INCOME TAXES

On December 22, 2017, the United States enacted significant changes to the U.S. tax law following the passage and signing of H.R.1, “An Act to Provide the Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Act”) (previously known as “The Tax Cuts and Jobs Act”). We applied the guidance in Staff Accounting Bulletin 118 (“SAB 118”) when accounting for the enactment-date effects of the Act. During the 4^th quarter of 2017, we recorded our best estimate of the impact of the Act in our year-end income tax provision in accordance with our understanding of the Act and guidance available and as a result recorded income tax expense of $54.1 million. This income tax expense was fully offset by a decrease in the valuation allowance previously recorded on our deferred tax assets. As such, the Act resulted in no net tax expense. As of December 31, 2018, we completed our accounting analysis for all of the enactment-date income tax effects and reduced our December 31, 2017 provisional amount by $2.5 million. The decrease in the income tax expense was fully offset by an increase in the valuation allowance. As such, the Act resulted in no net tax expense.

In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income ("GILTI") provisions of the Act. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to GILTI inclusions or to treat any taxes on GILTI inclusions as period costs are both acceptable methods subject to an accounting policy election. As of December 31, 2017, we had not yet completed our assessment or elected an accounting policy to either recognize deferred taxes for basis differences expected to reverse as GILTI or to record GILTI as period costs if and when incurred. After further consideration in 2018, we have elected to account for GILTI as a period cost in the year the tax is incurred.

The income tax provision (benefit) attributable to continuing operations for the years ended December 31, 2018, 2017, and 2016, consists of the following:



	Year Ended December 31,
	2018			2017			2016
	(In Thousands)
Current
Federal	$	—		$	(651	)	$	—
State	1,465			799			783
Foreign	5,430			3,943			3,181
	6,895			4,091			3,964
Deferred
Federal	(79		)	394			—
State	(153		)	(648		)	(610		)
Foreign	(364		)	(3,086		)	(1,198		)
	(596		)	(3,340		)	(1,808		)
Total tax provision (benefit)	$	6,299		$	751		$	2,156

A reconciliation of the provision (benefit) for income taxes attributable to continuing operations, computed by applying the federal statutory rate to income (loss) before income taxes and the reported income taxes, is as follows:



	Year Ended December 31,
	2018			2017			2016
	(In Thousands)
Income tax provision (benefit) computed at statutory federal income tax rates	$	(7,650	)	$	(15,415	)	$	(78,128	)
State income taxes (net of federal benefit)	55			1,664			(2,960		)
Impact of international operations	14,477			10,847			7,556
Impact of U.S. tax law change	(2,510		)	55,813			—
Goodwill impairments	—			—			12,990
Impact of noncontrolling interest	5,204			5,151			2,247
Valuation allowance	(7,443		)	(63,635		)	53,918
Other	4,166			6,326			6,533
Total tax provision (benefit)	$	6,299		$	751		$	2,156

Income (loss) before taxes and discontinued operations includes the following components:



	Year Ended December 31,
	2018			2017			2016
	(In Thousands)
Domestic	$	(44,957	)	$	(29,419	)	$	(221,609	)
International	8,531			(14,624		)	(1,611		)
Total	$	(36,426	)	$	(44,043	)	$	(223,220	)

A reconciliation of the beginning and ending amount of our gross unrecognized tax benefit is as follows:



	Year Ended December 31,
	2018			2017			2016
	(In Thousands)
Gross unrecognized tax benefits at beginning of period	$	530		$	857		$	1,219
Decreases in tax positions for prior years	—			—			—
Increases in tax positions for current year	—			—			16
Lapse in statute of limitations	(202		)	(327		)	(378		)
Gross unrecognized tax benefits at end of period	$	328		$	530		$	857

We recognize interest and penalties related to uncertain tax positions in income tax expense. During the years ended December 31, 2018, 2017, and 2016, we recognized $(0.2) million, $(0.3) million, and $(0.2) million, respectively, of interest and penalties to the provision for income tax. As of December 31, 2018 and 2017, we had $0.5 million and $0.7 million, respectively, of accrued potential interest and penalties associated with these uncertain tax positions. The total amount of unrecognized tax benefits that would affect our effective tax rate if recognized is $0.8 million and $1.1 million as of December 31, 2018 and 2017, respectively. We do not expect a significant change to the unrecognized tax benefits during the next twelve months.

We file tax returns in the U.S. and in various state, local, and non-U.S. jurisdictions. The following table summarizes the earliest tax years that remain subject to examination by taxing authorities in any major jurisdiction in which we operate:



Jurisdiction	Earliest Open Tax Period
United States – Federal	2012
United States – State and Local	2002
Non-U.S. jurisdictions	2011

We use the liability method for reporting income taxes, under which current and deferred tax assets and liabilities are recorded in accordance with enacted tax laws and rates. Under this method, at the end of each period, the amounts of deferred tax assets and liabilities are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. We establish a valuation allowance to reduce the deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. We considered all available evidence, both positive and negative, in determining whether, based on the weight of that evidence, a valuation allowance is needed for some portion or all of our deferred tax assets. In determining the need for a valuation allowance on our deferred tax assets we placed greater weight on recent and objectively verifiable current information, as compared to more forward-looking information that is used in valuating other assets on the balance sheet. While we have considered taxable income in prior carryback years, future reversals of existing taxable temporary differences, future taxable income, and tax planning strategies in assessing the need for the valuation allowance, there can be no guarantee that we will be able to realize all of our deferred tax assets. Significant components of our deferred tax assets and liabilities as of December 31, 2018 and 2017 are as follows:



	December 31,
	2018			2017
	(In Thousands)
Net operating losses	$	100,910		$	88,025
Federal tax credits	3,441			19,346
Accruals	9,396			24,577
Depreciation and amortization for book in excess of tax expense	35,242			40,979
All other	11,140			3,813
Total deferred tax assets	160,129			176,740
Valuation allowance	(129,034		)	(130,453		)
Net deferred tax assets	$	31,095		$	46,287



	December 31,
	2018		2017
	(In Thousands)
Depreciation and amortization for tax in excess of book expense	$	31,999	$	48,618
All other	2,325		2,064
Total deferred tax liability	34,324		50,682
Net deferred tax liability	$	3,229	$	4,395

We believe that it is more likely than not we will not realize all the tax benefits of the deferred tax assets within the allowable carryforward period. Therefore, an appropriate valuation allowance has been provided. The valuation allowance as of December 31, 2018 and 2017 primarily relates to federal deferred tax assets. The increase (decrease) in the valuation allowance during the years ended December 31, 2018, 2017, and 2016, were $(1.4) million, $(54.8) million, and $58.6 million, respectively.

At December 31, 2018, we had federal, state, and foreign net operating loss carryforwards/carrybacks equal to approximately $75.3 million, $11.1 million, and $14.5 million, respectively. In those countries and states in which net operating losses are subject to an expiration period, our loss carryforwards, if not utilized, will expire at various dates from 2019 through 2037. At December 31, 2018, we had $2.9 million of foreign tax credits available to offset future payment of federal income taxes. The foreign tax credits expire in varying amounts from 2020 through 2027. We have amended our 2012 - 2015 U.S. federal income tax returns to take a foreign tax deduction instead of a credit. This resulted in a decrease in our foreign tax credit carryforward of $16.2 million. The net impact to our deferred tax assets was a decrease of $12.8 million, offset by a corresponding increase in our valuation allowance. As such, the amended income tax returns resulted in no net tax expense. Utilization of the net operating loss and credit carryforwards may be subject to a significant annual limitation due to ownership changes that have occurred previously or could occur in the future provided by Section 382 of the Internal Revenue Code.