INCOME TAXES

Income Taxes

As of December 31, 2019, the Company had net operating loss carryforwards ("NOL"), of approximately $47.0 million, a foreign tax credit of $64 thousand and a domestic research and development tax credit carryforward of approximately $1.0 million. Our federal NOL is expected to expire as follows if unused: $41.0 million in 2020 through 2022, $5.5 million in 2024 through 2025 and $0.5 million in 2027 and later.

The Company is subject to income taxes in the U.S. federal jurisdiction, and various foreign, state and local jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. Although the U.S. and many states generally have statutes of limitations ranging from 3 to 5 years, those statutes could be extended due to the Company’s net operating loss and tax credit carryforward positions in several of the Company's tax jurisdictions. In the U.S., the tax years 2016 - 2018 remain open to examination by the Internal Revenue Service.

Cash paid for income taxes for the years ended December 31, 2019, 2018 and 2017 was $128 thousand, $36 thousand and $213 thousand, respectively.

The components of income before income taxes were as follows (in thousands):



	Year Ended December 31,
	2019			2018		2017
Domestic	$	(1,872	)	$	3,602	$	18,188
Foreign	(711		)	205		181
	$	(2,583	)	$	3,807	$	18,369

Temporary differences that give rise to the components of net deferred tax assets are as follows (in thousands):



	December 31,
	2019			2018
Inventory	$	2,005		$	1,249
Accrued compensation	122			110
Stock options	1,858			1,281
Research and development	990			476
Legal settlement	—			1,678
Research and development expense	1,417			—
Deferred revenue	2,052			3,305
Property and equipment	3,469			3,065
Net operating loss carryforwards	11,676			17,088
Foreign tax credit carryforward	64			38
Sales-type leases	(1,968		)	(3,936		)
Convertible debt equity component	(9,421		)	—
Foreign intangible	(691		)	—
Other	(179		)	—
	11,394			24,354
Valuation allowance	(5,656		)	(10,233		)
Total net deferred tax assets	$	5,738		$	14,121

The components of the income tax (benefit) expense are as follows (in thousands):



	Year Ended December 31,
	2019			2018			2017
Current income tax expense:
Federal	$	—		$	(115	)	$	—
State	189			192			6
Foreign	170			63			43
Total current expense	$	359		$	140		$	49
Deferred income tax (benefit) expense:
Federal	$	(1,610	)	$	(1,877	)	$	9,736
State	(307		)	(378		)	(872		)
Foreign	112			—			—
Total deferred (benefit) expense	(1,805		)	(2,255		)	8,864
Total income tax (benefit) expense	$	(1,446	)	$	(2,115	)	$	8,913

The Company's income tax (benefit) expense relating to income (loss) for the periods presented differs from the amounts that would result from applying the federal statutory rate to that income (loss) as follows:



	Year Ended December 31,
	2019		2018		2017
Statutory federal tax rate	21	%	21	%	34	%
State income taxes, net of federal benefit	9	%	(8	)%	(5	)%
Non-controlling interest in Heska Imaging US, LLC	—	%	—	%	1	%
Non-controlling interest in Optomed	(2	)%	—	%	—	%
Non-temporary stock option benefit	48	%	(50	)%	(30	)%
Meals and entertainment permanent difference	(2	)%	1	%	—	%
GILTI permanent difference	2	%	1	%	—	%
Other permanent differences	(1	)%	1	%	1	%
Foreign tax rate differences	6	%	—	%	—	%
Change in tax rate	(6	)%	—	%	32	%
Change in valuation allowance	(17	)%	—	%	16	%
Other deferred differences	(9	)%	(21	)%	—	%
Transaction costs	(6	)%	—	%	—	%
Executive compensation limit	(7	)%	—	%	—	%
Research & development credit	20	%	—	%	—	%
Other	—	%	(1	)%	—	%
Effective income tax rate	56	%	(56	)%	49	%

In 2019, we had total income tax benefit of $1.4 million, including $1.9 million in domestic deferred income tax benefit and $0.1 million in foreign deferred tax expense, and $0.4 million in current income tax expense. In 2018, we had total income tax benefit of $2.1 million, including approximately $2.3 million in domestic deferred income tax benefit, a non-cash benefit, and approximately $0.1 million in current income tax expense. In 2017, we had total income tax expense of $8.9 million, including $8.9 million in domestic deferred income tax expense, a non-cash expense, and $0.05 million in current income tax expense. Income tax benefit decreased in 2019 from 2018 due to executive compensation limitations and lower excess tax benefits related to stock-based compensation deductions. Income tax expense decreased in 2018 from 2017 from the recognition of $1.9 million in tax benefits related to stock-based compensation deductions.

ASC 740 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a "more-likely-than-not" recognition threshold before a benefit is recognized in the financial statements. As of December 31, 2019, the Company has not recorded a liability for uncertain tax positions. The Company would recognize interest and penalties related to uncertain tax positions in income tax (benefit) expense. No interest and penalties related to uncertain tax positions were accrued at December 31, 2019.