Income Taxes

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



	Years Ended January 31,
	2019			2018			2017
United States	$	(50,014	)	$	(49,827	)	$	(45,043	)
Foreign	(52,315		)	(32,859		)	(24,301		)
Total	$	(102,329	)	$	(82,686	)	$	(69,344	)

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



	Years Ended January 31,
	2019			2018			2017
Current:
Federal	$	76		$	—		$	—
State	134			88			97
Foreign	1,442			1,493			626
Total	1,652			1,581			723
Deferred:
Federal	(3,389		)	(96		)	39
State	(704		)	6			4
Foreign	(877		)	(204		)	(47		)
Total	(4,970		)	(294		)	(4		)
Provision for (benefit from) income taxes	$	(3,318	)	$	1,287		$	719

The items accounting for the difference between income taxes computed at the federal statutory income tax rate and the provision for (benefit from) income taxes consisted of the following (in thousands):



	Years Ended January 31,
	2019			2018			2017
Income tax benefit at statutory rate	$	(21,474	)	$	(27,958	)	$	(23,578	)
State taxes, net of federal benefit	106			564			101
Impact of foreign income taxes	5,111			5,555			7,053
Stock based compensation	(27,361		)	1,741			1,796
Non-deductible expenses	1,238			615			531
Change in valuation allowance	40,357			(11,791		)	13,740
Research and development credits	(1,540		)	(1,146		)	(775		)
Prior year true ups	135			(144		)	918
Change in tax rate due to the Tax Act	—			33,110			—
Other	110			741			933
Provision for (benefit from) income taxes	$	(3,318	)	$	1,287		$	719

The overall tax benefit recorded for the current fiscal year is driven is driven by a net release in the Company's valuation allowance on deferred tax assets relative to the prior year, principally as a result of deferred taxes recorded in purchase accounting as part of the mLab acquisition.

Impact of the 2017 Tax Cuts and Jobs Act

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) significantly revised the U.S. corporate income tax law, by among other things, reducing the corporate income tax rate to 21% for tax years beginning in 2018, implementing a modified territorial system that includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries and creating new taxes on certain foreign sourced earnings.

Also on December 22, 2017, the SEC staff issued Staff Accounting Bulletin 118 (“SAB 118”) to provide guidance for companies that are not able to complete their accounting for the income tax effects of the Tax Act in the period of enactment. SAB 118 provides for a measurement period of up to one year from the date of enactment. During the measurement period, a company must reflect adjustments to any provisional amounts if it obtains, prepares or analyzes additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts. As of January 31, 2019, we have completed our analysis of the Tax Act.

The provisional amount recorded related to the re-measurement of the Company’s deferred tax balance was $33.1 million before the valuation allowance. The provisional decrease to the valuation allowance related to the re-measurement of the deferred tax balance was $33.1 million. The income tax calculation for the year ending January 31, 2018 also included an immaterial tax benefit related to the re-measurement of a deferred tax liability on a long-lived asset. During the year ended January 31, 2019, this amount was finalized and no additional adjustment was required to be made.

The Tax Act also included a one-time Transition Tax on the Company’s total post-1986 earnings and profits (“E&P”), which had been previously deferred from U.S. federal income taxes as the E&P were considered to be indefinitely reinvested. The Company prepared a provisional estimate of the impact of the Transition Tax, and determined that due to significant non-U.S. E&P deficits, the Company is not subject to the Transition Tax. This amount was finalized by January 31, 2019 and no additional adjustment was required.

The Tax Act contains several new tax provisions that became effective on January 1, 2018, which did not have a material impact due to the Company’s size and structure, as well as its net operating loss and valuation allowance position. The Tax Act also included provisions for certain foreign-sourced earnings referred to as Global Intangible Low-Taxed Income (“GILTI”), which imposed a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. GILTI did not have a material impact on the Company’s results for the year ended January 31, 2019 due to the Company’s net operating loss and valuation allowance position.

Deferred Income Taxes

Deferred income taxes arise from temporary differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax reporting purposes, as well as operating losses and tax credit carryforwards.

Significant components of the Company’s deferred tax assets for federal and state income taxes are as follows as of January 31, 2019 and 2018, respectively (in thousands):



	Years Ended January 31,
	2019			2018
Deferred tax assets:
Net operating loss carryforwards	$	121,024		$	77,434
Deferred revenue	2,663			(4,119		)
Other liabilities and accruals	16			2,354
Depreciable assets	(2,288		)	1,583
Convertible senior notes	(19,066		)	—
Other reserves	346			339
Gross deferred tax assets	102,695			77,591
Valuation allowance	(101,502		)	(77,265		)
Total deferred tax assets, net of valuation allowance	1,193			326
Deferred tax liability:
Goodwill	(44		)	(18		)
Total deferred tax liability	(44		)	(18		)
Net deferred tax assets	$	1,149		$	308

Deferred tax assets are recognized when management believes it more likely than not that they will be realized. Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Due to the significant negative evidence resulting from losses since inception in the U.S. federal, U.S. state and Ireland jurisdictions, management maintains a full valuation allowance against the net deferred tax assets in these jurisdictions. The valuation allowance for deferred tax assets as of January 31, 2019 and 2018 was $101.5 million and $77.3 million, respectively. In assessing the realizability of deferred tax assets, management considers 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. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax planning strategies in making this assessment.

As of January 31, 2019 the Company had net operating loss carryforwards for federal, state and Irish income tax purposes of $359.2 million, $239.5 million and $199.5 million, respectively, which begin to expire in the year ending January 31, 2028 for federal purposes and January 31, 2020 for state purposes. Ireland and the U.S. allows net operating losses to be carried forward indefinitely. The Company also has federal research credit carryforwards of $4.7 million, which begin to expire in the year ending January 31, 2029. Utilization of the federal net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation, should the Company undergo an ownership change, may result in the expiration of federal or state net operating losses and credits before utilization, however the Company does not expect any such limitation to be material.

Uncertain Tax Positions

The calculation of the Company’s tax obligations involves dealing with uncertainties in the application of complex tax laws and regulations. ASC 740, Income Taxes, provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. The Company has assessed its income tax positions and recorded tax benefits for all years subject to examination, based upon the Company’s evaluation of the facts, circumstances and information available at each period end. For those tax positions where the Company has determined there is a greater than 50% likelihood that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is determined there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit has been recognized.

Although the Company believes that it has adequately reserved for its uncertain tax positions, the Company can provide no assurance that the final tax outcome of these matters will not be materially different. As the Company expands internationally, it will face increased complexity, and the Company’s unrecognized tax benefits may increase in the future. The Company makes adjustments to its reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made.

The following table summarizes the changes in the Company’s unrecognized gross tax benefits during the periods presented (in thousands):



	Years Ended January 31,
	2019			2018			2017
Unrecognized tax benefits at beginning of year	$	4,049		$	4,400		$	3,411
Decreases in tax positions in prior years	(26		)	(1,494		)	(83		)
Additions based on tax positions in the current year	580			1,143			1,072
Unrecognized tax benefits at end of year	$	4,603		$	4,049		$	4,400

As of January 31, 2019, there was $0.1 million of unrecognized tax benefits that would impact our effective tax rate if recognized. There were no such unrecognized tax benefits as of January 31, 2018 and 2017.

The Company continues to evaluate whether to continue applying the exception to the presumption of the repatriation of foreign earnings applying the rules of the Tax Act, and continues to be permanently reinvested outside of the United States. The Company has not provided for U.S. federal income and foreign withholding taxes on approximately $1.1 million of undistributed earnings from non-U.S. operations as of January 31, 2019 because the Company intends to reinvest such earnings indefinitely outside of the United States. If the Company were to distribute these earnings, foreign tax credits may become available under current law to reduce the resulting U.S. income tax liability. The Company has estimated the amount of unrecognized deferred tax liability related to these earnings to be approximately $0.1 million.

The Company is not currently under Internal Revenue Service, state, or foreign income tax examination. The Company does not anticipate any significant increases or decreases in its uncertain tax positions within the next twelve months. The Company files 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 the net operating loss and credit carryforwards. The Company files foreign tax returns in various locations. These foreign returns are open to examination for the fiscal years ending January 31, 2013 through January 31, 2018.