Income Taxes

The sources of income (loss) before income taxes are as follows:



	December 31,
	2018		2017			2016
United States	$	47,191	$	(28,577	)	$	30,696
Foreign	23,301		(841		)	7,070
Income (loss) before income taxes	$	70,492	$	(29,418	)	$	37,766

The provision for (benefit from) income taxes are as follows:



	December 31,
	2018			2017			2016
Current
Federal	$	12,311		$	10,107		$	12,261
State and local	4,843			2,372			3,219
Foreign	6,907			8,257			5,668
Current provision for income taxes	24,061			20,736			21,148
Deferred
Federal	6,403			5,642			727
State and local	(354		)	(2,951		)	(370		)
Foreign	(8,913		)	(4,210		)	848
Deferred provision (benefit) for income taxes	(2,864		)	(1,519		)	1,205
Total provision for income taxes	$	21,197		$	19,217		$	22,353

A reconciliation of the provision for income taxes to income taxes at the statutory U.S. federal income tax rate of 21% is as follows:



	December 31,
	2018			2017			2016
Income tax provision (benefit) at the statutory U.S. federal rate	$	14,803		$	(10,296	)	$	13,218
State income tax provision (benefit), net of federal tax benefit	3,242			(593		)	1,904
Nondeductible expenses, net	2,587			3,282			1,410
Foreign taxes (includes rate differential and changes in foreign valuation allowance)	(35		)	5,465			(2,133		)
Establishment (release) of valuation allowance	(43		)	(3,200		)	340
U.S. tax on foreign dividends	765			—			5,898
Current/deferred true-up	(1,199		)	567			1,226
Tax reform	—			23,732			—
Other, net	1,077			260			490
Total provision for income taxes	$	21,197		$	19,217		$	22,353

The deferred tax assets and liabilities are attributable to the following components:



	December 31,
	2018			2017
Deferred tax assets attributable to:
Foreign net operating loss carryforwards	$	18,259		$	31,960
Accrued compensation and employee benefits	15,442			15,809
Deferred compensation	15,587			13,600
Foreign tax credit carryforwards	8,163			8,128
Accrued rent	3,096			3,607
Other accrued expenses	6,290			2,179
Deferred tax assets, before valuation allowance	66,837			75,283
Valuation allowance	(26,460		)	(35,624		)
Deferred tax assets, after valuation allowance	40,377			39,659
Deferred tax liabilities attributable to:
Goodwill	2,203			306
Taxes provided on unremitted earnings	765			129
Depreciation on property and equipment	2,040			3,216
Other	686			606
Deferred tax liabilities	5,694			4,257
Net deferred tax assets	$	34,683		$	35,402

The recognition of deferred tax assets is based on management’s belief that it is more likely than not that the tax benefits associated with temporary differences, net operating loss carryforwards and tax credits will be utilized. The Company assesses the recoverability of the deferred tax assets on an ongoing basis. In making this assessment, the Company considers all positive and negative evidence, and all potential sources of taxable income including scheduled reversals of deferred tax liabilities, tax-planning strategies, projected future taxable income and recent financial performance.

The valuation allowance decreased from $35.6 million at December 31, 2017 to $26.5 million at December 31, 2018. The valuation allowance at December 31, 2018 was related to foreign net operating loss carryforwards, foreign tax credit carryforwards and certain foreign deferred tax assets. The Company intends to maintain these valuation allowances until sufficient evidence exists to support their reversal.

At December 31, 2018, the Company had a net operating loss carryforward of $118.0 million related to its foreign tax filings and $0.1 million related to its U.S. state tax filings. Of the $118.0 million net operating loss carryforward, $59.8 million is subject to a valuation allowance. Depending on the tax rules of the tax jurisdictions, the losses can be carried forward indefinitely or for periods ranging from five to twenty years. The Company also has a foreign tax credit carryforward of $8.2 million subject to a valuation allowance of $8.2 million.

At December 31, 2017, the Company had a net operating loss carryforward of $126.0 million related to its foreign tax filings and $0.1 million related to its U.S. state tax filings. Of the $126.0 million net operating loss carryforward, $95.4 million is subject to a valuation allowance. Depending on the tax rules of the tax jurisdictions, the losses can be carried forward indefinitely or for periods ranging from five to twenty years. The Company also has a foreign tax credit carryforward of $8.1 million subject to a valuation allowance of $8.1 million.

As of December 31, 2018, the Company had unremitted earnings held in its foreign subsidiaries of approximately $75.5 million, of which the company has provided $0.9 million of tax on $7.2 million of earnings that are intended to be remitted. The Company did not recognize a tax liability for income taxes and foreign withholding taxes related to the unremitted earnings of its foreign operations because the Company intends to reinvest those earnings indefinitely, net of any allowable deductions. An estimate of these taxes, however, is not practicable. A tax liability will be recognized if and when the Company is no longer able to demonstrate that it plans to permanently reinvest unremitted earnings.

As of December 31, 2017, the Company had unremitted earnings held in its foreign subsidiaries of approximately $74.1 million, of which the company has provided $1.6 million of tax on $15.7 million of earnings that are intended to be remitted. The Company did not recognize a tax liability for income taxes and foreign withholding taxes related to the unremitted earnings of its foreign operations because the Company intends to reinvest those earnings indefinitely, net of any allowable deductions. An estimate of these taxes, however, is not practicable. A tax liability will be recognized if and when the Company is no longer able to demonstrate that it plans to permanently reinvest unremitted earnings.

As of January 1, 2018, the Company had $0.7 million of unrecognized tax benefits. As of December 31, 2018, the Company had $1.1 million of unrecognized tax benefits of which, if recognized, would be recorded as a component of income tax expense.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:



	December 31,
	2018			2017			2016
Gross unrecognized tax benefits at January 1,	$	740		$	1,038		$	130
Gross increases for tax positions of prior years	608			167			2,146
Gross decreases for tax positions of prior years	—			—			(4		)
Settlements	(220		)	(465		)	(1,234		)
Lapse of statute of limitations	—			—			—
Gross unrecognized tax benefits at December 31,	$	1,128		$	740		$	1,038

In many cases the Company’s uncertain tax positions are related to tax years that remain subject to examination by the relevant taxable authorities. Years 2015 through 2017 are subject to examination by the state taxing authorities. The years 2015 and 2017 are subject to examination by the federal taxing authority. There are certain foreign jurisdictions that are subject to examination for years prior to 2014.

The Company is currently under audit by some jurisdictions. It is likely that the examination phase of several of these audits will conclude in the next twelve months. No significant increases or decreases in unrecognized tax benefits are expected to occur by December 31, 2019.

Estimated interest and penalties related to the underpayment of income taxes are classified as a component of the provision for income taxes in the Consolidated Statements of Comprehensive Income (Loss). Accrued interest and penalties are $0.4 million as of December 31, 2018.

The Global Intangible Low-Taxed Income ("GILTI") provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company became subject to incremental U.S. tax on GILTI income beginning in 2018 due to expense allocations required by the U.S. foreign tax credit rules. The Company has elected to account for GILTI tax in the period in which it is incurred, and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the year ended December 31, 2018.

The Base Erosion and Anti-Abuse Tax ("BEAT") provisions in the Tax Reform Act eliminates the deduction of certain base-erosion payments made to related foreign corporations, and impose a minimum tax if greater than regular tax. The Company does not expect it will be subject to this tax and therefore has not included any tax impacts of BEAT in its consolidated financial statements for the year ended December 31, 2018.