INCOME TAXES

The Company’s federal and state income tax benefit (expense) from continuing operations is summarized in the following table (in thousands):



	Year Ended December 31,
	2017			2016			2015
Current
Federal	$	925		$	—		$	—
State	(174		)	30			76
Total current	751			30			76
Deferred
Federal	1,951			(1,744		)	18,293
State	1,428			(301		)	3,163
Total deferred	3,379			(2,045		)	21,456
Total tax benefit (expense)	$	4,130		$	(2,015	)	$	21,532

The effect of temporary differences that give rise to a significant portion of deferred taxes is as follows (in thousands):



	December 31,
	2017			2016
Deferred tax assets:
Reserves not currently deductible	$	10,707		$	19,249
Net operating loss carryforwards	110,773			122,420
Goodwill and intangibles (tax deductible)	12,757			25,268
Accrued expenses	95			467
Property basis differences	2,813			2,578
Stock based compensation	2,371			6,887
Other	—			638
Total deferred tax assets	139,516			177,507
Deferred tax liabilities:
Other	(180		)	—
Less: valuation allowance	(138,238		)	(179,788		)
Net deferred tax asset	1,098			(2,281		)
Deferred taxes	$	1,098		$	(2,281	)

The Company continually assesses the necessity of a valuation allowance. Based on this assessment, the Company concluded that a valuation allowance, in the amount of $138.2 million and $179.8 million, was required as of December 31, 2017 and 2016, respectively. If the Company determines in a future period that it is more likely than not that part or all of the deferred tax assets will be realized, the Company will reverse part or all of the valuation allowance.

At December 31, 2017, the Company had federal net operating loss (“NOL”) carryforwards of approximately $410.3 million, of which $12.9 million is subject to an annual limitation, which will begin expiring in 2026 and later. The Company has post-apportioned state NOL carryforwards of approximately $450.4 million, the majority of which will begin expiring in 2018 and later.

The Company’s reconciliation of the statutory rate to the effective income tax rate from continuing operations is as follows (in thousands):



	Year Ended December 31,
	2017			2016			2015
Tax benefit at statutory rate	$	23,654		$	11,907		$	114,222
State tax benefit, net of federal taxes	4,587			1,398			8,414
Change in valuation allowance	41,550			(14,725		)	(57,567		)
Change in tax contingencies	10			66			37
Alternative minimum tax receivable	925			—			—
Corporate tax rate changes	(67,707		)	—			—
Goodwill impairment	—			—			(43,362		)
Other	1,111			(661		)	(212		)
Tax benefit (expense)	$	4,130		$	(2,015	)	$	21,532

As of December 31, 2017, the Company had $1.0 million of gross unrecognized tax benefits. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):



	Year Ended December 31,
	2017			2016			2015
Unrecognized tax benefits balance at January 1,	$	1,021		$	1,067		$	1,096
Lapse of statute of limitations	(7		)	(46		)	(29		)
Unrecognized tax benefits balance at December 31,	$	1,014		$	1,021		$	1,067

The Company’s policy for recording interest and penalties associated with uncertain tax positions is to record such items as a component of income tax expense in the Consolidated Statements of Operations. As of December 31, 2017 and December 31, 2016, the Company had a nominal amount of accrued interest related to uncertain tax positions.

The Company files income tax returns, including returns for its subsidiaries, with federal, state and local jurisdictions. The Company’s uncertain tax positions are related to tax years that remain subject to examination. As of December 31, 2017, U.S. tax returns for the years 2014 through 2017 remain subject to examination by federal tax authorities. Tax returns for the years 2013 through 2017 remain subject to examination by state and local tax authorities for a majority of the Company's state and local filings.

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act of 2017 or US Federal Tax Reform (the “Reform”). The enactment included broad tax changes that are applicable to Bioscrip, Inc. Most notably, the Reform has established the U.S. corporate tax rate decrease from a high of 35% to a flat 21% income tax rate effective January 1, 2018.

These changes require Bioscrip, Inc. to re-measure deferred tax assets and liabilities. The Company uses the asset and liability approach for accounting for income taxes. Under that method, assets and liabilities are recorded for future tax consequences attributable to the difference between financial statement balances of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates at which the temporary differences are expected to reverse. As a result of the decreased US corporate income tax rate from 35% to 21%, the Company has revalued its ending net deferred tax assets as of December 31, 2017. Due to the full valuation allowance against substantially all net deferred tax assets, the change in deferred tax rate to 21% does not have an impact on the Company’s financial statements.