The Tax Act was enacted on December 22, 2017. The Tax Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, provides an exemption from U.S. federal tax for dividends received from foreign subsidiaries, and creates new taxes on certain foreign sourced earnings. As of the fourth quarter of 2018, the Company completed its accounting for the tax effects of the Tax Act and recorded a $2.8 million adjustment to the provisional tax expense recorded in the fourth quarter of 2017.

The table below reflects the significant components of the net $2.8 million adjustment to tax expense recorded in the fourth quarter of 2018 and included as a component of income tax expense from continuing operations:

Component	Provisional Amount			Final Amount			Adjustment
Remeasurement of U.S. deferred tax assets and liabilities	$	2,913		$	3,112		$	199
Transition tax on foreign earnings		104,327			101,512			(2,815	)
Foreign tax credits used to offset transition tax		(58,975	)		(54,350	)		4,625
Other adjustments		(2,357	)		(1,604	)		753
Total net tax expense related to the Tax Act	$	45,908		$	48,670		$	2,762

The Company was able to use net operating loss carryforwards and tax credits to completely offset any cash tax obligations resulting from the transition tax. The other components shown above represent noncash adjustments to tax expense.

We remeasured certain U.S. deferred tax assets and liabilities using the lower corporate income tax rate of 21%.

The one-time transition tax is based on our total post-1986 earnings and profits (“E&P”) that we previously deferred from U.S. income taxes, and is net of indirect effects of unrecognized tax benefits. The $2.8 million adjustment in the fourth quarter of 2018 referred to in the table above results from completing our analysis and calculation of post-1986 E&P, including amounts held in cash or other specified assets.

No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities. Our undistributed foreign earnings, including those subject to the transition tax, continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of European and Asian subsidiaries. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable.

The Company is able to claim foreign tax credits against the incremental U.S. tax due on its previously deferred foreign earnings. The $4.6 million adjustment in the fourth quarter of 2018 referred to in the table above results from completing our analysis of the total amount of foreign taxes previously paid or accrued by our foreign subsidiaries that are creditable against the transition tax.

We have completed our analysis of the direct and indirect implications of the Tax Act on the Company’s tax attributes, such as tax credit carryforwards. As a result, we recorded a $0.8 million adjustment to finalize the accounting of the effect of our change in judgment regarding realizability of foreign tax credits and R&D credits.

The table below sets forth our (loss) income before taxes for the years ended December 31:

Income (loss) before income taxes	2018			2017			2016
U.S.	$	(24,141	)	$	(72,668	)	$	(40,861	)
Foreign		174,103			135,259			65,896
Total	$	149,962		$	62,591		$	25,035

The table below sets forth the components of our income tax provision (benefit) for the years ended December 31:

	2018			2017			2016
Current tax provision
Federal	$	-		$	-		$	-
Foreign		42,726			31,820			28,993
State		24			7			13
		42,750			31,827			29,006
Deferred tax provision (benefit)
Federal		2,400			30,186			(10,517	)
Foreign		(3,107	)		(2,352	)		(13,847	)
State		56			(8	)		101
		(651	)		27,826			(24,263	)
Liability for unrecognized tax benefits		2,457			2,672			1,815
Total income tax provision	$	44,556		$	62,325		$	6,558

The table below sets forth a reconciliation between the effective tax rate and the statutory tax rates for the years ended December 31:

	2018						2017						2016
				Percent						Percent						Percent
				of pretax						of pretax						of pretax
	Amount			earnings*			Amount			earnings*			Amount			earnings*
Federal tax	$	31,488			21.0		$	21,907			35.0		$	8,762			35.0
State income taxes, net of federal tax provision		(375	)		(0.3	)		(15	)		-			(65	)		(0.3	)
Foreign income taxed at lower tax rates		(2,844	)		(1.9	)		(23,515	)		(37.6	)		(6,955	)		(27.8	)
U.S. tax impact of foreign operations		4,140			2.8			6,726			10.7			324			1.3
Foreign withholding taxes		10,962			7.3			4,343			6.9			4,834			19.3
Research and development		(3,541	)		(2.4	)		(2,643	)		(4.2	)		(2,241	)		(9.0	)
Liability for unrecognized tax benefits		2,457			1.6			2,672			4.3			1,815			7.3
Valuation allowance		(379	)		(0.3	)		2,077			3.3			(2,600	)		(10.4	)
Employee stock-based compensation		(2,154	)		(1.4	)		1,537			2.5			-			-
U.S. Tax Cuts and Jobs Act		2,762			1.8			45,908			73.4			-			-
Other		2,040			1.4			3,328			5.3			2,684			10.7
Income tax provision	$	44,556			29.7		$	62,325			99.6		$	6,558			26.2

*	The sum of the amounts in the table may not equal to the effective tax rate due to rounding.

In accordance with the provisions related to accounting for uncertainty in income taxes, we recognize the benefit of a tax position if the position is “more likely than not” to prevail upon examination by the relevant tax authority. The table below sets forth a reconciliation of the beginning and ending amount of unrecognized tax benefits:

	2018			2017			2016
Balance at January 1,	$	30,581		$	28,849		$	26,503
Additions based on tax positions related to the current year		4,667			3,492			6,746
Additions for prior year tax positions		-			863			960
Reductions for prior year tax positions		(3,039	)		(2,623	)		(5,360	)
Balance at December 31,	$	32,209		$	30,581		$	28,849

If the $32.2 million of unrecognized tax benefits as of December 31, 2018, is recognized, approximately $28.8 million would affect the effective tax rate. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions will significantly increase or decrease within the next 12 months. These changes may be the result of settlements of ongoing audits or competent authority proceedings. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations by tax authorities for tax years before 2008, or for the 2010 and 2011 tax years. We are no longer subject to China income tax examinations by tax authorities for tax years before 2007. With respect to state and local jurisdictions and countries outside of the U.S., with limited exceptions, we are no longer subject to income tax audits for years before 2013. Although the outcome of tax audits is always uncertain, we believe that adequate amounts of tax, interest and penalties, if any, have been provided for in our reserve for any adjustments that may result from future tax audits. We recognize accrued interest and penalties, if any, related to unrecognized tax benefits in interest expense. We had an immaterial amount of accrued interest and penalties at December 31, 2018, 2017 and 2016.

The table below sets forth our deferred tax assets and liabilities as of December 31:

	2018			2017
Deferred tax assets
Inventory cost	$	7,974		$	8,000
Accrued expenses and accounts receivable		1,866			690
Foreign tax credits		17,600			10,626
Research and development tax credits		15,456			15,828
Net operating loss carryforwards		9,635			5,392
Accrued pension		4,294			5,428
Share based compensation and others		9,972			12,443
		66,797			58,407
Valuation allowances		(25,941	)		(22,560	)
Total deferred tax assets, non-current		40,856			35,847
Deferred tax liabilities
Plant, equipment and intangible assets		(16,661	)		(17,278	)
Outside basis differences and others		(7,267	)		-
Total deferred tax liabilities, non-current		(23,928	)		(17,278	)
Net deferred tax assets	$	16,928		$	18,569

We prospectively adopted ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, (“ASU 2013-11”) effective in the first quarter of 2014. ASU No. 2013-11 provides that an entity is required to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The $13.7 million net deferred tax assets presented in the balance sheet as of December 31, 2018, is net of $3.2 million of unrecognized tax benefits. The $16.9 million and $18.6 million net deferred tax asset presented above for December 31, 2018 and 2017, respectively, is prior to the net balance sheet presentation required by ASU 2013-11.

At December 31, 2018, we had federal tax credit and research credit carryforwards of approximately $26 million and $8 million, respectively, which are available to offset future income tax liabilities. The federal tax credit carryforwards begin to expire in 2026 and the state tax credit carryforwards will begin to expire in 2020. We determined that it is more likely than not that a portion of our federal and state research credit carryforwards will expire before they are utilized. The valuation allowances recorded against the related deferred tax assets totaled $19 million and $13 million as of December 31, 2018 and 2017, respectively.

At December 31, 2018, we had state net operating loss (“NOL”) carryforwards of approximately $3 million, and foreign NOL carryforwards of $34 million which are available to offset future taxable income. The U.S. NOL carryforwards will begin to expire in 2019. We determined that it is more likely than not that the U.S. NOL carryforwards will expire before they are fully utilized and recorded a full valuation allowance on the related deferred tax assets. The foreign NOL carryforwards will begin to expire in 2020. We determined that it is more likely than not that a portion of the foreign NOL carryforwards will expire before they are fully utilized. The valuation allowances recorded against the related deferred tax assets totaled $7 million and $5 million as of December 31, 2018 and 2017, respectively.

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of European and Asian subsidiaries. As of December 31, 2018, we had undistributed earnings from non-U.S. operations of approximately $742 million (including approximately $55 million of restricted earnings, which are not available for dividends). Undistributed earnings of our China subsidiaries comprise $381 million of this total. Additional Chinese withholding taxes of approximately $37 million would be required should the $381 million of such earnings be distributed out of China as dividends.

The impact of tax holidays decreased our tax expense by approximately $1.6 million, $3.7 million and $7.3 million for the years ended December 31, 2018, 2017 and 2016, respectively. The benefit of the tax holidays on basic and diluted earnings per share was $0.03, $0.08 and $0.15 for the twelve months ended December 31, 2018, 2017 and 2016, respectively.