We consider all available evidence to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), and projected taxable income in assessing the realizability of deferred tax assets. In making such judgments, significant weight is given to evidence that can be objectively verified. In order to fully realize the deferred tax assets, we will need to generate sufficient taxable income in future periods before the expiration of the deferred tax assets governed by the tax code.

We do not provide for deferred taxes on the excess of the financial reporting basis over the tax basis in our investments in foreign subsidiaries that are essentially permanent in duration or not subject to taxation in the U.S. or in the local country. Within consolidated retained earnings at December 31, 2019 are undistributed after-tax earnings from certain non-U.S. subsidiaries that are not indefinitely reinvested. At December 31, 2019, the Company has a deferred tax liability of $2,282 for the estimated taxes associated with the repatriation of these earning. Generally, the earnings of our foreign subsidiaries become subject to U.S. taxation based on certain provisions in U.S. tax law such as the Global intangible low taxable income and under certain other circumstances.

Differences between U.S. federal statutory income tax rates and our effective tax rates for year ended December 31, 2019 and 2018 are as follows:

We operate in multiple tax jurisdictions including Australia, Malaysia, India, Saudi, South Africa, UK, , the Netherlands, the Sri Lanka, the Argentina, the Peru, the Mauritius, Singapore, the Philippines, United Arab Emirates, the Honduras, the Jamaica, the Philippines, Canada and US. As a result, our effective tax rate changes from year to year based on recurring factors such as the geographical mix of income before taxes, state and local taxes, the ratio of permanent items to pre-tax book income and the implementation of various global tax strategies, as well as non-recurring events.

The Company recorded income tax expense of $4,791 and $3,570 for the year ended December 31, 2019 and 2018, respectively. The effective tax rate increased from 19% during the year ended December 31, 2018 to 56% during the year ended December 31, 2019 primarily as a result of:

(i) In 2019, the Government of India introduced a new tax regime for certain Indian companies by enacting the Taxation Laws (Amendment) Act, 2019. The new tax regime is optional and provides for a lower tax rate for Indian companies, subject to certain conditions which among other things include not availing of specified exemptions or incentives. The Indian subsidiary has opted for the new tax regime to obtain the benefit of a lower tax rate. This resulted into recording of net income tax expense of $ 778 on account of revaluation of net deferred tax asset due to change in corporate tax rate in India (ii) recording of income tax expense on undistributed earnings of Controlled Foreign Corporation of $ 1,232 (iii) recording of net income tax expense of $ 977 on Global Intangible Low Taxable Income (GILTI) of Controlled Foreign Corporation (iv) recording of a tax expense of $638 with respect to unused 2019 foreign income tax credits (v) income exempt for tax purposes of $1,123 (vi) tax effect of $ 1,753 on impairment charge.

We had U.S. gross federal net operating losses carry forwards of approximately $ 72.2 Mn and $ 60.4 Mn as at December 31, 2019 and as at December 31, 2018 respectively, and gross state net operating loss carry forwards of approximately $ 43.16 Mn and 66.3 Mn as at December 31, 2019 and as at December 31, 2018 respectively, which may be available to offset federal and state income tax liabilities, respectively, in the future. The federal net operating loss carry forwards generated in 2017 and before, if not utilized, will expire beginning in 2028. Federal NOL generated in 2018 and after will not expire. The State net operating losses will expire based on each state income tax laws. We had gross Non-US net operating losses carry forward of approximately $ 25.40 Mn as at December 31, 2019. Net operating losses of Srilanka, Mauritius and Argentina aggregating to $ 6.04 Mn will expire through 2025 and the remaining NOL have no expiration. In general, under Section 382 (“Section 382”) of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income.

We have been granted “Tax Holidays” as an incentive to attract foreign investment by the governments of Honduras, Jamaica, and certain qualifying locations in the Philippines. Generally, a Tax Holiday is an agreement between us and a foreign government under which we receive certain tax benefits in that country. In Honduras, we have been granted approval for an indefinite exemption from income taxes. The tax holidays for our qualifying Philippines facilities expire at staggered dates through 2021. Our Tax Holidays could be eliminated if there are future changes in our operations or the governmental authorities approve legislation to modify the Tax Holidays in the various taxing jurisdictions. The aggregate reduction in income tax expense for the year ended December 31, 2019 was $ 1.1 Mn.

Under accounting standards for uncertainty in income taxes (ASC 740-10), a company recognizes a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” in the accounting standards for income taxes refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods.

The following table indicates the changes to our unrecognized tax benefits for the year ended December 31, 2019 and December 31, 2018. The term “unrecognized tax benefits” in the accounting standards for income taxes refers to the differences between a tax position taken or expected to be taken in a tax return and the benefit measured and recognized in the financial statements. If recognized, all of these benefits would impact our income tax expense, before consideration of any related valuation allowance.

	*Year ended December 31, 2019*			*Nine months ended December 31, 2018*
Unrecognized, beginning		3,323			-
Additions due to acquisition		-			3,122
Additions based on tax positions taken in the period		-			201
Reductions based on tax positions taken in the period		(451	)		-
Unrecognized, ending		2,872			3,323

We file numerous consolidated and separate income tax returns in the U.S. federal and many state jurisdictions as well as in many foreign jurisdictions. Our U.S. federal returns and most state returns for tax years 2016 and forward are subject to examination. Tax return filings in India for the year ended March 2018 and onward are still open for examination as well as Malaysian tax returns for their tax years ending March 2018.