15. INCOME TAXES

As discussed in Note 2, the Company began operating in compliance with REIT requirements for federal income tax purposes effective January 1, 2016. As a REIT, the Company must distribute at least 90 percent of its taxable income (including dividends paid to it by its TRSs) except to the extent offset by NOLs. In addition, the Company must meet a number of other organizational and operational requirements. It is management's intention to adhere to these requirements and maintain the Company's REIT status. Most states where SBA operates conform to the federal rules recognizing REITs. Certain subsidiaries have made an election with the Company to be treated as TRSs in conjunction with the Company's REIT election; the TRS elections permit SBA to engage in certain business activities in which the REIT may not engage directly. A TRS is subject to federal and state income taxes on the income from these activities. A provision for taxes of the TRSs and of foreign branches of the REIT are included in its consolidated financial statements.

Income (loss) before provision for income taxes by geographic area is as follows:



		For the year ended December 31,
	2017		2016		2015

	(in thousands)

Domestic	$	73,405	$	(28,671)	$	(22,698)
Foreign		43,486		115,974		(143,897)
Total	$	116,891	$	87,303	$	(166,595)

The provision for income taxes consists of the following components:



		For the year ended December 31,
	2017		2016		2015

	(in thousands)
Current provision:
State	$	5,513	$	1,535	$	2,752
Foreign		11,681		8,121		6,314
Total current		17,194		9,656		9,066

Deferred provision (benefit) for taxes:
Federal		18,736		170,177		(3,023)
State		(241)		22,992		(3,106)
Foreign		9,155		30,425		(40,636)
Change in valuation allowance		(31,607)		(222,185)		46,760
Total deferred		(3,957)		1,409		(5)
Total provision for income taxes	$	13,237	$	11,065	$	9,061

A reconciliation of the provision for income taxes at the statutory U.S. Federal tax rate (35%) and the effective income tax rate is as follows:



	For the year ended December 31,
	2017		2016		2015

	(in thousands)
Statutory federal expense (benefit)	$	40,912	$	30,555	$	(58,307)
Foreign tax rate differential		3,745		1,083		3,534
State and local tax expense (benefit)		5,415		3,941		(230)
REIT adjustment		(34,346)		205,317		—
Permanent differences		(1,365)		(3,577)		4,892
Tax Act impact on deferred taxes		31,547		—		—
Foreign exchange rate changes		(55)		(5,822)		9,212
Other		(1,009)		1,753		3,200
Valuation allowance		(31,607)		(222,185)		46,760
Provision for income taxes	$	13,237	$	11,065	$	9,061

The components of the net deferred income tax asset (liability) accounts are as follows:



	As of December 31,
	2017			2016

	(in thousands)
Noncurrent deferred tax assets:
Net operating losses	$	65,257	$	50,143
Property, equipment, and intangible basis differences		3,038		2,583
Accrued liabilities		11,933		12,264
Non-cash compensation		7,500		19,908
Deferred revenue		2,110		3,904
Allowance for doubtful accounts		5,978		6,187
Currency translation		34,895		33,088
Other		2,698		1,032
Valuation allowance		(38,802)		(70,233)
Total noncurrent deferred tax assets, net (1)		94,607		58,876

Noncurrent deferred tax liabilities:
Property, equipment, and intangible basis differences		(98,589)		(65,459)
Straight-line rents		(22,740)		(18,081)
Deferred lease costs		(2,242)		(1,087)
Other		(136)		(922)
Total noncurrent deferred tax liabilities, net (1)	$	(29,100)	$	(26,673)

(1)Of these amounts, $1,670 and $30,770 are included in Other assets and Other long-term liabilities, respectively on the accompanying Consolidated Balance Sheets as of December 31, 2017. As of December 31, 2016, $774 and $27,447 are included in Other assets and Other long-term liabilities on the accompanying Consolidated Balance Sheet.

A deferred tax asset is reduced by a valuation allowance if based on the weight of all available evidence, including both positive and negative evidence, it is more likely than not (a likelihood of more than 50%) that the value of such assets will not be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. The realization of deferred tax assets, including carryforwards and deductible temporary differences, depends upon the existence of sufficient taxable income of the same character during the carryback or carryforward period. All sources of taxable income available to realize the deferred tax asset, including the future reversal of existing temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in carryback years and tax-planning strategies, should be considered.

The Company has recorded a valuation allowance for the majority of its deferred tax assets as management believes that it is not “more-likely-than-not” that the Company will generate sufficient taxable income in future periods to recognize the assets. Valuation allowances of $38.8 million and $70.2 million were being carried to offset net deferred income tax assets as of December 31, 2017 and 2016, respectively. The net change in the valuation allowance for the years ended December 31, 2017 and 2016 was $31.4 million and $222.6 million, respectively.

The Company has available at December 31, 2017, a federal NOL carry-forward of approximately $1.1 billion. These NOL carry-forwards will expire between 2022 and 2036. As of December 31, 2017, $956.7 million of the federal NOLs are attributes of the REIT. The Company may use these NOLs to offset its REIT taxable income, and thus any required distributions to shareholders may be reduced or eliminated until such time as the NOLs have been fully utilized. The Internal Revenue Code places limitations upon the future availability of NOLs based upon changes in the equity of the Company. If these occur, the ability of the Company to offset future income with existing NOLs may be limited. In addition, the Company has available at December 31, 2017, a foreign NOL carry-forward of $79.5 million and a net state operating tax loss carry-forward of approximately $456.1 million. These net operating tax loss carry-forwards begin to expire in 2018.

The U.S. tax losses generated in tax years 1999 through 2014 remain subject to adjustment, and tax years 2014 through 2017 are open to examination by the major jurisdictions in which the Company operates.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation in the form of the Tax Cuts and Jobs Act (the “Tax Act”) that significantly revises the U.S. tax code effective January 1, 2018 by, among other things, lowering the corporate income tax rate from a top marginal rate of 35% to a flat 21%, imposing a mandatory one-time deemed repatriation of foreign earnings (commonly referred to as the “transition tax”), limiting deductibility of interest expense and certain executive compensation and implementing a territorial tax system. The full impact of this change in tax law is provisional and subject to further analysis.

The Company does not expect to remit earnings from its foreign subsidiaries. Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $102.2 million at December 31, 2017. Those earnings are considered to be permanently reinvested and the Company could be subject to withholding taxes payable to various foreign countries. The Tax Act passed December 22, 2017 caused the Company to record a one-time income inclusion of unremitted earnings in the amount of $52.4 million. The Company's provisional calculation of its remaining outside basis difference is not considered material. Determining the amount of unrecognized deferred tax liability related to any additional outside basis difference in these entities (i.e., basis difference other than those subject to the one-time transition tax) is not practicable due to the complexities of the hypothetical calculation in determining residual taxes on undistributed earnings, including the availability of foreign tax credits, applicability of any additional local withholding tax, and other indirect tax consequence that may arise due to the distribution of these earnings.

The global intangible low-taxed income (“GILTI”) provisions of the Tax Act impose a tax on the income of certain foreign subsidiaries in excess of a specified return on tangible assets used by the foreign companies. FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. Given the complexity of the GILTI provisions, the Company is still evaluating the effects of the GILTI provisions and has not yet determined the new accounting policy. At December 31, 2017, the Company is still evaluating the GILTI provisions and the analysis of future taxable income that is subject to GILTI, the Company is still unable to make a reasonable estimate and has not reflected any adjustments related to GILTI in the Company's consolidated financial statements.