For the years ended December 31, 2019, 2018 and 2017, our income tax expense (benefit) was comprised of the following (in thousands):


	2019		2018		2017
Current:
Federal	$	3	$	—	$	(65)
State	60		25		68
Foreign	1,091		432		1,009
Total current expense	1,154		457		1,012
Deferred:
Federal	—		—		(42)
State	—		—		—
Foreign	(334)		(218)		(209)
Total deferred benefit	(334)		(218)		(251)
Total income tax expense	$	820	$	239	$	761

For the years ended December 31, 2019, 2018 and 2017, the provision for income taxes differs from the amount computed by applying the federal statutory income tax rates to our loss before the provision (benefit) for income taxes, as follows:


	2019		2018		2017
U.S. federal statutory tax rate	21.0	%	21.0	%	34.0	%
State tax expense	7.1		7.2		4.9
Foreign rate differential	(5.1)		(5.1)		(6.7)
Nondeductible expenses	(0.7)		(0.7)		(0.9)
Equity compensation	12.0		9.5		—
Tax credits	6.5		3.9		5.8
Unrecognized tax benefits	(1.1)		(0.8)		(0.7)
Other	(0.8)		0.6		(0.3)
Remeasurement of deferred taxes	(1.6)		—		(7.0)
Change in valuation allowance	(38.9)		(36.0)		(31.6)
Total	(1.6)	%	(0.4)	%	(0.4)	%

The effective tax rate of (1.6)% in 2019 includes a net $10.2 million of tax expense attributable to the change in the valuation allowance in the United States and Switzerland, partially offset by favorable excess tax benefits for equity compensation and research credits.

Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amount of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

As of December 31, 2019 and 2018, significant components of our deferred tax assets and liabilities were as follows (in thousands):


	2019		2018
Deferred tax assets:
Net operating losses	$	34,875	$	21,059
Tax credits	8,648		5,945
Deferred revenue	1,291		4,179
Equity compensation	1,668		3,923
Lease liabilities	13,066		—
Accrued vacation	409		1,170
Deferred rent	—		373
Bad debt	164		164
Depreciation	—		151
Other	260		548
Gross deferred tax assets	60,381		37,512
Less: Valuation allowance	(35,607)		(30,039)
Total deferred tax assets	24,774		7,473
Deferred tax liabilities:
Prepaid expenses	(9,562)		(6,640)
Right-of-use assets	(6,488)		—
Unbilled receivables	(3,849)		(419)
Depreciation	(4,377)		—
Other	(42)		(130)
Total deferred tax liabilities	(24,318)		(7,189)
Net deferred tax asset	$	456	$	284

As of December 31, 2019 and 2018, we had $99.3 million and $56.9 million of gross net operating loss (“NOL”) carryforwards for U.S. federal tax purposes, respectively. U.S. federal NOL carryforwards, in the amount of $24.4 million, generated prior to 2018 will expire, if unused, in 2037. Due to the Tax Cuts and Jobs Act of 2017 (the "TCJA"), U.S. federal NOL carryforwards, in the amount of $74.9 million, generated after 2017 have an indefinite carryforward period.

Section 382 of the Internal Revenue Code limits the utilization of the NOL carryforwards when ownership changes occur, as defined by that section. A number of states have similar state laws that limit utilization of the state NOL carryforwards when ownership changes occur. We have performed an analysis of our Section 382 ownership changes and have determined that all U.S. federal and state NOL carryforwards are available for use as of December 31, 2019.

As of December 31, 2019 and 2018, we had $7.5 million and $6.4 million, respectively, of U.S. federal tax credit carryforwards which will expire, if unused, in 2039.

As of December 31, 2019 and 2018, we had U.S. gross state NOL carryforwards of $100.9 million and $57.2 million, respectively. We had tax effected state NOL carryforwards of $6.5 million and $3.7 million as of December 31, 2019 and 2018,

respectively. The majority of state NOL carryforwards generated prior to 2018 will expire, if unused, in 2037. Due to the TCJA, certain state NOL carryforwards generated after 2017 have an indefinite carryforward period.

As of December 31, 2019 and 2018, we had foreign gross NOL carryforwards of $62.8 million and $56.3 million, respectively, primarily attributable to our subsidiary in Switzerland. Those NOL carryforwards will begin to expire, if unused, between 2021 to 2026.

On May 19, 2019, Swiss voters approved the Federal Act on Tax Reform and AHV Financing (TRAF) which resulted in a change to the Swiss income tax rate, amongst other items. The tax law change is considered enacted in 2019 for U.S. GAAP purposes. We remeasured our Swiss deferred tax balances and offsetting valuation allowance using the enacted tax rates, resulting in an immaterial net tax impact.

The net change during the year in the total valuation allowance was $5.6 million, primarily driven by the valuation allowance recorded against the United States and Switzerland deferred tax assets.

As of December 31, 2019, we continued to maintain a full valuation allowance against U.S. deferred tax assets based on our cumulative operating results as of December 31, 2019, three-year cumulative loss and assessment of our expected future results of operations. We have evaluated all evidence, both positive and negative, in assessing the likelihood of realizability and the negative evidence outweighed the positive evidence.

As of December 31, 2019, we have a valuation allowance of $7.3 million against foreign deferred tax assets, primarily for deferred tax assets at our subsidiary in Switzerland. Based on our cumulative operating results as of December 31, 2019, and assessment of our expected future results of operations, we determined that it was not more likely than not that we would be able to realize the deferred tax assets prior to expiration.

We plan to distribute previously undistributed earnings of our foreign subsidiaries back to the United States in future years. Upon repatriation of those earnings, if any, we may be subject to taxes, including withholding taxes, net of any applicable foreign tax credits. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable.

As of December 31, 2019 and 2018, we had unrecognized tax benefits of $1.6 million and $1.0 million, respectively, of which the entire portion would affect our effective tax rate if recognized. The following table summarizes the activity related to our unrecognized tax benefit from January 1, 2017 to December 31, 2019 (in thousands):


Balance as of January 1, 2017	$	419
Additions for tax positions in current years	232
Additions for tax positions in prior years	—
Reductions due to lapse in statutes of limitations	—
Settlements	—
Balance as of December 31, 2017	651
Additions for tax positions in current years	388
Additions for tax positions in prior years	—
Reductions due to lapse in statutes of limitations	—
Settlements	—
Balance as of December 31, 2018	1,039
Additions for tax positions in current years	536
Additions for tax positions in prior years	—
Reductions due to lapse in statutes of limitations	—
Settlements	—
Balance as of December 31, 2019	$	1,575

We recognize interest and penalties related to uncertain tax positions in income tax expense. During the year ended December 31, 2019, we recognized approximately $3 thousand in interest. We did not recognize any interest during the year ended December 31, 2018. The cumulative balance of interest and penalties as of December 31, 2019 and 2018 was $36 thousand and $33 thousand, respectively. If recognized, approximately $1.6 million and $1.0 million of unrecognized tax benefits would impact the effective tax rate during the years ended December 31, 2019 and 2018, respectively.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. The tax years 2015 through 2019 remain open to examination by the major taxing jurisdictions to which we are subject. There are no open examinations that would have a material impact to our consolidated financial statements.

On January 1, 2019, we adopted ASC 606 and recorded no net impact to retained earnings for the tax effects of the adoption because of the existence of valuation allowances in the United States and Switzerland.