INCOME TAXES

The loss before income taxes and equity in earnings of equity-method investment is as follows (in thousands):



	Year Ended December 31,
	2019			2018			2017
United States	$	(107,905	)	$	(63,450	)	$	(45,541	)
Foreign	(31,912		)	3,032			421
Loss before income taxes and equity in earnings of equity-method investment	$	(139,817	)	$	(60,418	)	$	(45,120	)

Income tax (benefit) expense consisted of the following (in thousands):



	Year Ended December 31,
	2019			2018		2017
Current:
Federal	$	—		$	—	$	(730	)
State	128			118		123
Foreign	559			277		507
	687			395		(100		)
Deferred:
Federal	—			—		—
State	—			—		—
Foreign	(2,335		)	262		353
	(2,335		)	262		353
Income tax (benefit) expense	$	(1,648	)	$	657	$	253

A reconciliation of the U.S. statutory rate of 21% for 2019 and 2018, and 34% for 2017 and the effective income tax rate is as follows:



	Year Ended December 31,
	2019		2018		2017
Federal income tax at statutory rates	(21.0	)%	(21.0	)%	(34.0	)%
State income tax	(4.6	)	(5.5	)	(5.0	)
Other permanent differences	(0.3	)	1.2		0.4
Tax rates different than statutory	(0.5	)	1.2		0.5
Statutory tax rate change - Deferred - Tax Reform Act	—		—		(128.4	)
Statutory tax rate change - Valuation Allowance - Tax Reform Act	—		—		128.4
Goodwill impairment	3.4		—		—
Refundable AMT credit	—		—		(1.5	)
Change in valuation allowance	21.8		25.2		40.1
Effective tax rate	(1.2	)%	1.1	%	0.5	%

Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of net deferred tax assets (liabilities) were as follows (in thousands):



	December 31,
	2019			2018
Deferred income tax assets:
Net operating loss carryforwards	$	99,481		$	93,704
Property and equipment	35,535			38,556
Goodwill and intangible assets	9,253			—
Deferred revenue	1,439			971
Non-deductible interest	23,181			10,028
Leases - ASC 842	20,811			—
Stock-based compensation	2,073			1,486
Provision for doubtful accounts	682			956
Accrued compensation	308			1,008
Tax credits carried forward	1,832			2,735
Other	1,919			1,785
Total deferred income tax assets	196,514			151,229

Deferred income tax liabilities:
Leases - ASC 842	(15,889		)	—
Contracts assets	(6,244		)	(6,186		)
Goodwill and intangible assets	—			(375		)
Refinancing costs	(416		)	(4,130		)
Total deferred income tax liabilities	(22,549		)	(10,691		)

Net deferred income tax assets	173,965			140,538
Valuation allowance	(173,841		)	(142,749		)
Net deferred income tax assets (liabilities)	$	124		$	(2,211	)

The table above has been adjusted to reflect certain changes to deferred tax assets and liabilities as of December 31, 2018 related to a correction in these balances. The Company considered these errors in connection with ASC 250-10-S99 and concluded that the errors were not material.

As of December 31, 2019, we have U.S. net operating loss carryforwards for federal tax purposes of $341.2 million, of which $285.2 million will expire in tax years 2020 through 2037, and $56.0 million will not expire. There are an additional $190.7 million of U.S. net operating loss carryforwards not reported in the amounts above as they are subject to restrictions attributable to prior ownership changes under Section 382 of the Tax Code that may be available under section 108 of the Tax Code to offset against cancellation of debt income arising from the Chapter 11 Restructuring. The Company also has non-U.S. net operating loss carryforwards of $46.6 million. The largest components of the non-U.S. loss carryforwards are in the United Kingdom, with approximately $14.3 million, and in Canada, with $9.8 million of Canadian federal loss carryforwards and $10.1 million of Quebec loss carryforwards. In addition, the Company has research and development tax credits, foreign tax credits and state and local tax credits carried forward amounting to approximately $0.4 million. The research and development credits will begin to expire in 2027.

Our ability to use U.S. net operating loss and non-U.S. net operating loss carryforwards to reduce future taxable income, or to use tax credits and other carryforwards to reduce future income tax liabilities, is subject to the ability to generate sufficient taxable income of an appropriate characterization in the proper taxing jurisdictions. In some instances, the utilization is also subject to restrictions attributable to changes of ownership during prior tax years, as defined by appropriate law in the relevant taxing jurisdiction. These limitations, as mentioned above, prevent the Company from utilizing certain deferred tax assets and were considered in establishing our valuation allowances. As of December 31, 2019, we reported a valuation allowance of $166.6 million against the U.S. deferred tax assets and $7.2 million against the non-U.S. deferred tax assets that we do not believe are more likely than not to be realized. We continually evaluate the recoverability of the deferred tax assets and the appropriateness of the valuation allowance.

Changes in our valuation allowance are summarized as follows (in thousands):



	Year Ended December 31,
	2019		2018		2017
Balance, January 1,	$	142,749	$	132,712	$	164,865
Increase in deferred tax assets	31,092		10,037		27,183
Remeasurement in deferred tax assets	—		—		(59,336		)
Balance, December 31,	$	173,841	$	142,749	$	132,712

During 2019, the Company changed its indefinite reinvestment assertion and therefore recorded deferred income taxes on a portion of unremitted earnings of one of its non-U.S. subsidiaries. As of December 31, 2019, no deferred taxes have been provided for the portion of the unremitted earnings of certain of the Company’s subsidiaries. The unremitted earnings of the non-U.S. subsidiary for which the Company does not assert indefinite reinvestment have a deferred tax liability recorded of less than $0.1 million. The unremitted earnings of non-U.S. subsidiaries for which the Company does not assert indefinite reinvestment would likely result in an immaterial amount of deferred tax liabilities upon any future distribution.

Our accounting for unrecognized tax benefits arising from an uncertainty in income taxes requires us to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, we must measure the tax position to determine the amount to recognize in the financial statements.

Changes in our unrecognized tax benefits are summarized as follows (in thousands):



	Year Ended December 31,
	2019			2018		2017
Unrecognized tax benefits balance, January 1,	$	462		$	162	$	187
Additions for tax positions - current year	11			—		—
Additions for tax positions - prior year	1			300		162
Reductions for tax positions - prior year	(93		)	—		(187		)
Unrecognized tax benefits balance, December 31,	$	381		$	462	$	162

During 2019, we recorded less than $0.1 million decrease to our unrecognized tax benefits primarily due to our recognizing the impact that prior year non-U.S. net operating losses had on the calculations of interest and penalty liabilities.

We classify interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations and comprehensive loss as a component of "Income tax (benefit) expense." As of December 31, 2019 and 2018, we had an accrual of $(0.1) million and $0.2 million, respectively, for interest and penalties related to uncertain tax positions.

Our U.S. federal and state income tax returns remain open to examination for the tax years 2016 through 2019; however, tax authorities have the right to adjust the net operating loss carryovers for years prior to 2019. Returns filed in other jurisdictions are generally subject to examination for years prior to 2019.