(9) Income Taxes

The components of loss before income taxes are as follows:

	Year Ended December 31,
	2017			2016			2015
	(in thousands)
Domestic	$	(16,642	)	$	(8,572	)	$	(8,016	)
Foreign		(2,945	)		(2,738	)		(3,370	)
Total	$	(19,587	)	$	(11,310	)	$	(11,386	)

For purposes of reconciling the Company’s provision for income taxes at the statutory rate and the Company’s provision (benefit) for income taxes at the effective tax rate, a notional 34% tax rate was applied as follows:

	Year Ended December 31,
	2017			2016			2015
	(in thousands)
Income tax at federal statutory rate	$	(6,659	)	$	(3,846	)	$	(3,871	)
Increase/(decrease) in tax resulting from:
State income tax expense, net of federal tax effect		(421	)		(183	)		(103	)
Nondeductible permanent items		1,506			1,012			567
Foreign rate differential		599			662			474
Tax rate change		7,226			(13	)		(74	)
Adjustment to deferred taxes		37			(132	)		(525	)
Change in valuation allowance		(2,291	)		2,351			2,921
Uncertain tax positions		76			83			50
Other		(26	)		42			(1	)
Total	$	47		$	(24	)	$	(562	)

The difference between the statutory federal income tax rate and the Company’s effective tax rate in 2017, 2016 and 2015 is primarily attributable to the effect of state income taxes, difference between the U.S. and foreign tax rates, deferred tax state rate adjustment, share-based compensation and other non-deductible permanent items, and the change in valuation allowance. The Company’s China, Sweden and U.K. subsidiaries were subject to 25%, 22% and 20% applicable statutory income tax rates, respectively, for the periods presented.

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

	Year Ended December 31,
	2017			2016			2015
	(in thousands)
Current:
Federal	$	(23	)	$	—		$	(14	)
State		51			31			4
Foreign		31			109			(101	)
		59			140			(111	)
Deferred:
Federal		3,307			(1,823	)		(2,536	)
State		(669	)		(396	)		(315	)
Foreign		(359	)		(296	)		(521	)
		2,279			(2,515	)		(3,372	)
Change in valuation allowance		(2,291	)		2,351			2,921
Total	$	47		$	(24	)	$	(562	)

The net deferred tax assets (liabilities) at December 31, 2017 and 2016 are comprised of the following:

	As of December 31,
	2017			2016
	(in thousands)
Deferred rent	$	133		$	47
AMT credit		9			31
Accrued expenses		1,474			1,091
Deferred revenue		292			441
Net operating loss carryforward		14,957			18,722
Other assets		1,643			423
Intangible assets		(2,210	)		(2,173	)
Property and equipment		(190	)		(166	)
Other liabilities		—			(28	)
Valuation allowance		(16,590	)		(18,882	)
Total non-current deferred income tax liabilities	$	(482	)	$	(494	)

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2017. Such objective evidence limits the ability to consider other subjective evidence such as its projections for future growth. On the basis of this evaluation, at December 31, 2017 and 2016, a valuation allowance of $16.6 million and $18.9 million, respectively, has been recorded since it is more likely than not that the deferred tax assets will not be realized.

At December 31, 2017, the Company has federal and state net operating loss carryforwards of $52.4 million and $45.6 million, respectively, which expire in varying amounts through 2036. At December 31, 2016, the Company has federal and state net operating loss carryforwards of $46.2 million and $40.5 million, respectively. Section 382 of the Internal Revenue Code, or Section 382, imposes limitations on a corporation’s ability to utilize its Net Operating Losses, or NOLs, if it experiences an “ownership change.” In general terms, an ownership change may result from transactions increasing the ownership percentage of certain stockholders in the stock of the corporation by more than 50% over a three year period. In the event of an ownership change, utilization of the NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax exempt rate. The Company has not completed a Section 382 study at this time; however should a study be completed certain NOLs may be subject to such limitations. Any future annual limitation may result in the expiration of NOLs before utilization.

For the period ended December 31, 2017, 2016 and 2015, the Company has recorded income tax expense of $76,000, $83,000 and $50,000 related to uncertain tax positions. The Company’s policy is to recognize potential interest and penalties related to unrecognized tax benefits associated with uncertain tax positions, if any, in the income tax provision. At December 31, 2017 and 2016, the Company had accrued $11,000 and $8,000 in interest and penalties related to uncertain tax positions.

The Company is subject to taxation in the United States and various states along with other foreign countries. Due to the presence of net operating loss carryforwards, all of the income tax years remain open for examination by the IRS and various state and foreign taxing authorities. The Company has not been notified that it is under audit by the IRS for any of the tax years currently open. The Company is not currently under audit from any state taxing authorities.

On December 22, 2017, the United States government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act, or the Tax Act. The Tax Act significantly revises the existing tax law by, among other things, lowering the United States corporate income tax rate from 35% to 21% beginning in 2018. The Company reviewed and incorporated the impact of the Tax Act in its tax calculations and disclosures. The primary impact on the Company stems from the re-measurement of its deferred taxes at the new corporate tax rate of 21%, which reduced the Company's net deferred tax assets, before valuation allowance, by $7.2 million. Due to the full valuation allowance, the change in deferred taxes was fully offset by the change in valuation allowance, except for an immaterial amount that is reflected in income tax expense related to the rate re-measurement of the tax deductible goodwill. The Tax Act did not have a significant impact on the Company's Consolidated Financial Statements for the year ended December 31, 2017.

The following changes occurred in the amount of unrecognized tax benefits during the years ended December 31, 2017, 2016, and 2015:

	Year Ended December 31,
	2017		2016		2015
	(in thousands)
Beginning balance of unrecognized tax benefits	$	250	$	167	$	117
Additions for current year tax positions		65		75		50
Ending balance (excluding interest and penalties)		315		242		167
Interest and penalties		11		8		—
Total	$	326	$	250	$	167

The amount of income taxes the Company pays is subject to ongoing audits by taxing jurisdictions around the world. The Company’s estimate of the potential outcome of any uncertain tax position is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. The Company believes that it has adequately provided for these matters. However, the Company’s future results may include favorable or unfavorable adjustments to its estimates in the period the audits are resolved, which may impact the Company’s effective tax rate. The Company does not believe that it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease in the next 12 months. As of December 31, 2017, the Company’s tax filings are generally subject to examination in major tax jurisdictions for years ending on or after December 31, 2012.

Deferred income taxes have not been provided for undistributed earnings of the Company’s consolidated foreign subsidiaries because of the Company’s intent to reinvest such earnings indefinitely in active foreign operations. At December 31, 2017, the Company had $0.2 million in unremitted earnings that were permanently reinvested related to its consolidated foreign subsidiaries.