

	Years Ended
	December 28, 2019			December 29, 2018			December 30, 2017
Current:
Federal	$	—		$	—		$	—
State	288			186			69
Foreign	3,046			6,832			4,679
Total current	$	3,334		$	7,018		$	4,748
Deferred:
Federal	$	369		$	(546	)	$	—
State	—			—			—
Foreign	(740		)	(7,127		)	(6,178		)
-	$	(371	)	$	(7,673	)	$	(6,178	)
Total provision for/(benefit from) income taxes	$	2,963		$	(655	)	$	(1,430	)

Loss before provision for income taxes from international operations was $202.2 million, $135.5 million and $22.6 million for the years ended December 28, 2019, December 29, 2018 and December 30, 2017, respectively.



	Years Ended
	December 28, 2019		December 29, 2018		December 30, 2017
Expected tax at federal statutory rate	21.0	%	21.0	%	35.0	%
State taxes, net of federal benefit	(0.1	)%	(0.1	)%	—	%
Research credits	1.0	%	1.8	%	1.8	%
Stock-based compensation	(2.0	)%	(0.8	)%	(6.0	)%
Change in valuation allowance	(19.7	)%	(18.1	)%	(26.8	)%
Foreign rate differential	(0.2	)%	(2.9	)%	(3.3	)%
Other	(0.8	)%	(0.6	)%	—	%
Effective tax rate	(0.8	)%	0.3	%	0.7	%

For 2019, the Company's income tax expense was $3.0 million with effective tax rate of (0.8)%. The difference between the effective income tax rate and the U.S federal statutory rate of 21% to income before income taxes is primarily the result of foreign income taxed at different rates and valuation allowances. The Company recognized an income tax benefit of $0.7 million and $1.4 million in fiscal years 2018 and 2017. The resulting effective tax rates were 0.3% and 0.7% for 2018 and 2017. The 2018 and 2017 effective tax rates differ from the expected statutory rate of 21% and 35%, respectively, based on the Company's ability to benefit from its U.S. loss carryforwards, offset by state income taxes, non-deductible stock-based compensation expenses and foreign taxes provided on foreign subsidiary earnings.

Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis using enacted tax rates in effect for the year in which the differences are expected to reverse. Significant deferred tax assets and liabilities consist of the following (in thousands):



	Years Ended
	December 29, 2019			December 29, 2018
Deferred tax assets:
Net operating losses	$	301,929		$	257,928
Research and foreign tax credits	121,065			221,943
Nondeductible accruals	72,094			50,312
Inventory valuation	31,982			39,430
Property, plant and equipment	4,601			2,591
Leasing Liabilities	19,265			—
Stock-based compensation	3,998			4,825
Total deferred tax assets	$	554,934		$	577,029
Valuation allowance	(484,834		)	(493,157		)
Net deferred tax assets	$	70,100		$	83,872
Deferred tax liabilities:
Accrual and reverse - lease	—			(16,802		)
Depreciation	—			(199		)
Accruals, reserves and prepaid expenses	(830		)	(784		)
Right of use asset	(16,261		)	—
Acquired intangible assets	(34,542		)	(49,406		)
Convertible senior notes	(25,417		)	(29,419		)
Total deferred tax liabilities	$	(77,050	)	$	(96,610	)
Net deferred tax liabilities	$	(6,950	)	$	(12,738	)

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company must consider all positive and negative evidence, including the Company's forecasts of taxable income over the applicable carryforward periods, its current financial performance, its market environment, and other factors in evaluating the need for a full or partial valuation allowance against its net U.S. deferred tax assets. Based on the available objective evidence, management believes it is not more likely than not that the domestic net deferred tax assets will be realizable in the foreseeable future. Accordingly, the Company has provided a full valuation allowance against its domestic deferred tax assets, net of deferred tax liabilities, as of December 28, 2019 and December 29, 2018.

To the extent that the Company determines that deferred tax assets are realizable on a more likely than not basis, and an adjustment is needed, that adjustment will be recorded in the period that the determination is made and would generally decrease the valuation allowance and record a corresponding benefit to earnings.

As of December 28, 2019, the Company had net operating loss carryforwards of approximately $576.1 million for federal income tax purposes which will begin to expire in 2027 if unused. The Company had net operating loss carryforwards of approximately $442.5 million for state income tax purposes which will begin to expire in the year 2020 if unused. The Company also had foreign net operating loss carryforwards of approximately $605.5 million.

As of December 28, 2019, the Company also had R&D credit carryforwards of approximately $52.1 million for federal income tax and $52.9 million for state income tax purposes. The federal R&D tax credit will begin to expire in 2023 if unused. State R&D tax credits will carry forward indefinitely.

As of December 28, 2019, the Company also had Foreign Tax credit carryforwards of approximately $39.5 million for federal income tax. The foreign R&D tax credit will begin to expire in 2023 if unused.

Infinera Canada Inc., an indirect wholly owned subsidiary, has Scientific Research and Experimental Development Expenditures (“SRED”) credits available of $2.5 million to offset future Canadian income tax payable as of December 28, 2019. The Company's Portugal subsidiary has a SIFIDE Credit of $5.0 million to offset future income tax in Portugal payable as of December 28, 2019. Canadian SRED credits will begin to expire in the year 2032 if not fully utilized. The Portugal SIFIDE credits will begin to expire in the year 2021.

The federal and state net operating loss carryforwards may be subject to significant limitations under Section 382 and Section 383 of the Internal Revenue Code of 1986 and similar provisions under state law. The Tax Reform Act of 1986 contains provisions that limit the federal net operating loss carryforwards that may be used in any given year in the event of special occurrences, including significant ownership changes. The Company has completed a Section 382 review and has determined that none of its operating losses will expire solely due to Section 382 limitation(s).



	December 29, 2019			December 29, 2018			December 30, 2017
Beginning balance	$	24,617		$	19,786		$	22,282
Tax position related to current year
Additions	1,965			2,296			2,234
Tax positions related to prior years
Additions	18,212			2,981			—
Reductions	(542		)	(40		)	(4,728		)
Lapses of statute of limitations	(160		)	(406		)	(2		)
Ending balance	$	44,092		$	24,617		$	19,786

As of December 28, 2019, the cumulative unrecognized tax benefit was $44.1 million, of which $40.8 million was netted against deferred tax assets that would have otherwise been subjected with a full valuation allowance. Of the total unrecognized tax benefit as of December 28, 2019, approximately $3.1 million, if recognized, would impact the Company’s effective tax rate. Prior year addition of $18.2 million is related to reserve on Federal and California R&D credits acquired from Coriant Operations, Inc. As the Company determined that it is more likely than not that 100% of the Federal and California R&D credit will not be sustained in the event of an audit. As such the Company recorded a 100% reserve on these acquired R&D credits in 2019.

As of December 28, 2019, December 29, 2018 and December 30, 2017, the Company had $1.4 million, $1.2 million and $0.7 million, respectively, of accrued interest or penalties related to unrecognized tax benefits, of which less than $0.8 million was included in the Company’s provision for income taxes in each of the years ended December 28, 2019, December 29, 2018 and December 30, 2017, respectively. The Company’s policy is

The Company files income tax returns in the United States, various state jurisdictions and various foreign jurisdictions. As of December 28, 2019, the Company is potentially subject to examination by the Internal Revenue Service and the relevant state income taxing authorities and other major foreign jurisdictions where the Company conducts business, under the statute of limitations for years 2002 and forward.

With these jurisdictions and in the United States, it is reasonably possible that there could be significant changes to the Company's unrecognized tax benefits in the next twelve months due to either the expiration of a statute of limitation or a tax audit settlement that will be partially offset by an anticipated tax liability related to unremitted foreign earnings, where applicable. Given the number of years and numerous matters that remain subject to examination in various tax jurisdictions, management is unable to estimate the range of possible changes to the balance of the Company's unrecognized tax benefits.

The Company has received assessments of tax resulting from transfer pricing examinations in India for most years in the range of fiscal years ending March 2005 through March 2015. While some of the assessment years have been settled with no change from the original tax return position, the Company intends to appeal all remaining assessment years, and does not expect a significant adjustment to unrecognized tax benefits as a result of these inquiries. The Company believes that the resolution of these disputed issues will not have a material impact on its financial statements.

Included in the balance of income tax liabilities, accrued interest and penalties at December 28, 2019 is an immaterial amount related to tax positions for which it is reasonably possible that the statute of limitations will expire in various jurisdictions within the next twelve months.