Income Taxes

The components of the provision for income taxes are as follows:



	Year Ended December 31,
	2017			2016			2015
	(amounts in thousands)
Current:
U.S. federal	$	3,244		$	3,382		$	3,351
State	907			639			720
Foreign	150			(18		)	53
Total current	4,301			4,003			4,124
Deferred:
U.S. federal	3,845			1,694			3,299
State	(192		)	(62		)	846
Foreign	71			(71		)	—
Total deferred	3,724			1,561			4,145
Provision for income taxes	$	8,025		$	5,564		$	8,269

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and significant changes to the U.S. tax code that affects the year ended December 31, 2017, including, but not limited to, a change in the federal rate from 35% to 21%, as well as the requirement to pay a one-time transition tax (“deemed repatriation tax”) on all undistributed earnings of foreign subsidiaries.

As of December 31, 2017, the Company had not completed its accounting for the tax effects of the Tax Act; however, the Company made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax. In accordance with Staff Accounting Bulletin 118 (“SAB 118”), income tax effects of the Tax Act may be refined upon obtaining, preparing, or analyzing additional information during the measurement period and such changes could be material. During the measurement period, provisional amounts may be adjusted for the effects, if any, of interpretative guidance issued after December 31, 2017, by U.S. regulatory and standard-setting bodies.

The reconciliation of income tax expense computed at the U.S. federal statutory rate to the income tax provision for the years ended December 31, 2017, 2016 and 2015 is as follows:



	Year Ended December 31,
	2017			2016			2015
	(amounts in thousands)
Income taxes at federal statutory rate	$	4,610		$	6,190		$	4,806
State income taxes, net of federal benefit	480			425			1,078
Foreign taxes	(85		)	(45		)	(65		)
Income tax reserve and other assessments	(479		)	(1,281		)	286
Nondeductible expenses	282			264			236
Excess tax benefits related to share-based compensation	(442		)	—			—
Provision for foreign unremitted earnings	74			103			46
Valuation allowance	423			115			2,190
Impact of Tax Act	3,030			—			—
Other	132			(207		)	(308		)
Provision for income taxes	$	8,025		$	5,564		$	8,269

The Company adopted ASU 2016-09 as of January 1, 2017, which resulted in the Company recording excess tax benefits from share-based award activity as a reduction of the provision for income taxes, whereas they were previously recognized in equity. Refer to "Recently Issued Accounting Pronouncements" in Note 2 for further detail.

The Tax Act reduces the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018. The Company recorded a provisional expense of $3.0 million with a corresponding decrease to its net deferred tax assets. Included in the $3.0 million amount is the Company's estimate of the deemed repatriation tax in the amount of $0.3 million. The deemed repatriation tax is a tax on previously untaxed earnings and profits of certain foreign subsidiaries. To determine the amount of the tax, the Company must determine, in addition to other factors, the amount of earnings and profits subject to U.S. tax for the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. The Company continues to gather additional information to more precisely compute the amount of deemed repatriation tax, which may be impacted by further legislative technical corrections, amendments and/or revised earnings and profits computations.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities consist of the following:



	Year Ended December 31,
	2017			2016
	(amounts in thousands)
Deferred tax assets:
Net operating loss and tax credit carryforwards	$	6,109		$	10,367
Allowance for doubtful accounts and other reserves	1,681			2,218
Deferred rent	1,102			1,726
Stock-based compensation	1,791			2,112
Equity method investments	2,060			2,529
Other	199			84
Valuation allowance	(2,500		)	(2,734		)
Total deferred tax assets	$	10,442		$	16,302
Deferred tax liabilities:
Unremitted earnings	$	—		$	(371	)
Intangible assets	(1,304		)	(1,855		)
Property and equipment	(750		)	(1,518		)
Capitalized software costs	(1,888		)	(2,640		)
Total deferred tax liabilities	(3,942		)	(6,384		)
Total net deferred tax assets	$	6,500		$	9,918

As of December 31, 2017, the Company had net operating loss carryforwards of approximately $23.4 million for federal tax purposes, which are set to expire in years 2018 through 2028. The majority of this amount represents acquired tax loss carryforwards of WeddingChannel.com, which are subject to limitation on future utilization under Section 382 of the Internal Revenue Code of 1986. Section 382 imposes limitations on the availability of a company’s net operating losses after a more than 50 percentage point ownership change occurs over a 3 year period. It is estimated that the effect of Section 382 will generally limit the amount of the net operating loss carryforwards of WeddingChannel.com that is available to offset future taxable income to approximately $3.6 million annually. The overall determination of the annual loss limitation is subject to interpretation, and, therefore, the annual loss limitation could be subject to change.

The following is a reconciliation of the Company’s unrecognized tax benefits for 2017 and 2016:



	2017			2016
	(amounts in thousands)
Balances of unrecognized tax benefits as of January 1	$	2,105		$	3,630
Decreases for positions taken in prior years	(199		)	(1,330		)
Increases for positions related to the current year	—			69
Expiration of the statute of limitations	(261		)	(264		)
Balance of unrecognized tax benefits as of December 31	$	1,645		$	2,105

As of December 31, 2017, $0.7 million of unrecognized tax benefits is presented within other long-term liabilities in the Consolidated Balance Sheets. These unrecognized tax benefits would affect the Company's effective income tax rate, if and when recognized in future years. The remainder of the unrecognized tax benefits has been netted against the related deferred and current tax assets and, if recognized, would also be reported as a reduction of income tax expense. The Company does not presently anticipate such uncertain tax positions will significantly increase or decrease in the next twelve months; however, actual developments could differ from those currently expected.

The Company is subject to income tax in the United States and various foreign state and local jurisdictions. During 2017, the IRS completed an audit on the 2015 tax year and concluded there were no adjustments necessary to the filed tax return.

The Company currently has no state and foreign audits pending. During 2017, the Company received a “Notice of Proposed Deficiency” from the state of Illinois in the amount of $9,000, including interest and penalties. The Company agreed with the auditor’s assessment. State income tax returns are generally subject to examination for a period of three to five years after filing of the return. However, the state impact of any federal changes remains subject to examination by various states for a period generally up to one year after formal notification to the states of the federal changes.

The Company records interest and penalties as a component of income tax expense. The total interest and penalties included in the Company's tax provision for the years ended December 31, 2017 and 2016 was immaterial.