Note 12. Income Taxes

The components of loss before provision for income taxes were as follows (in thousands):

	Year Ended January 31,
	2018			2017			2016
United States	$	(107,701	)	$	(115,640	)	$	(155,794	)
Foreign		(46,544	)		(35,233	)		(46,464	)
Total	$	(154,245	)	$	(150,873	)	$	(202,258	)

The components of the provision for income taxes were as follows (in thousands):

	Year Ended January 31,
	2018			2017			2016
Current:
Federal	$	(430	)	$	26		$	29
State		75			122			146
Foreign		1,426			770			298
Total	$	1,071		$	918		$	473
Deferred:
Federal	$	(134	)	$	96		$	61
State		18			—			—
Foreign		(240	)		(100	)		156
Total	$	(356	)	$	(4	)	$	217
Provision for income taxes	$	715		$	914		$	690

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). The Tax Act reduces the U.S. federal corporate tax rate from 34% to 21%, imposes a one-time repatriation tax, and numerous other provisions transitioning to a territorial system.

As a result of the Tax Act, the corporate tax rate changed from 34% to 21% effective January 1, 2018. For the fiscal year ended January 31, 2018, we are subject to a blended rate of 32.92%, determined based on the number of days before and after the effective date of the new corporate tax rate. The items accounting for the difference between income taxes computed at the federal statutory income tax rate of 32.92% and the provision for income taxes consisted of the following (in thousands):

	Year Ended January 31,
	2018			2017			2016
Tax benefit at federal statutory rate	$	(50,772	)	$	(51,297	)	$	(68,767	)
State taxes, net of federal benefit		(7,803	)		(7,778	)		(8,799	)
Foreign rate difference		7,988			7,363			6,744
Nondeductible expenses		689			594			429
Research and development credit		(3,967	)		(3,607	)		(3,533	)
Stock-based compensation		(4,148	)		6,451			6,214
Change in reserve for unrecognized tax benefits		3,537			3,634			3,562
Other		(383	)		97			61
Change in valuation allowance, including the effect of tax rate change		(34,119	)		45,457			64,779
Effect of tax rate change on deferred tax assets		89,693			—			—
Total provision for income taxes	$	715		$	914		$	690

The significant components of our deferred tax assets and liabilities were as follows (in thousands):

	January 31,
	2018			2017
Deferred tax assets:
Net operating loss carryforward	$	210,143		$	227,023
Accruals and reserves		17,433			23,960
Stock-based compensation		11,673			13,304
Depreciation and amortization		5,809			7,513
Tax credit carryover		4,325			4,002
Acquired intangible assets		597			811
Total deferred tax assets		249,980			276,613
Valuation allowance		(249,359	)		(276,392	)
Total deferred tax assets, net of valuation allowance		621			221
Deferred tax liabilities:
Goodwill with indefinite life amortization		(191	)		(157	)
Total deferred tax liabilities		(191	)		(157	)
Net deferred tax assets	$	430		$	64

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As a result, we have established a full valuation allowance against our U.S. and United Kingdom deferred tax assets to the extent they are not offset by liabilities from uncertain tax positions based on our history of losses. The valuation allowance decreased by $27.0 million and increased by $44.2 million, respectively, during the years ended January 31, 2018 and 2017.

Under the Tax Act, NOLs generated for tax years ending after December 31, 2017, will have an indefinite carryforward period. In light of the Tax Act, we have assessed and believe that, it is more likely than not, that the NOLs generated for the fiscal year ended January 31, 2018, in the U.S. will be realized to the extent of future reversal of taxable temporary difference associated with indefinite-lived intangible assets.

Based on provisions of the Tax Act, we remeasured the deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. Accordingly, we recorded a provisional tax expense of $89.7 million associated with the remeasurement of our deferred tax balances. However, as we recognize a valuation allowance on deferred tax assets if it is more likely than not that the assets will not be realized in future years, there is no impact to the effective tax rate, as any change to deferred taxes are offset by the valuation allowance.

The one-time repatriation tax is based on our post-1986 earnings and profits (E&P) that were previously deferred from U.S. income taxes. Due to the ability to offset positive accumulated foreign earnings with existing accumulated foreign deficits, our provisional estimate of the one-time repatriation tax did not result in additional income tax expense.

The changes included in the Tax Act are broad and complex. The final transition impacts of the Tax Act may differ from the above estimate, possibly materially, due to, among other things, changes in interpretations of the Tax Act any legislative action to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates we have utilized to calculate the transition impacts, including impacts from changes to current year earnings estimates and foreign exchange rates of foreign subsidiaries. The Securities Exchange Commission has issued SAB 118 that would allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. We currently anticipate finalizing and recording any resulting adjustments by the year ending January 31, 2019.

As of January 31, 2018, we had federal, state and foreign net operating loss carryforwards of $624.7 million, $613.7 million and $214.7 million, respectively, available to offset future taxable income. The federal net operating loss carryforwards generated prior to fiscal year 2018 will expire at various dates beginning in 2025, if not utilized. The state net operating loss carryforwards will expire at various dates beginning in 2028, if not utilized. The foreign net operating loss carryforwards do not expire. In addition, as of January 31, 2018, we had federal and state research and development tax credit carryforwards of $18.2 million and $20.8 million, respectively. The federal research and development tax credit carryforwards will expire beginning in 2025 if not utilized. The state research and development tax credit carryforwards do not expire.

Utilization of the federal and state NOLs may be subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

We evaluate tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. We believe that we have provided adequate reserves for our income tax uncertainties in all open tax years.

A reconciliation of the gross unrecognized tax benefits is as follows (in thousands):

	Year Ended January 31,
	2018			2017		2016
Unrecognized tax benefits—beginning of period	$	28,644		$	20,656	$	13,607
Reductions for tax positions related to prior year		(971	)		—		—
Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations		(337	)		—		—
Additions for tax positions related to prior year		—			447		238
Additions for tax positions related to current year		8,858			7,541		6,811
Unrecognized tax benefits—end of period	$	36,194		$	28,644	$	20,656

The gross unrecognized tax benefits, if recognized, would not materially affect the effective tax rate as of January 31, 2018, 2017 and 2016. We do not expect our gross unrecognized tax benefits to change significantly over the next 12 months.

Our policy is to classify interest and penalties associated with uncertain tax positions, if any, as a component of our income tax provision. Interest and penalties were not significant during the years ended January 31, 2018, 2017 and 2016.

We file tax returns in the United States for federal, California, and other states. All tax years remain open to examination for both federal and state purposes as a result of our net operating loss and credit carryforwards. We began to file foreign tax returns in the United Kingdom starting with the year ended January 31, 2013, in France, Germany, and Japan starting with the year ended January 31, 2014, in Canada starting with the year ended January 31, 2015 and in Australia, Sweden, and Netherlands starting with the year ended January 31, 2016. Certain tax years remain open to examination.