Income Taxes

The geographical breakdown of loss before provision for income taxes is as follows (in thousands):



	Year Ended January 31,
	2016			2017			2018
Domestic	$	(195,019	)	$	(200,355	)	$	(135,115	)
International	(17,164		)	(42,824		)	(38,598		)
Total	$	(212,183	)	$	(243,179	)	$	(173,713	)

The components of the provision for income taxes are as follows (in thousands):



	Year Ended January 31,
	2016			2017			2018
Current:
State	$	210		$	389		$	525
Foreign	2,198			1,806			3,580
Total	$	2,408		$	2,195		$	4,105
Deferred:
Foreign	(839		)	(308		)	(216		)
Provision for income taxes	$	1,569		$	1,887		$	3,889

The reconciliation of the federal statutory income tax rate and effective income tax rate is as follows (in thousands):



	Year Ended January 31,
	2016			2017			2018
Tax at federal statutory rate	$	(72,142	)	$	(82,682	)	$	(57,144	)
State tax, net of federal benefit	152			276			351
Stock-based compensation expense	10,866			(5,242		)	(9,953		)
Research and development tax credits	(3,832		)	(1,570		)	(7,629		)
Foreign rate differential	7,106			15,878			18,667
Change in valuation allowance	58,979			73,863			(48,703		)
Remeasurement of deferred tax assets and liabilities	—			—			107,029
Other	440			1,364			1,271
Provision for income taxes	$	1,569		$	1,887		$	3,889

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of our deferred tax assets and liabilities were as follows (in thousands):



	January 31,
	2017			2018
Deferred tax assets:
Net operating loss carryforwards	$	173,942		$	127,621
Tax credit carryover	15,319			33,105
Accruals and reserves	3,112			1,809
Deferred revenue	53,424			46,570
Stock-based compensation expense	26,401			24,133
Depreciation and amortization	7,302			15,367
Charitable contribution carryforwards	4,345			2,892
Other	—			465
Total deferred tax assets	283,845			251,962
Valuation allowance	(271,779		)	(240,519		)
Total deferred tax assets, net of valuation allowance	12,066			11,443
Deferred tax liabilities:
Deferred commissions	(11,222		)	(10,383		)
Total deferred tax liabilities	(11,222		)	(10,383		)
Net deferred tax assets	$	844		$	1,060

The Tax Act was signed into law on December 22, 2017. The new legislation decreases the U.S. corporate federal income tax rate from 35% to 21% effective January 1, 2018. As a result, our U.S. federal and state deferred tax assets and valuation allowance each decreased by approximately $98 million, and accordingly there is no impact to our provision for income taxes. Since we have a January 31 fiscal year end, we have a federal blended tax rate of 32.9% for the year ended January 31, 2018 and 21% thereafter on any current U.S. federal taxes payable.

The Tax Act also includes a number of other provisions including the elimination of loss carrybacks and limitations on the use of future losses, limitations on the deductibility of executive compensation, limitation or modification on the deductibility of certain business expenses, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and the introduction of a base erosion and anti-abuse tax. We will continue to assess the impact of the Tax Act during the one-year measurement period from the Tax Act enactment date as allowed by Staff Accounting Bulletin No. 118 (SAB 118) issued in connection with the Tax Act. We expect to complete the accounting for the tax effects of the Tax Act in calendar year 2018.

As of January 31, 2018, the undistributed earnings of $20.8 million from non-U.S. operations held by our foreign subsidiaries are designated as permanently reinvested outside the U.S. Accordingly, no additional U.S. income taxes or additional foreign withholding taxes have been provided thereon. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

As of January 31, 2018, we had net operating loss carryforwards for federal income tax purposes of approximately $508.9 million and state income tax purposes of approximately $331.9 million. These net operating loss carryforwards will expire, if not utilized, beginning in 2028 for federal and state income tax purposes.

We had federal and state research and development tax credit carryforwards of approximately $26.6 million and $22.2 million as of January 31, 2018. The federal research and development tax credit carryforwards will expire commencing in 2028, while the state research and development tax credit carryforwards have no expiration date.

Realization of deferred tax assets is dependent on future taxable income, the existence and timing of which is uncertain. Based on our history of losses, management has determined that it is more likely than not that the U.S. deferred tax assets will not be realized, and accordingly has placed a full valuation allowance on the net U.S. deferred tax assets. The valuation allowance increased by $68.0 million, $90.9 million, and decreased by $31.3 million, respectively, during the years ended January 31, 2016, 2017 and 2018.

Utilization of the net operating loss carryforwards and credits may be subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. In February 2018, we completed an analysis through January 2018 to evaluate whether there are any limitations of our net operating loss carryforwards and concluded no limitations currently exist.

Uncertain Tax Positions

The activity related to the unrecognized tax benefits is as follows (in thousands):



	Year Ended January 31,
	2016			2017			2018
Gross unrecognized tax benefits—beginning balance	$	13,874		$	15,470		$	6,375
Decreases related to tax positions taken during prior years	(3,969		)	(11,286		)	(24		)
Increases related to tax positions taken during prior years	35			—			619
Increases related to tax positions taken during current year	5,530			2,191			5,431
Gross unrecognized tax benefits—ending balance	$	15,470		$	6,375		$	12,401

As of January 31, 2018, our gross unrecognized tax benefit was approximately $12.4 million, none of which if recognized, would have an impact on the effective tax rate because it would be offset by the reversal of deferred tax assets which are subject to a full valuation allowance.

As of January 31, 2018, we had no current or cumulative interest and penalties related to uncertain tax positions.

It is difficult to predict the final timing and resolution of any particular uncertain tax position. Based on our assessment, including experience and complex judgments about future events, we do not expect that changes in the liability for unrecognized tax benefits during the next twelve months will have a significant impact on our consolidated financial position or results of operations.

We file income tax returns in the U.S. federal jurisdiction as well as many U.S. states and foreign jurisdictions. Our fiscal year 2014 federal income tax return examination by the Internal Revenue Service was concluded with no adjustments. The tax returns for fiscal years 2013 and forward remain open to examination by the major jurisdictions in which we are subject to tax. The tax returns for fiscal years outside the normal statutes of limitation remain open to audit by tax authorities due to tax attributes generated in those early years, which have been carried forward and may be audited in subsequent years when utilized.