Income Tax

Our financial statements include a total income tax expense of $0 on net losses of $14.3 million, $85.5 million and $2.2 million for the years ended December 31, 2017, 2016 and 2015, respectively. A reconciliation of the difference between the provision for income taxes and income taxes at the statutory U.S. federal income tax rate is as follows for the years ended December 31:



	2017		2016		2015
Federal statutory rate	34.0	%	34.0	%	34.0	%
Effect of:
Change in valuation allowance	(34.5	)%	(36.5	)%	(28.0	)%
Federal effect of change in state and local tax valuation allowance	0.5	%	2.5	%	(6.0	)%
Income tax provision effective rate	—	%	—	%	—	%

The significant components of our deferred tax asset were as follows as of December 31 (in thousands):



	2017			2016
Deferred tax assets relating to:
Net operating loss carryforwards	$	20,476		$	25,880
Loan loss reserve	27,186			40,897
Imputed interest income	424			800
Deferred rent	1,892			2,670
Miscellaneous items	45			174
Total gross deferred tax assets	50,023			70,421
Deferred tax liabilities:
Internally developed software	3,912			2,224
Property, equipment and software	4,242			6,747
Origination costs	4,078			7,417
Miscellaneous items	40			430
Total gross deferred tax liabilities	12,272			16,818
Net deferred tax asset	37,751			53,603
Less: valuation allowance	(37,751		)	(53,603		)
Net deferred tax asset less valuation allowance	$	—		$	—

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. 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. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and planned tax strategies in making this assessment. Based upon the level of historical losses and projections for future taxable income over the periods in which the deferred tax assets are deductible, we believe it is more likely than not that we will not realize the benefits of these deductible differences in the future. Therefore, we have recorded a full valuation allowance on our net deferred tax asset.

Deductions that are not deemed more likely than not to withstand examination by a taxing authority are considered to be "uncertain tax positions" as defined in ASC 740 Income Taxes. Prior to January 1, 2016, we had not recognized any uncertain tax positions. During the year ended December 31, 2016, we claimed deductions on our U.S. federal tax return for certain expenses related to our initial public offering that were validated at the level of substantial authority, but did not exceed the "more likely than not" threshold. We estimate the tax-effected exposure of these deductions to be approximately $2.2 million. These deductions did not result in any change to our tax payable or our provision for income taxes, both of which were $0 as of and for the year ended December 31, 2017. These deductions will increase our deferred tax asset as well as the corresponding valuation allowance. There will be no financial statement benefit derived from this additional deferred tax asset until such time as the valuation allowance is released.

Our net operating loss carryforwards for federal income tax purposes were approximately $82.1 million, $69.7 million and $50.6 million at December 31, 2017, 2016 and 2015, respectively, and, if not utilized, will expire at various dates beginning in 2029. State net operating loss carryforwards were $81.3 million, $68.9 million and $49.8 million at December 31, 2017, 2016 and 2015, respectively. Net operating loss carryforwards and tax credit carryforwards reflected above may be limited due to historical and future ownership changes.

Recently Enacted Tax Reform Bill

On December 22, 2017, the Tax Cuts and Jobs Act, or Tax Act, was signed into U.S. law and included numerous provisions that significantly revise existing tax law. The Tax Act introduces changes, including the reduction of the corporate income statutory tax rate from 35% to 21% for tax years beginning after December 31, 2017, an increase in bonus depreciation and the deductibility of certain depreciable assets, limitations on the deductibility of net interest expense, changes to net operating loss carryover and carryback rules, the transition of U.S international taxation from a worldwide tax system to a territorial system, and reductions in the amount of executive pay that could qualify as a tax deduction. The Company is currently evaluating the impact of the Tax Act on its consolidated financial statements.

On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, or SAB 118, to assist registrants in accounting for the tax effects of the Tax Act specifically when an accounting analysis of the Tax Act is incomplete for registrant's financial statements for the reporting period in which the Tax Act became law. SAB 118 permits us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. In accordance with SAB 118, we have been able to reasonably estimate the effect the change in the corporate tax rate will have on our deferred tax asset. At December 31, 2017, our deferred tax asset has been provisionally remeasured and adjusted by $18.8 million from $56.6 million to $37.8 million. Because a full valuation allowance has been and will continue to be recorded against our deferred tax asset, an amount corresponding to the reduction of the deferred tax asset has been released from the valuation allowance. These two adjustments offset each other and result in no net impact to our results of operations.