INCOME TAXES

Benefit from (provision for) income taxes for the three and nine months ended September 30, 2018 and 2017 consisted of the following (in thousands):



	Three Months Ended September 30,					Nine Months Ended September 30,
	2018		2017			2018		2017
Benefit from (provision for) income taxes	$	684	$	(232	)	$	281	$	(417	)

The Company is subject to income tax in the United States as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income tax. The tax benefit for the nine months ended September 30, 2018 is $0.3 million, which is due to $1.2 million in U.S. federal, state and foreign income tax expense, offset by $1.5 million of net discrete tax benefit related to a change in the valuation allowance from return to provision true-ups and excess stock option benefits. The tax provision for the nine months ended September 30, 2017 is due to $0.4 million in U.S. state and foreign income tax expense.

Accounting for income taxes for interim periods generally requires the provision for income taxes to be determined by applying an estimate of the annual effective tax rate for the full fiscal year to income or loss before income taxes, excluding unusual or infrequently occurring discrete items ("Ordinary" income), for the reporting period. For the three and nine months ended September 30, 2018, a discrete effective tax rate method was used in jurisdictions where a small change in estimated Ordinary income has a significant impact on the annual effective tax rate. The primary difference between the effective tax rate and the federal statutory tax rate relates to the valuation allowances on certain of the Company’s net operating losses, foreign tax rate differences and stock-based compensation expense. Jurisdictions where no benefit is recorded on forecasted losses were excluded from the consolidated effective tax rate. As of September 30, 2018, the total amount of gross unrecognized tax benefits was $24.4 million, $23.5 million of which is subject to a full valuation allowance and would not affect the Company’s effective tax rate if recognized. As of September 30, 2018, amounts related to the accrual of interest and penalties were immaterial. During the three months ended September 30, 2018, the Company’s gross unrecognized tax benefits increased by $2.0 million, an immaterial amount of which would affect the Company’s effective tax rate if recognized.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the "Tax Act") was signed into law. The Tax Act makes broad and complex changes to the U.S. tax code that impact the Company's provision for income taxes, including, but not limited to, reducing the U.S. federal corporate tax rate from 35.0% to 21.0% (the "Tax Rate Reduction"), and requiring a one-time Deemed Repatriation Tax (the "Transition Tax") on certain un-repatriated earnings of foreign subsidiaries. However, because the Company has a net cumulative deficit on the earnings and profits of its foreign subsidiaries, it is not subject to the Transition Tax.

Prior to the effectiveness of the Tax Act, the Company did not recognize a deferred tax liability related to un-remitted foreign earnings because such earnings were expected to be reinvested indefinitely. Although the Company is not subject to the Transition Tax, an actual repatriation from its non-U.S. subsidiaries could still be subject to additional foreign withholding taxes and U.S. state taxes. However, it remains the Company’s intention to reinvest the earnings from its non-U.S. subsidiaries. As of September 30, 2018, the Company estimates that it had $3.3 million of cumulative earnings upon which U.S. income taxes had not been provided. Determination of the amount of unrecognized deferred tax liability with respect to un-remitted foreign earnings, if any, is not practicable.

In March 2018, FASB issued Accounting Standards Update No. 2018-05, "Income Taxes Topic (740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118" ("ASU 2018-05") to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. As of September 30, 2018, the Company's analysis for the Transition Tax was final; the Company considered its accounting for this area of the Tax Act to be complete as of such date and did not make any measurement-period adjustments related to it. However, the Company's accounting for other areas of the Tax Act was incomplete as of September 30, 2018. For the nine months ended September 30, 2018, the Company made measurement-period adjustments related to the re-measurement of deferred taxes and valuation allowance due to the Tax Rate Reduction previously estimated, but the adjustment had no material impact on the Company's income tax benefit. Since ongoing guidance and accounting interpretation for the Tax Act are expected over the next three months, the Company considers the accounting for areas of the Tax Act other than the Transition Tax to be incomplete as the Company continues to gather additional information and evaluate the provisions of the Tax Act and the application of ASU 2018-05. The Company expects to finalize the analysis and record any adjustments to provisional estimates no later than one year beyond the enactment date in accordance with ASU 2018-05. Any subsequent adjustment to these amounts will be recorded to current tax expense in the quarter of 2018 when the analysis is complete.

In addition, the Company is subject to the continuous examination of its income tax returns by the Internal Revenue Service and other tax authorities. The Company’s federal and state income tax returns for fiscal years subsequent to 2003 remain open to examination. In the Company’s most significant foreign jurisdictions — Canada, Ireland, the United Kingdom and Germany — the tax years subsequent to 2010 remain open to examination. The Company regularly assesses the likelihood of adverse outcomes resulting from examinations to determine the adequacy of its provision for income taxes, and monitors the progress of ongoing discussions with tax authorities and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. The Company believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. Although the timing of the resolution or closure of audits is not certain, the Company believes it is reasonably possible that its unrecognized tax benefits could be reduced by an immaterial amount over the 12 months following December 31, 2017.