Commitments and Contingencies

Leases

We have entered into long-term operating lease agreements for office space and capital leases for fixed assets. The minimum fixed commitments related to all non-cancellable leases are as follows:



Years Ending December 31,	Operating Leases		Capital Leases
	(in thousands)
2018	$	3,390	$	494
2019	1,466		400
2020	110		20
2021	93		7
Total minimum lease payments	$	5,059	921
Less: amount representing interest			(106		)
Present value of minimum lease payments			815
Less: current obligation			(423		)
Long-term obligations under capital lease			$	392

During the year ended December 31, 2017, we did not enter into any new capital lease arrangements. During the year ended December 31, 2016, we entered into additional capital lease agreements for approximately $884 thousand. We recorded the lease liability at the fair market value of the underlying assets in our consolidated balance sheets. Rental expenses included in general and administrative expenses for the years ended December 31, 2017 and 2016 were $3.2 million and $3.0 million, respectively.

Legal Proceedings

In the normal course of business, we may become involved in various legal proceedings. Except as stated below, we know of no pending or threatened legal proceedings to which we are or will be a party that, if successful, would result in a material adverse change in our business or financial condition.

In July 2012, the Consumer Financial Protection Bureau (“CFPB”) served a Civil Investigative Demand on Intersections Inc. with respect to its billing practices for identity protection and credit monitoring products sold and enrolled through depositary customers. An action was filed on July 1, 2015 in the United States District Court for the Eastern District of Virginia, Alexandria Division, and a Stipulated Final Judgment and Order (the “Order”) concurrently entered, entitled Consumer Financial Protection Bureau v. Intersections Inc. Without admitting or denying the allegations in the complaint, we agreed to implement a satisfactory compliance plan to comply with the Order and to provide a progress update. We paid a civil monetary penalty of $1.2 million in 2015, and in the year ended December 31, 2016, we paid $63 thousand to 661 customers who had not previously received refunds for periods where the full benefit of the service was not delivered. Intersections also submitted an amended compliance plan to the CFPB in early 2017.

In January 2013, the Office of the West Virginia Attorney General ("WVAG") served Intersections Insurance Services Inc. ("IISI") with a complaint filed in the Circuit Court of Mason County, West Virginia on October 2, 2012. The complaint alleges violations of West Virginia consumer protection laws based on the marketing of unspecified products. On April 21, 2017, the Court granted a motion of the WVAG to add Intersections Inc. as a defendant to the lawsuit. The parties are currently engaged in discovery. No trial has been scheduled. We continue to believe that the claims in the complaint are without merit and intend to continue to vigorously defend this matter.

On March 22, 2018, Johan Roets, the Company’s former Chief Executive Officer, filed a civil Complaint against the Company in the Circuit Court of Fairfax County Virginia. The Complaint alleges that the Company’s termination of Mr. Roets’ employment on February 22, 2018 violated his Employment Agreement and seeks monetary damages from the Company. The Company believes that the Complaint is without merit and plans to vigorously defend this litigation.

For information regarding our policy for analyzing legal proceedings, please see “Contingent Liabilities” in Note 2. As of December 31, 2017, we do not have any significant liabilities accrued for any of the legal proceedings mentioned above. We believe based on information currently available that the amount, if any, accrued for the above contingencies is adequate. However, legal proceedings are inherently unpredictable and, although we believe that accruals are adequate and we intend to vigorously defend ourselves against such matters, unfavorable resolution could occur, which could have a material effect in our consolidated financial statements, taken as a whole.

Other

We periodically analyze our facts and circumstances related to potential obligations in state jurisdictions, including the delivery nature of our services, the relationship through which our services are offered, and changing state laws and interpretations of those laws, and have determined we may have indirect tax obligations in state and other jurisdictions. The following table summarizes the non-income business tax liability activity during the years ended December 31, 2017 and 2016 (in thousands):



	2017			2016
Balance, beginning of year	$	94		$	3,427
Adjustments to existing liabilities	1,516			(2,110		)
Payments	(827		)	(1,223		)
Balance, end of year	$	783		$	94

We continue to analyze what obligations we have, if any, to state taxing authorities. As a result of an audit by a state for non-income business taxes, for which an assessment was received in the year ended December 31, 2017, we recorded a liability of $936 thousand in the same period for the underpayment of taxes and related interest, which was recorded primarily in cost of revenue in our consolidated statements of operations. Additionally, we recorded an estimated liability of $580 thousand for the potential underpayment in other jurisdictions. We analyzed all the information available to us in order to estimate a liability for potential obligations in other jurisdictions including, but not limited to: the delivery nature of our services; the relationship through which our services are offered; the probability of obtaining resale or exemption certificates; limited, if any, nexus-creating activity; and our historical success in settling or abating liabilities under audit. We continue to correspond with the applicable authorities in an effort toward resolution of our potential liabilities using a variety of settlement options including, but not limited to, voluntary disclosures, negotiation and standard appeals process, and we may adjust the liability as a result of such correspondence. Proceedings with jurisdictions are inherently unpredictable, but we believe it is reasonably possible that other states may approach us or that the scope of the taxable base in any state may also increase.

We have entered into various software licenses and operational commitments totaling approximately $70.6 million as of December 31, 2017, payable in monthly and yearly installments through December 31, 2021. These amounts will be expensed on a pro-rata basis and recorded in cost of services revenue and general and administrative expenses in our consolidated statements of operations.