

	Year Ended December 31,
	2019			2018			2017
Current taxes:
Federal	$	—		$	—		$	(100	)
Foreign	918			83			62
State	101			69			74
Total current taxes	$	1,019		$	152		$	36
Deferred taxes:
Federal	$	129		$	(305	)	$	32
Change in valuation allowance - acquisitions	(14,994		)	(2,970		)	—
Foreign	(113		)	(2		)	—
State	1,472			(678		)	(382		)
Total deferred taxes	(13,506		)	(3,955		)	(350		)
Benefit from income taxes	$	(12,487	)	$	(3,803	)	$	(314	)

The Company had federal net operating loss carryforwards of approximately $425.0 million and $276.9 million at December 31, 2019 and 2018, respectively, which will expire at various dates beginning in 2026, if not utilized. Federal net

operating losses generated during and after the year ended December 31, 2018 will have an indefinite carryforward period. The Company also held state tax credits of $2.4 million and $1.2 million for the years ended December 31, 2019 and 2018, respectively, and federal R&D tax credits of $8.1 million and $3.2 million for the years ended December 31, 2019 and 2018, respectively. The federal and state net operating losses along with state tax credits will begin to expire in 2026, if not utilized.

Utilization of the net operating losses and credit carryforwards may be subject to a substantial annual limitation due to the "change in ownership" provisions of the Internal Revenue Code of 1986. The annual limitation may result in the expiration of net operating losses and credit carryforwards before utilization.

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 the Company's deferred taxes consisted of the following:



	December 31,
	2019			2018
Deferred tax assets:
NOL and credit carryforwards	$	109,610		$	69,339
Deferred revenue	10,082			5,064
Accrued expenses and other	2,596			5,347
Stock-based compensation	5,894			5,494
Lease liabilities	10,778			—
Interest expense carryforwards	619			—
Convertible debt hedge	9,932			—
Foreign	—			41
Total deferred tax assets	149,511			85,285
Deferred tax liabilities:
Deferred expenses	(10,264		)	(6,717		)
Convertible debt	(27,115		)	(10,045		)
Depreciation and amortization	(31,610		)	(12,830		)
Capitalized software	(490		)	(637		)
Right of use assets	(8,400		)	—
Total deferred tax liabilities	(77,879		)	(30,229		)
Deferred tax assets less tax liabilities	71,632			55,056
Less: valuation allowance	(71,945		)	(53,936		)
Net deferred tax asset (liability)	$	(313	)	$	1,120

The Company has established a valuation allowance due to uncertainties regarding the realization of deferred tax assets based on the Company's lack of earnings history. During 2019, the valuation allowance increased by approximately $42.2 million due to continuing operations. The valuation allowance change included a reduction of $10.0 million due to issuance of convertible debt during the year and $15.0 million due to acquired income tax benefits as a result of the 2019 business combinations, which was recorded as an income tax benefit in the year ended December 31, 2019. The Company recorded a valuation allowance on all state credits due to the uncertainty of the recent acquisition on current and future state apportionment.

At December 31, 2019, the Company did not provide any U.S. income or foreign withholding taxes on approximately $2.1 million of certain foreign subsidiaries' undistributed earnings, as such earnings have been retained and are intended to be indefinitely reinvested. It is not practicable to estimate the amount of taxes that would be payable upon remittance of these earnings, because such tax, if any, is dependent upon circumstances existing if and when remittance occur. The Company's benefit from income taxes attributable to continuing operations differs from the expected tax benefit amount computed by applying the statutory federal income tax rate of 21%, 21%, and 34% to income before taxes for each of the years ended December 31, 2019, 2018, and 2017, respectively, primarily as a result of the following:



	Year Ended December 31,
	2019		2018		2017
Income tax at U.S. statutory rate	21.0	%	21.0	%	34.0	%
Effect of:
Increase in deferred tax valuation allowance	(50.6	)	(50.6	)	(77.1	)
Stock compensation	20.7		21.9		32.7
Acquisitions	15.8		5.9		—
R&D credit	4.8		5.0		4.7
State taxes, net of federal benefit	7.1		7.6		6.2
Tax impact of federal law change	—		—		1.2
Executive compensation	(3.3	)	(0.3	)	—
Other permanent items	(0.4	)	(0.8	)	(0.5	)
Income tax benefit effective rate	15.1	%	9.7	%	1.2	%

The Company files income tax returns in the U.S. federal jurisdiction, several state jurisdictions, and several foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years before 2016. Operating losses generated in years prior to 2016 remain open to adjustment until the statute of limitations closes for the tax year in which the net operating losses are utilized. The tax years 2016 through 2019 remain open to examination by all the major taxing jurisdictions to which the Company is subject, though the Company is not currently under examination by any major taxing jurisdiction.

The Tax Act was enacted in December 2017. The Tax Act significantly changed U.S. tax law by, among other things, lowering U.S. corporate income tax rates, implementing a modified territorial tax system, and imposing a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. The Tax Act reduced the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018.

In connection with the initial analysis of the impact of the Tax Act, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The remeasurement of the Company's deferred tax balance was primarily offset by application of its valuation allowance. The Company applied the guidance in SAB 118 when accounting for the enactment-date effects of the Tax Act in 2017 and throughout 2018, recording a provisional amount of $0.2 million related to the remeasurement of the deferred tax balances in the fourth quarter of 2017. During 2018, the Company completed its 2017 income tax returns and its accounting for the enactment-date income tax effects of the Act with no adjustments to the provisional amounts recorded at December 31, 2017.

While the Tax Act provides for a modified territorial tax system, beginning in 2018, global intangible low-taxed income, or GILTI, provisions will be applied providing an incremental tax on certain foreign income. The 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. Under GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on the future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred, or the period cost method, or (2) factoring such amounts into the Company's measurement of its deferred taxes, or the deferred method. The Company has selected the period cost method as its accounting policy with respect to the new GILTI tax rules.

The total amount of unrecognized benefits as of December 31, 2019 and 2018 was $10.7 million and $0.3 million. The reconciliation of unrecognized tax benefits at the beginning and end of the year is as follows:



	Year Ended December 31,
	2019		2018
Beginning balance	$	293	$	—
Gross increase related to prior year positions	396		—
Gross increase related to acquisitions	—		293
Gross increase related to current year positions	10,049		—
Ending balance	$	10,738	$	293

At December 31, 2019, approximately $0.7 million, including interest, would reduce the Company's annual effective tax rate, if recognized. As of December 31, 2019, the Company had less than $0.1 million of accrued interest. The Company believes it is reasonably possible that $10.0 million of its unrecognized tax benefits will be resolved within the next 12 months due to its IRS private letter ruling request. The Company records any interest and penalties related to unrecognized tax benefits in income tax expense.