Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 14 — INCOME TAXES

The Company's provision for income taxes consists of the following for the years ended December 31, 2019, 2018 and 2017:

	Year Ended December 31,
	2019		2018			2017
Current:
Federal	$	16,499	$	2,117		$	3,804
State		6,176		284			1,019
Foreign		1,092		(352	)		(975	)
Total current provision		23,767		2,049			3,848
Deferred:
Federal		10,702		1,817			6,889
State		175		353			(1,937	)
Foreign		—		684			(290	)
Total deferred		10,877		2,854			4,662
Total provision for income taxes	$	34,644	$	4,903		$	8,510

A reconciliation of the federal statutory rate of 21%, 21% and 35% to the effective tax rate for income before income taxes is as follows for the year ended December 31, 2019, 2018 and 2017, respectively:

	Year Ended December 31,
	2019			2018			2017
Provision for income taxes at federal statutory rate		21.0	%		21.0	%		35.0	%
State income taxes, net of federal benefit		5.9			6.0			5.0
Transaction expenses		—			1.7			2.0
Noncontrolling interest tax differential		(0.1	)		(1.2	)		(6.6	)
Key man life insurance		—			—			(7.9	)
Employee stock based compensation		(0.9	)		(9.9	)		(8.7	)
Internal Revenue Service Section 338(g) - Treatment of acquisition of UOL as a taxable business combination		—			—			(44.6	)
U.S. Tax Cuts and Jobs Act		—			—			63.8
Other		3.8			5.4			3.6
Effective income tax rate		29.7	%		23.0	%		41.6	%

Deferred income tax assets (liabilities) consisted of the following as of December 31, 2019 and 2018:

	December 31,
	2019			2018
Deferred tax assets:
Deductible goodwill and other intangibles	$	—		$	690
Accrued liabilities and other		1,793			4,182
Deferred revenue		—			—
Mandatorily redeemable noncontrolling interests		1,190			1,120
Other		2,760			4,157
State taxes		—			123
Share based payments		3,441			2,148
Foreign tax and other tax credit carryforwards		1,558			1,848
Capital loss carryforward		61,945			61,127
Net operating loss carryforward		45,535			45,705
Total deferred tax assets		118,222			121,100
Deferred tax liabilities:
Deductible goodwill and other intangibles		(6,246	)		—
State taxes		(2,831	)		(75	)
Depreciation		143			(421	)
Deferred revenue		(222	)		(702	)
Total deferred tax liabilities		(9,156	)		(1,198	)
Net deferred tax assets		109,066			119,902
Valuation allowance		(77,544	)		(77,503	)
Net deferred tax assets	$	31,522		$	42,399

The Company's income before income taxes of $116,592 for the year ended December 31, 2019 includes a United States component of income before income taxes of $107,073 and a foreign component comprised of income before income taxes of $9,519. As of December 31, 2019, the Company had federal net operating loss carryforwards of $53,932, state net operating loss carryforwards of $64,088. The Company's federal net operating loss carryforwards will expire in the tax years commencing in December 31, 2032 through December 31, 2037, the state net operating loss carryforwards will expire in tax years commencing in December 31, 2029 and the foreign tax credit carryforwards will expire in tax years commencing 2024.

The Company establishes a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax benefits of operating loss, capital loss and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances. The Company's net operating losses are subject to annual limitations in accordance with Internal Revenue Code Section 382. Accordingly, the Company is limited to the amount of net operating loss that may be utilized in future taxable years depending on the Company's actual taxable income. As of December 31, 2019, the Company believes that the existing net operating loss carryforwards will be utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that future taxable earnings will be sufficient to realize its deferred tax assets and has not provided a valuation allowance. The Company does not believe that it is more likely than not that the Company will be able to utilize the benefits related to capital loss carryforwards and has provided a valuation allowance in the amount of $61,945 against these deferred tax assets.

At December 31, 2019, the Company had gross unrecognized tax benefits totaling $10,156 all of which would have an impact on the Company's effective income tax rate, if recognized. A reconciliation of the amounts of gross unrecognized tax benefits (before federal impact of state items), excluding interest and penalties, was as follows:

	Year Ended
	December 31,
	2019
Beginning balance	$	11,138
Additions for current year tax positions		21
Additions for prior year tax positions		505
Reductions for prior year tax positions		(1,435	)
Reductions due to lapse in statutes of limitations		(73	)
Ending balance	$	10,156

The Company files income tax returns in the U.S., various state and local jurisdictions, and certain other foreign jurisdictions. The Company is currently under audit by certain federal, state and local, and foreign tax authorities. The audits are in varying stages of completion. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by tax authorities. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, case law developments and closing of statutes of limitations. Such adjustments are reflected in the provision for income taxes, as appropriate. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the calendar years ended December 31, 2016 to 2019.

At December 31, 2019, the Company believes it is reasonably possible that its gross liabilities for unrecognized tax benefits may decrease by approximately $125 within the next 12 months due to expiration of statute of limitations.

The Company had accrued interest and penalties relating to uncertain tax positions of $754 and $3,967 for UOL and magicJack, respectively, for the year ended December 31, 2019 all of which was included in income taxes payable. The Company recorded a benefit of $73 and $174 for UOL and magicJack, respectively, related to interest and penalties for uncertain tax positions primarily due to the lapse in statute of limitation and resolution of magicJack's 2015 IRS audit in favor of the Company