deferred income tax expense		(1,572)		(2,467)		(2,104)
Ending balance	$	10,867	$	9,526	$	9,949

Expiration of Net Operating Loss Carryforwards

As of December 31, 2018, after consideration of all tax loss and tax credit carry back opportunities, the Company had tax affected tax loss carry forwards worldwide expiring as follows (in thousands):


2019	$	86
2020		146
2021		91
2022		—
After 2022		12,361
No expiration		5,791
Total	$	18,475

Reserve for Uncertain Tax Positions Rollforward

The tabular reconciliation of the reserve for uncertain tax benefits on a gross basis without interest for the three years ended December 31, 2018 is presented below (in thousands):


Balance as of December 31, 2015	$	2,709
Additions for current year tax positions		826
Reductions in prior year tax positions		(1,153)
Balance as of December 31, 2016		2,382
Additions for current year tax positions		916
Reductions in prior year tax positions		—
Balance as of December 31, 2017		3,298
Additions for current year tax positions		3,600
Reductions in prior year tax positions		(2,114)
Balance as of December 31, 2018	$	4,784

Jurisdictions Open to Income Tax Examination

The following table presents the major tax jurisdictions and tax years that are open as of December 31, 2018 and subject to examination by the respective tax authorities:


Tax Jurisdiction		Tax Year Ended
United States		2015 to present
Australia		2014 to present
Brazil		2013 to present
Canada		2010 to present
Mexico		2013 to present
Philippines		2015 to present