INCOME TAXES

Income Tax Provision

On December 22, 2017, the President of the United States signed into law the Tax Act. The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Company recognized the income tax effects of the Tax Act in its 2017 financial statements in accordance with Staff Accounting Bulletin No. 118 ("SAB 118"), which provides SEC staff guidance for the application of ASC Topic 740, Income Taxes, in the reporting period in which the Tax Act was signed into law and permits a measurement period not to exceed one year from the enactment date for companies to complete the required analysis and accounting. As permitted under SAB 118, the adjustments we recorded due to the Tax Act, including the remeasurement of deferred tax assets and liabilities and the transition tax, were based on reasonable estimates and were considered provisional. As of December 31, 2018, the one-time impact of the change in tax rate on our deferred tax assets and liabilities is complete. Additionally, we have completed our assessment of global intangible low taxed income ("GILTI") and have established a policy to account for this tax on a period basis beginning in January 1, 2018. We have also completed our analysis of the one-time transition tax and recorded the impact.

As a result of the reduction in the U.S. federal tax rate from 35% to 21% under the Tax Act, the Company revalued its ending gross deferred tax assets at December 31, 2017 by $46,189 which was fully offset by a decrease in valuation allowance. Additionally, the Company recorded an amount of $0 tax payable with respect to the deemed mandatory repatriation of undistributed foreign earnings of foreign subsidiaries. On this basis, the net impact on tax expense provided in the Company’s consolidated financial statements for the years ended December 31, 2018 and 2017 related to the Tax Act is $0.

The domestic and foreign components of income (loss) before income taxes from continuing operations were as follows:



	Year ended December 31,
	2018			2017
Domestic	$	(6,819	)	$	(7,851	)
Foreign	1,652			5,876
Income (loss) from continuing operations before provision for income taxes	$	(5,167	)	$	(1,975	)

The provision for (benefit from) income taxes from continuing operations were as follows:



	Year ended December 31,
	2018			2017
Current tax provision (benefit):
U.S. Federal	$	—		$	—
State and local	20			19
Foreign	627			106
Total current provision for (benefit from) income taxes	647			125
Deferred tax provision (benefit):
U.S. Federal	(235		)	—
State and local	(67		)	—
Foreign	(246		)	744
Total deferred provision for (benefit from) income taxes	(548		)	744
Total provision for (benefit from) income taxes from continuing operations	$	99		$	869

Tax Rate Reconciliation

The effective tax rates for the years ended December 31, 2018 and 2017 were negative 1.9% and negative 44.0%. These effective tax rates differ from the U.S. Federal statutory rate of 21% in 2018 and 35% in 2017 due to state income taxes, changes in valuation allowances in the U.S. and certain foreign jurisdictions which reduces or eliminates the effective tax rate on current year profits or losses, variations from the U.S. Federal statutory rate in foreign jurisdictions, taxes on repatriations of foreign profits, and non-deductible expenses. The effects of U.S. federal tax rate changes in 2017 and state tax rate changes in 2018 on deferred tax assets and other federal and deferred tax adjustments in 2018 and 2017 were offset by changes in valuation allowances and have no net impact on effective tax rates.

The following is a reconciliation of the effective tax rate from continuing operations for the years ended December 31, 2018 and 2017 to the U.S. Federal statutory rate of 21% and 35%, respectively:



	Year ended December 31,
	2018			2017
Provision for (benefit from) continuing operations at Federal statutory rates	$	(1,085	)	$	(691	)
State income taxes, net of Federal income tax effect	15			13
Change in valuation allowance	2,904			(46,491		)
Taxes related to foreign income	443			452
Effect of U.S. federal and state tax rate changes on deferred tax assets	(1,727		)	46,189
Nondeductible expenses	573			62
Other federal and state deferred tax adjustments	(1,024		)	1,335
Provision for (benefit from) income taxes from continuing operations	$	99		$	869

Deferred Taxes Assets (Liabilities)

Deferred income taxes are provided for the tax effect of temporary differences between the financial reporting basis and the tax basis of assets and liabilities. Net deferred tax assets have been classified as non-current in the accompanying Consolidated Balance Sheets. Significant temporary differences at December 31, 2018 and 2017 were as follows:



	As of December 31,
	2018			2017
Deferred tax assets (liabilities):
Allowance for doubtful accounts	$	25		$	29
Property and equipment	19			800
Goodwill and intangibles	670			1,614
Accrued compensation	1,232			1,512
Accrued liabilities and other	559			787
Tax loss carry-forwards	197,564			89,534
Deferred tax assets (liabilities) gross, total	200,069			94,276
Valuation allowance	(199,486		)	(93,952		)
Deferred tax assets (liabilities), net of valuation allowance, total	$	583		$	324

During the fourth quarter 2017, the Company reevaluated its position that all unremitted earnings of its foreign subsidiaries would be indefinitely reinvested and the Company is now required to account for U.S. tax on these earnings. Future repatriations of previously unremitted foreign earnings are expected to either be exempt from U.S. taxation or offset by NOLs, therefore as of December 31, 2018 and December 31, 2017, no U.S. tax has been provided on unremitted foreign earnings. The Company has provided $47 and $30 of withholding tax with respect to unremitted foreign earnings, respectively at December 31, 2018 and December 31, 2017.

Net Operating Losses ("NOLs"), Capital Losses, and Valuation Allowance

At December 31, 2018, the Company had losses for U.S. Federal tax purposes of approximately $721,260 in total, made up of net U.S. Federal NOLs incurred through December 31, 2018 of $341,145 and U.S. Federal capital losses of $380,115 as a result of the Sales Transaction. The NOLs include approximately $16,584 of tax losses that were not absorbed by Monster Worldwide, Inc. ("Monster") on its consolidated U.S. Federal tax returns through the spin off of the Company on April 1, 2003. U.S. Federal NOLs incurred through December 31, 2017 expire at various dates through 2037 with $3,440 scheduled to expire during 2019. U.S. Federal NOLs incurred in 2018 may be carried forward indefinitely. U.S. Federal capital losses expire in five years during 2023.

The Company's utilization of U.S. NOLs is subject to an annual limitation imposed by Section 382 of the Internal Revenue Code ("IRC"), which may limit our ability to utilize all of the existing NOLs before the expiration dates. Based upon IRC Section 382 studies prepared by the Company, Section 382 ownership changes have occurred that will result in $227,564 of the Company’s Federal NOLs generated through September 2006 and recognized built-in losses during the five year period after September 2006 being subject to IRC Section 382 limitations. As a result of IRC Section 382 limitations, $31,288 of the $227,564 NOLs that are limited are expected to expire prior to utilization specifically as a result of the IRC Section 382 cumulative annual limitations.

As of December 31, 2018, certain international subsidiaries had NOLs for local tax purposes of $12,050. With the exception of $6,208 of NOLs with an indefinite carry forward period as of December 31, 2018, these losses will expire at various dates through 2035, with $0 scheduled to expire during 2019. The deferred tax recognized for NOLs are presented net of unrecognized tax benefits, where applicable.

ASC 740-10-30-5 requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In making this assessment, management considers the level of historical taxable income, scheduled reversals of deferred tax liabilities, tax planning strategies, and projected future taxable income. The provision for income tax includes a net tax benefit of $43, resulting from changes in judgment regarding the realizability of deferred tax assets in future years. As of December 31, 2018, $197,558 of the valuation allowance relates to the deferred tax asset for NOLs, $194,740 of which is U.S. Federal and state, and $2,818 of which is foreign, that management has determined will more likely than not expire prior to realization. The remaining valuation allowance of $1,928 relates to deferred tax assets on U.S. and foreign temporary differences that management estimates will not be realized due to the Company's U.S. and foreign tax losses. The increase in valuation allowance for the year ended December 31, 2018 includes an increase relating to continuing operations of $3,158 and an increase relating to U.S. capital losses as a result of the Sales Transaction of $102,660.

Uncertain Tax Positions

As of December 31, 2018 and 2017, the Company's unrecognized tax benefits, including interest and penalties, which would lower the Company’s annual effective income tax rate if recognized in the future, were as follows:



	As of December 31,
	2018		2017
Gross unrecognized tax benefits excluding interest and penalties	$	1,574	$	1,311
Less: amount presented as a reduction to a deferred tax asset	180		195
Unrecognized tax benefits, excluding interest and penalties	1,394		1,116
Accrued interest and penalties	588		566
Total unrecognized tax benefits that would impact the effective tax rate	$	1,982	$	1,682

The following table shows a reconciliation of the beginning and ending amounts of unrecognized tax benefits, exclusive of interest and penalties:



Balance at January 1, 2018	$	1,311
Additions based on tax positions related to the current year	360
Reductions for tax positions of prior years	(68		)
Lapse of statute of limitations	(2		)
Currency Translation	(27		)
Balance at December 31, 2018	$	1,574

Estimated interest and penalties classified as part of the provision for income taxes in the Company’s Consolidated Statements of Operations for the years ended December 31, 2018 and 2017 were as follows:



	Year ended December 31,
	2018		2017
Expense for (benefit of) estimated interest and penalties related to unrecognized tax benefits	$	55	$	49

Based on information available as of December 31, 2018, it is reasonably possible that the total amount of unrecognized tax benefits could decrease in the range of $0 to $200 over the next 12 months as a result of projected resolutions of global tax examinations and controversies and potential lapses of the applicable statutes of limitations.

In many cases, the Company’s unrecognized tax benefits are related to tax years that remain subject to examination by the relevant tax authorities. Tax years with NOLs remain open until such losses expire or the statutes of limitations for those years when the NOLs are used or expire. As of December 31, 2018, the Company's open tax years remain subject to examination by the relevant tax authorities and currently under income tax examination were principally as follows:



		Year
Earliest tax years remain subject to examination by the relevant tax authorities:
U.S. Federal		2015
Majority of U.S. state and local jurisdictions		2014
Australia		2017
Belgium		2016
Canada		2014
Netherlands		2013
Switzerland		2014
United Kingdom		2017
Jurisdictions in Asia		2018

The Company believes that its tax reserves are adequate for all years subject to examination above.