Income Taxes

12 Months Ended

Dec. 31, 2018

Note 17. Income Taxes

For the years ended December 31, 2018 and 2017, the loss from continuing operations before income taxes consists of the following:

	2018			2017
Domestic	$	(36,506	)	$	(16,536	)
Foreign		597			535
	$	(35,909	)	$	(16,001	)

Income tax expense attributable to continuing and discontinued operations for the years ended December 31, 2018 and 2017 consisted of the following:

	2018			2017
Continuing operations
Current:
Federal	$	(6	)	$	—
State		22			—
Foreign		22			62
Deferred:
Federal		(316	)		49
State		—			—
Foreign		—			—
	$	(278	)	$	111

	2018		2017
Discontinued operations
Current:
Federal	$	—	$	11
State		—		1
Foreign		—		—
Deferred:
Federal		—		—
State		—		—
Foreign		—		—
	$	—	$	12

Income tax expense attributable to continuing operations differed from the amounts computed by applying the applicable United States federal income tax rate to loss from continuing operations before taxes on income as a result of the following:

	For the years ended December 31,
	2018			2017
Loss from continuing operations before income taxes	$	(35,909	)	$	(16,001	)
Tax rate		21	%		35	%

Computed “expected” tax benefit		(7,541	)		(5,600	)
State taxes, net of federal income tax benefit		(1,422	)		(647	)
Change in valuation allowance		7,539			(19,554	)
Nondeductible expenses		242			800
Tax Reform Rate impact		—			24,486
Other items		904			626
Income tax expense (benefit) for continuing operations	$	(278	)	$	111

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 tax assets and liabilities as of December 31, 2018 and 2017 are as follows:

	December 31,
	2018			2017
Deferred income tax assets
Net operating loss carryforwards	$	39,972		$	35,743
Stock-based compensation		4,468			4,238
Intangible assets and other		4,308			1,020
Net deferred income tax assets		48,748			41,001
Less:
Valuation allowance		(48,748	)		(41,209	)
Net deferred income tax assets	$	—		$	(208	)

The Company assesses the need for a valuation allowance related to its deferred income tax assets by considering whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. A valuation allowance has been recorded against the Company’s deferred income tax assets, as it is in the opinion of management that it is more likely than not that the net operating loss carryforwards (“NOLs”) will not be utilized in the foreseeable future.

The cumulative valuation allowance as of December 31, 2018 is $

48,748

which will be reduced if and when the Company determines that the deferred income tax assets are more likely than not to be realized.

The following table presents the changes to the valuation allowance during the years presented:

As of January 1, 2017	$	58,914
Charged to cost and expenses – continuing operations		(19,206	)
Charged to cost and expenses – discontinued operations		1,455
Return to provision true-up and other		46
As of December 31, 2017		41,209
Charged to cost and expenses – continuing operations		8,300
Charged to cost and expenses – discontinued operations		342
Return to provision true-up and other		(1,103	)
As of December 31, 2018	$	48,748

As of

December 31, 2018

, the Company’s estimated aggregate total

NOLs

were $

150,926

for U.S. federal purposes, expiring

years from the respective tax years to which they relate, and $23,139 for U.S. federal purposes with an indefinite life due to new regulations in the TCJA of 2017. The NOL amounts are presented before Internal Revenue Code, Section 382 limitations (“Section 382”). The Tax Reform Act of 1986 imposed substantial restrictions on the utilization of NOL and tax credits in the event of an ownership change of a corporation. Thus, the Company’s ability to utilize all such NOL and credit carryforwards may be limited. The NOLs available post-merger that the Company completed in 2012 that are not subject to limitation amount to $134,463. The remaining NOLs of

39,601

are subject to the limitation of Section

382

. The annual limitation is approximately $

2,000

The Company files its tax returns in the U.S. federal jurisdiction, as well as in various state and local jurisdictions. XpresSpa Group has open tax years for 2015 through 2017.

On December 22, 2017, the United States government enacted the Tax Act, which made changes to the corporate tax rate, business-related deductions and taxation of foreign earnings, among other changes, that was generally effective for tax years beginning after December 31, 2017. After the one-year evaluation under SAB 118, the Company determined that there was no material impact from the TCJA.

As a result of the reduction to the corporate tax rate, the Company was required to remeasure its deferred tax assets and liabilities and any associated adjustment to the valuation allowance. As the Company was in a full valuation allowance in both 2018 and 2017, the net impact to the financial statements associated with the rate change was immaterial.