Income Taxes

12 Months Ended

Dec. 31, 2019

Loss before the provision for (benefit from) income taxes consisted of the following for the periods indicated (in thousands):


	Year Ended December 31,
	2019		2018		2017
Domestic	$	(60,807)	$	(50,133)	$	(31,681)
International	(8,145)		(12,795)		(6,879)
Total	$	(68,952)	$	(62,928)	$	(38,560)

The components of the Company's income tax provision (benefit) were as follows for the periods indicated (in thousands):


	Year Ended December 31,
	2019		2018		2017
Current tax expense (benefit)
Federal	$	(17)	$	234	$	—
State	93		(10)		109
Foreign	112		823		278
Total current tax expense (benefit)	188		1,047		387
Deferred tax expense (benefit)
Federal	315		317		99
State	171		153		55
Foreign	(866)		(367)		(554)
Total deferred tax expense (benefit)	(380)		103		(400)
Total income tax provision (benefit)	$	(192)	$	1,150	$	(13)

The reconciliation of the federal statutory income tax provision to the Company’s effective income tax provision is as follows for the periods indicated (in thousands):


	Year Ended December 31,
	2019		2018		2017
Federal tax benefit at statutory rate	$	(14,480)	$	(13,298)	$	(13,147)
State tax	93		(10)		2,009
Foreign rate differential	136		1,315		2,513
Non-deductible permanent items	(468)		4,129		1,142
Stock-based compensation	(9,850)		(1,178)		1,950
Tax credits	(1,403)		(922)		(1,702)
Change in valuation allowance	25,780		11,114		(14,653)
Tax Act-revaluation of deferred taxes	—		—		21,875
Total	$	(192)	$	1,150	$	(13)

The Company’s deferred tax assets and liabilities as of the dates indicated were as follows (in thousands):


	Year Ended December 31,
	2019		2018
Deferred tax assets:
Net operating losses	$	78,001	$	50,154
Accruals and reserves	3,514		7,725
Tax credit carryforward	11,013		8,503
Stock-based compensation	8,280		5,944
Depreciation and amortization	4,381		4,735
Total deferred tax assets	105,189		77,061
Valuation allowance	(104,298)		(75,436)
Net deferred tax assets	891		1,625
Deferred tax liabilities:
Depreciation and amortization	(2,550)		(3,665)
Net deferred taxes	$	(1,659)	$	(2,040)

The Company regularly assesses the realizability of its deferred tax assets and establishes a valuation allowance if it is more-likely-than-not that some portion 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. Due to the Company’s history of net operating losses, the Company believes it is more likely than not that the majority of its federal, state, and certain foreign deferred tax assets will not be realizable as of December 31, 2019 and 2018. The total valuation allowance recorded as of December 31, 2019 and 2018 was $104.3 million and $75.4 million respectively. The activity in the Company's deferred tax asset valuation allowance for the periods indicated was as follows (in thousands):


	Balance, Beginning of Period		Charged to Costs & Expenses	Charged to Other Accounts	Deductions	Balance, end of Period
Year ended December 31, 2019
Deferred tax asset valuation allowance	$	75,436	29,576	(714)	—	$	104,298
Year ended December 31, 2018
Deferred tax asset valuation allowance	$	58,748	13,243	3,445	—	$	75,436
Year ended December 31, 2017
Deferred tax asset valuation allowance	$	59,806	—	—	(1,058)	$	58,748

As of December 31, 2019 and 2018, the Company has net operating loss carryforwards for federal income tax purposes of $251.0 million and $152.1 million, respectively, available to reduce future taxable income. The federal net operating loss carryforwards will begin to expire, if not utilized, in 2025. In addition, the Company has $70.3 million and $49.6 million of net operating loss carryforwards available to reduce future taxable income for California state income tax purposes for the years ended December 31, 2019 and 2018, respectively. The state net operating loss carryforwards will begin to expire, if not utilized, in 2023. The federal and state net operating loss carryforwards are subject to various annual limitations under Section 382 of the Internal Revenue Code and similar state provisions. As of December 31, 2019 and 2018, the Company had foreign net operating loss carryforwards of $13.5 million and $12.2 million, respectively, which, if not utilized, will expire at various dates beginning in 2020.

As of December 31, 2019, the Company had Federal and California Research and Development Credits of $10.6 million and $9.0 million, respectively. The Federal Research and Development Credits will begin to expire, if not utilized, in 2031. The California Research and Development Credits do not expire since these attributes have an indefinite life. As of December 31, 2019 and 2018, the Company had California EZ Hiring Tax Credits of $2.2 million. The California Hiring Tax Credits will begin to expire, if not utilized, in 2020. As of December 31, 2019 and 2018, the Company had foreign tax credits of $0.2 million and $0.1 million, respectively. The foreign tax credits will begin to expire, if not utilized, in 2028.

As of December 31, 2019 and 2018, the Company had unrecognized tax benefits of $9.8 million and $7.2 million, respectively, which would not impact the effective tax rate because of the Company's valuation allowance position. A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows (in thousands):


Balance as of December 31, 2016	$	—
Gross amount of increases in unrecognized tax benefits for tax positions taken in current year	1,526
Gross amount of increases in unrecognized tax benefits for tax positions taken in prior year	3,970
Balance as of December 31, 2017	5,496
Gross amount of increases in unrecognized tax benefits for tax positions taken in current year	1,744
Gross amount of decreases in unrecognized tax benefits for tax positions taken in prior year	—
Balance as of December 31, 2018	7,240
Gross amount of increases in unrecognized tax benefits for tax positions taken in current year	2,584
Gross amount of decreases in unrecognized tax benefits for tax positions taken in prior year	—
Balance as of December 31, 2019	$	9,824

The Company classifies uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year or otherwise directly related to an existing deferred tax asset, in which case the uncertain tax position is recorded net of the asset on the consolidated balance sheet. As of December 31, 2019, $9.8 million of the Company’s gross unrecognized tax benefits were recorded as a reduction of the related deferred tax assets.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of its provision for income taxes. The amount of interest and penalties accrued as of December 31, 2018 and 2019 was zero.

The Company does not anticipate that its total unrecognized tax benefits will significantly change due to settlement of examination or the expiration of statute of limitations during the next 12 months.

The Company files income tax returns in the U.S. federal jurisdiction as well as many U.S. states and certain foreign jurisdictions. Material jurisdictions where the Company is subject to potential examination include the United States, United Kingdom and Netherlands. The Company is subject to examination in these jurisdictions for all years since 2006. Fiscal years outside the normal statute of limitation remain open to audit due to tax attributes generated in the early years which have been carried forward and may be audited in subsequent years when utilized.