(12) Income Taxes

For the years ended December 31, 2019, 2018 and 2017, income before income taxes consisted of the following (in thousands):



	Year Ended December 31,
	2019		2018		2017
U.S. operations	$	(6,203)	$	(3,215)	$	(3,408)
Foreign operations		61,416		86,874		59,279
	$	55,213	$	83,659	$	55,871

Income tax expense (benefit) attributable to income from continuing operations consisted of (in thousands):



	Year Ended December 31,
	2019		2018		2017
Current
Federal	$	5	$	2	$	(563)
State		89		98		82
Foreign		364		282		536
		458		382		55
Deferred
Federal		2,486		1,859		(8,755)
State		396		734		826
Foreign		852		1,579		1,180
		3,734		4,172		(6,749)
Income tax expense (benefit)	$	4,192	$	4,554	$	(6,694)

The reconciliations between the Company’s income tax expense and the amounts computed by applying the U.S. federal income tax rate of 21.0% for the years ended December 31, 2019 and 2018 and 35.0% for the year ended December 31, 2017 are as follows (in thousands):



	Year Ended December 31,
	2019		2018		2017
Computed expected tax expense	$	11,595	$	17,568	$	19,555
Increase (decrease) in income taxes resulting from:
Foreign tax differential		(11,648)		(16,384)		(19,032)
State income tax expense, net of federal income tax benefit		433		534		(1,158)
Subpart F income		3,592		2,202		683
IRC Section 162(m) excess officer's compensation		215		172		-
Non-deductible stock-based compensation		94		133		218
Excess tax benefit related to stock-based compensation		(155)		(34)		(1,858)
Increase in uncertain tax positions		1		1		61
Adjustment for prior years		(13)		304		1,894
Change in Federal tax rate		-		-		(6,962)
Adjustment to contingent consideration		-		-		(429)
Other		78		58		334
	$	4,192	$	4,554	$	(6,694)

As of December 31, 2019, the Company had $78.3 million and $15.4 million of net operating loss (NOL) carry forwards available to offset future federal and state taxable income, respectively. The NOL carry forwards will begin to expire in 2035 and 2029 for federal and state income tax purposes, respectively.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2019 and 2018 are presented below (in thousands):



	Year Ended December 31,
	2019		2018
Deferred tax assets:
Accounts receivable	$	357	$	144
Accrued expenses and other current liabilities		422		743
Unearned revenue		33		51
Stock-based compensation		1,026		1,060
Other		53		62
Net operating loss carry forwards		21,087		37,464
Gross deferred tax assets		22,978		39,524
Valuation allowance		-		-
Net deferred tax assets		22,978		39,524

Deferred tax liabilities:
Depreciation and amortization		46,180		68,859
Foreign deferred tax liabilities		953		1,047
Intangible assets		1,167		1,425
Deferred subpart F income		10,054		6,512
Gross deferred tax liabilities		58,354		77,843
Net deferred tax liability	$	35,376	$	38,319

The 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’s management considers the projected future taxable income for making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, the Company’s management believes it is more likely than not the Company will realize the benefits of the deductible differences noted above.

Deferred income taxes have not been provided on the undistributed earnings of foreign subsidiaries. As of December 31, 2019, the amount of such earnings totaled approximately $6.4 million. These earnings have been permanently reinvested and the Company does not plan to initiate any action that would precipitate the payment of income taxes thereon. The amount of income taxes that would have resulted had such earnings been repatriated is not practically determinable.

The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):



Balance at December 31, 2017	$	277
Increases related to current year tax positions		14
Balance at December 31, 2018		291
Increases related to current year tax positions		12
Balance at December 31, 2019	$	303

The unrecognized tax benefits of $0.3 million at December 31, 2019, if recognized, would reduce the Company’s effective tax rate. The Company accrued potential interest and penalties of less than $0.1 million related to unrecognized tax benefits for each of the years ended December 31, 2019 and 2018.

The U.S. Tax Cuts and Job Act of 2017 (TCJA) was signed into law on December 22, 2017. The most significant effect of TCJA on the Company was the U.S. federal corporate tax rate reduction from 35% to 21%, which required re-measurement of the Company’s U.S. deferred income tax assets and liabilities as of December 31, 2017. As the Company was in an overall net deferred tax liability position, the corporate tax rate reduction resulted in a net tax benefit of $16.9 million in 2017.

Other significant provisions of the TCJA that became effective in 2018 that may impact the Company’s income taxes are: the limitation on the deduction of interest expense in excess of 30 percent of adjusted taxable income; limitation on the utilization of net operating losses generated after fiscal year 2017 to 80 percent of taxable income; the taxation of global intangible low-taxed income (GLTI) of controlled foreign corporations; and limitation on the deduction for executive compensation. As a result of the GILTI provisions of the TCJA, the Company is likely to incur additional taxes on GILTI in the future, although the timing and amount of such taxes cannot be reasonably determined, as it depends on the Company’ future operating results and investment in containers. The Company adopted the accounting policy of accounting for taxes on GILTI in the period that it is subject to such tax.

The Company’s tax returns, including the United States, California, New Jersey and South Carolina, are subject to examination by the tax authorities. The Company accrues for unrecognized tax benefits based upon its best estimate of the additional taxes, interest and penalties expected to be paid. These estimates are updated over time as more definitive information becomes available from taxing authorities, completion of tax audits, expiration of statute of limitations, or upon occurrence of other events.

The Company does not believe the total amount of unrecognized tax benefit as of December 31, 2019 will increase or decrease significantly in the next twelve months. As of December 31, 2019, the statute of limitations for tax examinations in the United States has not expired for the years ended December 31, 2015 through 2018. California, New Jersey and South Carolina have not expired for tax returns filed for the years ended December 31, 2015 through 2018. The Company was notified on May 1, 2017 that its 2015 U.S. federal income tax return was selected for examination. The examination was concluded on June 20, 2018 with no impact to tax expense.