Income Taxes

Our financial statements include a total income tax expense of $0 on net income (loss) of $25.3 million, $(14.3) million and $(85.5) million for the years ended December 31, 2018, 2017 and 2016, 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:



	2018		2017		2016
Federal statutory rate	21.0	%	34.0	%	34.0	%
Effect of:
Change in valuation allowance	(21.4	)%	(34.5	)%	(36.5	)%
Federal effect of change in state and local tax valuation allowance	0.4	%	0.5	%	2.5	%
Income tax provision effective rate	—	%	—	%	—	%

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



	2018			2017
Deferred tax assets relating to:
Net operating loss carryforwards	$	4,104		$	20,476
Loan loss reserve	33,691			27,186
Deferred compensation	5,839			—
Imputed interest income	415			424
Deferred rent	1,207			1,892
Unrealized loss	545			—
Miscellaneous items	613			45
Total gross deferred tax assets	46,414			50,023
Deferred tax liabilities:
Property, equipment and software	3,151			8,154
Origination costs	5,685			4,078
Miscellaneous items	—			40
Total gross deferred tax liabilities	8,836			12,272
Net deferred tax asset	37,578			37,751
Less: valuation allowance	(37,578		)	(37,751		)
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. After considering these factors, including the significance of our historical losses, we can not conclude that it is more likely than not that we will 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. We previously 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 prior year tax payable or our provision for income taxes as they only increased our deferred tax asset as well as the corresponding valuation allowance.

Our net operating loss carryforwards for federal income tax purposes were approximately $3.7 million, $69.6 million and $75.7 million at December 31, 2018, 2017 and 2016, respectively, and if not utilized, will expire at various dates beginning in 2027. State post-apportionment net operating loss carryforwards were $14.9 million, $36.7 million and $68.9 million at December 31, 2018, 2017 and 2016, 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. Other than impacting the value of our deferred tax assets, deferred tax liabilities, valuation allowance, minor changes to our future temporary differences and changes to our future taxes payable due to the lowered tax rates, the impact of the new Tax Act was not material to our core 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, 2018, we have completed our accounting for the tax effects of the Tax Act with no material change to the estimate recorded at December 31, 2017.