INCOME TAXES

12 Months Ended

Dec. 31, 2019

The domestic and foreign components of income (loss) before income taxes consisted of the following:



	Years Ended December 31,
	2019		2018			2017
	(In thousands)
United States	$	85,520	$	(14,322	)	$	(47,882	)
Foreign	4,594		4,093			2,541
Income (loss) before income taxes	$	90,114	$	(10,229	)	$	(45,341	)

The income taxes (benefit) provision for the years presented is as follows:



	Years Ended December 31,
	2019			2018			2017
	(In thousands)
Current:
Federal	$	—		$	—		$	—
State	327			42			21
Foreign	1,589			1,233			1,224
	1,916			1,275			1,245
Deferred:
Federal	(56,959		)	(35		)	(1,092		)
State	(17,458		)	(21		)	(21		)
Foreign	1,467			179			(281		)
	(72,950		)	123			(1,394		)
Income taxes (benefit) provision	$	(71,034	)	$	1,398		$	(149	)

A reconciliation of the income tax (benefit) provision and the amount computed by applying the statutory federal income tax rate of 21% in 2019 and 2018 and 34% in 2017 to income (loss) before income taxes for the years presented is as follows:



	Years Ended December 31,
	2019			2018			2017
	(In thousands)
Income tax (benefit) provision at statutory federal rate	$	18,929		$	(2,148	)	$	(15,416	)
State taxes, net of federal benefit	(17,197		)	17			(64		)
Change in valuation allowance	(71,300		)	8,198			(20,571		)
Foreign tax rate and tax law differential	1,206			313			(133		)
Tax credits	(1,803		)	(378		)	(382		)
Stock-based compensation	(8,072		)	(953		)	761
Other permanent items	31			235			479
Other nondeductible/nontaxable items	2,765			(5,112		)	930
Uncertain tax positions	504			107			106
Tax law changes	—			—			34,141
GILTI	1,086			917			—
Section 162(m)	2,817			202			—
Income tax (benefit) provision	$	(71,034	)	$	1,398		$	(149	)

A summary of significant components of the Company’s deferred tax assets and liabilities as of December 31, 2019 and 2018 is as follows (in thousands):



	December 31,
	2019			2018
Deferred tax assets:
Allowances and reserves	$	10,726		$	10,022
Net operating loss and tax credit carryforwards	54,369			71,568
Stock-based compensation	3,753			3,662
Deferred revenue	16,736			19,562
Fixed assets and intangibles	2,720			3,836
Sec. 163(j) interest carryforward	—			2,064
Other	1,109			2,084
Subtotal	89,413			112,798
Less valuation allowance	—			(98,631		)
Total deferred tax assets, net of valuation allowance	89,413			14,167
Deferred tax liabilities:
Goodwill	(1,368		)	(1,070		)
Unremitted foreign earnings	(5		)	(16		)
Deferred cost of goods sold	(14,374		)	(12,655		)
Total deferred tax liabilities	(15,747		)	(13,741		)
Net deferred tax asset	$	73,666		$	426

The Company's accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of the Company's deferred tax assets. Assessing the realizability of deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible. The Company's management forecasts taxable income by considering all available positive and negative evidence including its history of operating income or losses and its financial plans and estimates which are used to manage the business. These assumptions require significant judgment about future taxable income. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are reduced.

In the fourth quarter of fiscal year 2019, the Company's management determined, based on the Company's recent history of earnings coupled with its forecasted profitability, that it is more likely than not that all of deferred tax assets will be realized in the foreseeable future. Accordingly, in the fourth quarter of fiscal year 2019, the Company released $92.9 million of the valuation allowance on its deferred tax assets, related to its federal and state deferred tax assets.

The Company has net operating loss carryforwards for federal and California income tax purposes of approximately $147.4 million and $78.9 million, respectively, as of December 31, 2019. The federal and state net operating loss carryforwards, if not utilized, will expire beginning in 2028.

The Company has approximately $12.4 million of federal research credit and $11.3 million of state research credit carryforwards. The federal credits begin to expire in 2026 and the state credits can be carried forward indefinitely.

Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The Company has completed a Section 382 analysis through December 31, 2019, which indicated no such change has occurred through December 31, 2019.

The accounting for uncertain tax positions prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company is required to recognize in the financial statements the impact of a tax position, if that position is more-likely-than-not of being sustained on audit, based on the technical merits of the position. The Company recorded a net charge for unrecognized tax benefits in 2019 of $0.3 million.

The Company does not have any tax positions for which it is reasonably possible the total amount of gross unrecognized tax benefits will increase or decrease over the next year. The unrecognized tax benefits may increase or change during the next year for items that arise in the ordinary course of business.

A tabular reconciliation of the total amounts of unrecognized tax benefits for the years presented is as follows (in thousands):



	Years Ended December 31,
	2019			2018			2017
Unrecognized tax benefits—at beginning of year	$	6,325		$	6,106		$	6,016
Decreases in balances related to tax positions taken in prior years	(370		)	—			(135		)
Increases in balances related to tax positions taken in current year	771			329			306
Lapses in statutes of limitations	(137		)	(110		)	(81		)
Unrecognized tax benefits—at end of year	$	6,589		$	6,325		$	6,106

The Company includes interest and penalties related to unrecognized tax benefits within the benefit from (provision for) income taxes. As of years ended December 31, 2019 and 2018, the total amount of gross interest and penalties accrued in each year was immaterial. Both the unrecognized tax benefits and the associated interest and penalties that are not expected to result in payment or receipt of cash within one year are classified as other non-current liabilities in the consolidated balance sheets. In connection with tax matters, the Company’s interest and penalty expense recognized in 2019, 2018 and 2017 in the consolidated statements of operations was immaterial.

The Company’s tax returns continue to remain effectively subject to examination by U.S. federal authorities for the years 2006 through 2019 and by California state authorities for the years 2006 through 2019 due to use and carryovers of net operating losses and credits.