Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of Income before Income Tax, Domestic and Foreign

Income (loss) before income taxes included the following components for the years ended December 31 (in thousands):



	2019			2018		2017
United States	$	(1,449	)	$	25,751	$	14,978
Foreign	3,519			2,353		783
Total	$	2,070		$	28,104	$	15,761

Significant Components of the Provision for Income Taxes

Significant components of the provision for income taxes are as follows for the years ended December 31 (in thousands):



	2019			2018			2017
Current:
Federal	$	4,247		$	4,900		$	6,039
State	2,414			1,377			1,263
Foreign	1,533			228			656
Total current	8,194			6,505			7,958
Deferred:
Federal	(6,060		)	(8,382		)	4,539
State	(1,665		)	(364		)	(1,631		)
Foreign	(264		)	(3		)	(78		)
Total deferred	(7,989		)	(8,749		)	2,830
Tax impact of unrecorded tax benefits liability	983			1,143			(234		)
Provision for income taxes (Income tax benefit)	$	1,188		$	(1,101	)	$	10,554

Reconciliation of the Company's Effective Income Tax Rate to the Federal Statutory Rate

A reconciliation of our effective income tax rate to the federal statutory rate follows for the years ended December 31 (in thousands):



	2019			2018			2017
Federal income tax at the statutory rate	$	435		$	5,902		$	5,518
State income taxes, net of federal benefit	526			(215		)	339
Difference between statutory and foreign tax rates	43			7			(560		)
Permanent differences ⁽¹⁾	1,139			725			300
Executive compensation limitation	7,596			1,167			—
Research and development	(4,911		)	(6,908		)	(2,380		)
Return to provision adjustment	(9		)	1,780			23
Change in liability for unrecognized tax benefits	1,191			1,768			7
Excess stock-based compensation benefit	(4,999		)	(8,907		)	(1,819		)
Change in valuation allowance	368			1,984			1,949
Tax effects of intercompany transactions	16			1,004			(277		)
Adjustments to deferred tax assets, net resulting from enactment of new tax law ⁽²⁾	—			—			7,601
Other	(207		)	592			(147		)
Provision for income taxes (Income tax benefit)	$	1,188		$	(1,101	)	$	10,554
Effective tax rate	57.4		%	(3.9		)%	66.9		%

⁽¹⁾

Permanent differences include certain expenses that are not deductible for tax purposes including meals and entertainment, certain transaction costs, lobbying fees, and taxable income as a result of global intangible low-tax income ("GILTI") offset by favorable items including the domestic production activities deduction, for tax year 2017, and a deduction for foreign derived intangible income ("FDII") beginning in 2018.

⁽²⁾

The adjustment to deferred tax assets of $7.6 million in 2017 was a result of the impact of changes in the U.S. federal effective tax rate, as well as a reduction of the stock-based compensation deferred tax asset due to expected permanent limitations on its deductibility for certain key executives under the Tax Cuts and Jobs Act.

Components of Deferred Income Tax Assets and Liabilities

Significant components of our deferred income tax assets and liabilities are as follows at December 31 (in thousands):



	2019			2018
Deferred income tax assets:
Net operating loss carryforward	$	2,341		$	2,347
Deferred revenue	15,348			13,304
Deferred compensation	971			858
Lease liability	2,460			—
Inventory reserve	1,258			1,294
Stock-based compensation	10,769			3,758
Amortization	1,133			412
Research and development tax credit carryforward	4,957			5,193
Reserves, accruals, and other	3,394			3,094
Total deferred income tax assets	42,631			30,260
Deferred income tax liabilities:
Customer contract asset	(883		)	—
Right of use asset	(2,228		)	—
Depreciation	(3,715		)	(2,195		)
Amortization	(62		)	(57		)
Other	(1,237		)	(1,232		)
Total deferred income tax liabilities	(8,125		)	(3,484		)
Net deferred income tax assets before valuation allowance	34,506			26,776
Valuation allowance	(7,172		)	(7,429		)
Net deferred income tax assets	$	27,334		$	19,347

Roll Forward of Liability for Unrecognized Tax Benefits Exclusive of Accrued Interest

The following table presents a roll forward of our liability for unrecognized tax benefits, exclusive of accrued interest, as of December 31 (in thousands):



	2019			2018			2017
Balance, beginning of period	$	6,058		$	4,243		$	4,050
Increase (decrease) in previous year tax positions	(615		)	213			379
Increase in current year tax positions	1,749			1,982			587
Decrease due to lapse of statutes of limitations	(331		)	(380		)	(773		)
Balance, end of period	$	6,861		$	6,058		$	4,243