Income Taxes

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



	Year Ended January 31,
	2017			2018			2019
	(As Adjusted*)			(As Adjusted*)
Domestic	$	(176,821	)	$	(117,391	)	$	(145,428	)
International	(42,824		)	(38,598		)	(31,845		)
Total	$	(219,645	)	$	(155,989	)	$	(177,273	)

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*As adjusted to reflect the impact of the full retrospective adoption of ASC 606. For further information, see Note 2.

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



	Year Ended January 31,
	2017			2018			2019
Current:
State	$	389		$	525		$	571
Foreign	1,806			3,580			4,214
Total	$	2,195		$	4,105		$	4,785
Deferred:
Federal	$	—		$	—		$	(2,776	)
State	—			—			(920		)
Foreign	(308		)	(216		)	—
Total	$	(308	)	$	(216	)	$	(3,696	)
Provision for income taxes	$	1,887		$	3,889		$	1,089

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



	Year Ended January 31,
	2017			2018			2019
	(* As Adjusted)			(* As Adjusted)
Tax at federal statutory rate	$	(74,680	)	$	(51,314	)	$	(37,227	)
State tax, net of federal benefit	276			351			(469		)
Stock-based compensation expense	(5,242		)	(9,953		)	(28,437		)
Research and development tax credits	(1,570		)	(7,629		)	(10,371		)
Foreign rate differential	15,878			18,667			12,299
Change in valuation allowance	65,861			(44,784		)	85,533
Foreign on-shoring intellectual property	—			—			(20,371		)
Remeasurement of deferred tax assets and liabilities due to tax reform	—			97,280			—
Other	1,364			1,271			132
Provision for income taxes	$	1,887		$	3,889		$	1,089

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*As adjusted to reflect the impact of the full retrospective adoption of ASC 606. For further information, see Note 2.

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,
	2018			2019
	(As Adjusted*)
Deferred tax assets:
Net operating loss carryforwards	$	127,621		$	189,117
Tax credit carryover	33,105			50,848
Accruals and reserves	1,809			12,506
Deferred revenue	38,816			43,579
Stock-based compensation expense	24,133			31,743
Depreciation and amortization	15,367			19,578
Charitable contribution carryforwards	2,892			2,850
Other	465			81
Total deferred tax assets	$	244,208		$	350,302
Valuation allowance	(221,930		)	(307,475		)
Total deferred tax assets, net of valuation allowance	$	22,278		$	42,827
Deferred tax liabilities:
Deferred commissions	$	(21,218	)	$	(27,537	)
Convertible debt	—			(14,230		)
Total deferred tax liabilities	$	(21,218	)	$	(41,767	)
Net deferred tax assets	$	1,060		$	1,060

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*As adjusted to reflect the impact of the full retrospective adoption of ASC 606.

We adopted ASC 606 effective February 1, 2018 and recorded a decrease of $7.8 million in U.S. deferred tax assets related to deferred revenue and an increase of $10.8 million in U.S. deferred tax liabilities related to deferred commissions as of January 31, 2018, which was fully offset by a decrease in the valuation allowance of $18.6 million.

In connection with the StorReduce acquisition during the third quarter of fiscal year 2019, we recorded a net deferred tax liability which provides an additional source of taxable income to support the realizability of the pre-existing deferred tax assets and, accordingly, we released $3.7 million of our U.S. valuation allowance. We continue to maintain a valuation allowance for our U.S. federal and state deferred tax assets.

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.

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. Under the Tax Act, the Global Intangible Low-Taxed Income (GILTI) provision taxes foreign income in excess of a deemed return on tangible assets of foreign corporations. Under U.S. GAAP, companies are allowed to make an accounting policy election to either (i) account for GILTI as a component of tax expense in the period in which a company is subject to the rules — the period cost method, or (ii) account for GILTI in a company’s measurement of deferred taxes — the deferred method. Though we did not generate any GILTI during the year ended January 31, 2019, we have elected to recognize the GILTI tax as a period cost in the future, as applicable.

As of January 31, 2019, the undistributed earnings of $31.2 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, 2019, we had net operating loss carryforwards for federal income tax purposes of approximately $772.1 million and state income tax purposes of approximately $451.5 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 $40.5 million and $34.4 million as of January 31, 2019. 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 decreased by $28.4 million and increased by $85.5 million, during the years ended January 31, 2018 and 2019.

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 2019, we completed an analysis through January 2019 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,
	2017			2018			2019
Gross unrecognized tax benefits—beginning balance	$	15,470		$	6,375		$	12,401
Decreases related to tax positions taken during prior years	(11,286		)	(24		)	(845		)
Increases related to tax positions taken during prior years	—			619			—
Increases related to tax positions taken during current year	2,191			5,431			7,335
Gross unrecognized tax benefits—ending balance	$	6,375		$	12,401		$	18,891

As of January 31, 2019, our gross unrecognized tax benefit was approximately $18.9 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, 2019, 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. The tax returns for fiscal years 2009 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.