9. INCOME TAXES

Income tax benefit (expense) consists of the following:


	Year Ended December 31,
(In thousands)	2018		2017		2016
Current
State	$	19	$	(4)	$	(95)
Deferred
Federal		190,195		—		—
State		5,859		—		—
		196,054		—		—
Total income tax benefit (expense), net	$	196,073	$	(4)	$	(95)

The impacts of the differences between the expected U.S. federal statutory income tax to our income tax expense are as follows:


		Year Ended December 31,
(In thousands)	2018		2017		2016
Expected tax at federal statutory rate	$	44,154	$	46,997	$	20,871
State income tax, net of federal benefit		(5,878)		4		—
Non-deductible executive compensation		747		987		925
Noncontrolling interest		(2,367)		—		—
Other		310		(1,506)		(122)
Impact of tax reform rate change		—		124,017		—
Change in valuation allowance		(233,039)		(170,495)		(21,579)
Income tax expense (benefit), net	$	(196,073)	$	4	$	95

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and deferred tax liabilities are as follows:


	As of December 31,
(In thousands)	2018		2017
Deferred tax assets
Net operating loss carryforwards	$	215,497	$	257,000
Research and development tax credit carryforwards		56,231		57,000
Other		1,647		3,000
Total deferred tax assets before valuation allowance		273,375		317,000
Valuation allowance		(64,199)		(303,000)
Total deferred tax assets		209,176		14,000
Deferred tax liabilities
Debt issuance discount and other		(13,122)		(14,000)
Net deferred tax assets	$	196,054	$	—

We record deferred tax assets if the realization of such assets is more likely than not to occur. Significant management judgment is required in determining whether a valuation allowance against the deferred tax assets is required. We have considered all available evidence, both positive and negative, such as our historical operating results and predictability of future taxable income, in making such determination. We are also required to exercise significant management’s judgment in forecasting future taxable income. Specifically, we evaluate the following criteria when considering a valuation allowance:

the history of tax net operating losses in recent years;

predictability of operating results;

profitability for a sustained period of time; and

level of profitability on a quarterly basis.

As of December 31, 2018, we had cumulative net income before tax for the three years then ended. Based on our historical operating performance and estimated future taxable income, we have concluded that it is more likely than not that we will be able to realize approximately $190.2 million and $5.9 million benefits of the U.S. federal and state deferred tax assets in the future, respectively.

As of December 31, 2017 and in earlier periods, the deferred tax assets were fully offset by a valuation allowance. The valuation allowance decreased by $181.2 million in the year ended December 31, 2017 primarily related to net operating losses utilization during 2017 and remeasurement of the deferred tax assets and liabilities due to enactment of the Tax Cuts and Jobs Act (the “TCJA”).

As of December 31, 2018, we had federal net operating loss carryforwards of approximately $0.8 billion, which will expire from 2027 through 2035, and federal research and development tax credit carryforwards of approximately $44.8 million, which will expire from 2019 through 2034. We also had state net operating loss carryforwards of approximately $653.0 million expiring in the years 2028 through 2035 and state research tax credits of approximately $32.3 million, which do not expire.

Utilization of net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code and similar state provisions. Annual limitations may result in expiration of net operating loss and tax credit carryforwards before some or all of such amounts have been utilized.

We conducted an Internal Revenue Code of 1986, as amended, Section 382 (“Section 382”) analysis through September 30, 2018 to determine whether an ownership change had occurred since inception. The Section 382 study concluded that it is more likely than not that the Company did not experience an ownership change during the testing period. However, notwithstanding the applicable annual limitations, no portion of the net operating loss or credit carryforwards is expected to expire before becoming available to reduce federal and state income tax liabilities as a result of those identified ownership changes. If we undergo another ownership change, the utilization of the pre-ownership change net operating loss carryforwards or pre-ownership change tax attributes, such as research tax credits, to offset the post-ownership change income may be subject to an annual limitation, pursuant to Sections 382 and 383 of the Internal Revenue Code of 1986, as amended. Similar rules may apply under state tax laws.

Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2018 and 2017, we had no accrued interest or penalties.

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, effective January 1, 2018, made broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21%, and creating a new limitation on deductible interest expense.

The staff of the SEC has recognized the complexity of reflecting the impacts of the TCJA, and, on December 22, 2017, issued guidance in Staff Accounting Bulletin 118 (“SAB 118”). SAB 118 clarifies accounting for income taxes under ASC Topic 740, Income Taxes (“ASC 740”), if information is not yet available or complete and provides for up to a one-year period in which to complete the required analyses and accounting (the measurement period). SAB 118 describes three scenarios (or “buckets”) associated with a company’s status of accounting for income tax reform: (1) a company is complete with its accounting for certain effects of tax reform, (2) a company is able to determine a reasonable estimate for certain effects of tax reform and records that estimate as a provisional amount, or (3) a company is not able to determine a reasonable estimate and therefore continues to apply ASC 740, based on the provisions of the tax laws that were in effect immediately prior to the TCJA being enacted. We completed our analysis during the measurement period and there were no measurement period adjustments recognized during the reporting period.

Uncertain Tax Positions

A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits are as follows (in thousands):


(In thousands)
Unrecognized tax benefits as of December 31, 2017, 2016 and 2015	$	15,488
Gross decrease in tax portions for 2018		(75)
Unrecognized tax benefits as of December 31, 2018	$	15,413

Our total unrecognized tax benefits as of December 31, 2018 were $15.4 million. Total unrecognized tax benefits that, if recognized, would affect our effective tax rate, were $8.0 million as of December 31, 2018. We do not anticipate the total amount of unrecognized income tax benefits relating to uncertain tax positions existing as of December 31, 2018 will significantly increase or decrease in the next 12 months.

We are subject to taxation in the U.S. and various state jurisdictions. The tax years 1999 and forward remain open to examination by the federal and most state tax authorities due to net operating loss and overall credit carryforward positions.