INCOME TAXES

The Company accounts for income taxes in accordance with the FASB’s Codification topic, Income Taxes. These provisions require a company to determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. The Company did not have any unrecognized tax positions as of December 31, 2017 and 2016.

The federal returns for tax years 2013 through 2016 remain open to examination, and the tax years 2013 through 2016 remain open to examination by certain other taxing jurisdictions to which the Company is subject. Additional years may be open to the extent attributes are being carried forward to an open year.

Deferred income taxes arise from the temporary differences in the recognition of income and expenses for tax purposes. A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized.

On December 22, 2017, H.R. 1, commonly known as the Tax Cuts and Jobs Act (the "Act"), was signed into law. Among other things, the Act reduces our corporate federal tax rate from 35% to 21% effective January 1, 2018. As a result we are required to re-measure, through income tax expense, our deferred tax assets and liabilities using the enacted rate at which we expect them to be recovered or settled. The re-measurement of our net deferred tax liability resulted in an additional tax benefit of $1.9 million for the period ended December 31, 2017.

Deferred tax assets and liabilities were comprised of the following at December 31, 2017 and 2016:



(In thousands)	2017			2016
Deferred tax assets:
Accounts receivable and financing receivables	$	1,395		$	1,392
Accrued vacation	519			1,022
Stock-based compensation	1,416			1,678
Deferred revenue	132			894
Accrued severance	207			75
Accrued liabilities and other	884			1,025
Fixed assets	172			—
Credits	—			349
Net operating loss	13,261			26,689
Deferred tax assets	17,986			33,124
Less: Valuation allowance	1,605			1,624
Total deferred tax assets	$	16,381		$	31,500
Deferred tax liabilities:
Intangible assets	21,048			$	34,696
Fixed assets	—			50
Total deferred tax liabilities	$	21,048		$	34,746
Total net deferred tax liability	$	(4,667	)	$	(3,246	)

Significant components of the income tax provision for the years ended December 31, 2017, 2016 and 2015 were as follows:



(In thousands)	2017		2016			2015
Current provision:
Federal	$	1,535	$	(72	)	$	8,576
State	977		453			1,270
Deferred provision:
Federal	1,070		4,144			(2,421		)
State	351		(472		)	(277		)
Total income tax provision	$	3,933	$	4,053		$	7,148

The difference between income taxes at the U.S. federal statutory income tax rate of 35% and those reported in the consolidated statements of operations for the years ended December 31, 2017, 2016 and 2015 are as follows:



(In thousands)	2017			2016			2015
Income taxes at U.S. federal statutory rate	$	(4,584	)	$	2,795		$	8,922
Provision-to-return adjustments	433			325			(293		)
State income tax, net of federal tax effect	458			5			944
Domestic production activities deduction	(280		)	—			(670		)
Tax credits	(393		)	(349		)	(414		)
Uncertain tax positions	—			—			(1,219		)
Transaction costs	—			1,312			—
Goodwill impairment	9,520			—			—
Stock-based compensation	1,155			—			—
Deferred impact of tax reform	(1,890		)	—			—
Change in valuation allowance	(304		)	—			—
Other	(182		)	(35		)	(122		)
Total income tax provision	$	3,933		$	4,053		$	7,148

Our effective tax rates for the years ended December 31, 2017, 2016 and 2015 were (29.17)%, 50.75% and 28.04%, respectively. Our effective tax rate for the year ended December 31, 2017 was significantly impacted by tax shortfalls related to stock-based compensation resulting from our adoption of ASU 2016-09, the non-deductible nature of our goodwill impairment charges, and the effect of recent tax reform legislation. These three factors combined for a net $8.8 million tax expense impact during 2017, affecting the period's effective tax rate by approximately 65.2%. Our effective tax rate for the year ended December 31, 2016 was uncharacteristically high, primarily due to permanent non-deductible acquisition transaction costs of $3.8 million. The significantly reduced effective tax rate for the year ended December 31, 2015 is mostly due to beneficial adjustments recorded during 2015 related to our reserves for uncertain tax positions. The federal returns for tax years 2004 through 2009 had previously been under examination by the IRS, primarily in relation to research credits claimed on those returns. The IRS completed these examinations during 2015, consequently resulting in enhanced clarity regarding the sustainability of our uncertain tax positions for all years. The completion of these examinations prompted a change in our measurement of reserves for uncertain tax positions that benefited our effective tax rate by approximately 4.8% during 2015.

We have federal net operating loss carryfowards related to the acquisition of HHI of $82.9 million, $70.5 million, and $53.9 million at January 8, 2016, December 31, 2016, and December 31, 2017, respectively, which expire at various dates from 2028 to 2035. We have state net operating loss carryforwards related to the acquisition of HHI of $47.6 million, $46.5 million, and $37.1 million at January 8, 2016, December 31, 2016, and December 31, 2017, respectively, which expire at various dates from 2018 to 2035.

Realization of deferred tax assets associated with the state net operating loss carryforward is dependent upon generating sufficient taxable income prior to their expiration. We believe it is more likely than not that the benefit from certain state NOL carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance on the deferred tax assets related to these state NOL carryforwards of $1.6 million at January 8, 2016 and December 31, 2016 and $1.6 million as of December 31, 2017.