6. Income taxes

The following table presents the components of loss before income taxes (in thousands):


	Year Ended December 31,
	2019		2018		2017
United States	$	(40,010)	$	(31,436)	$	(27,019)
Foreign		(973)		(75)		—
	$	(40,983)	$	(31,511)	$	(27,019)

The following table summarizes income tax benefit (provision) (in thousands):


	Year Ended
	December 31,
	2019		2018		2017
Current:
United States
Federal	$	—	$	—	$	—
State		(20)		(18)		—
Foreign		(93)		—		—
Total current income tax provision		(113)		(18)		—
Deferred
United States
Federal		(3)		(2)		—
State		(1)		(5)		—
Foreign		304		—		—
Total deferred income tax benefit (provision)		300		(7)		—
Total income tax benefit (provision)	$	187	$	(25)	$	—

During the years ended December 31, 2019, 2018, and 2017, the Company recorded an income tax benefit (provision) of $0.2 million, less than $(0.1) million, and $0, respectively.

A reconciliation of the federal statutory income tax rate to the effective tax rate is as follows:


	Year Ended December 31,
	2019		2018
Federal statutory income tax rate	21.0	%	21.0	%
Foreign tax rate differential	—	%	—	%
State taxes, net of federal benefit	3.2	%	6.0	%
Tax credits	2.3	%	2.7	%
Share-based compensation	2.3	%	1.1	%
Permanent items	(0.9)	%	(1.2)	%
Defereed tax rate changes	(1.4)	%	—	%
Change in valuation allowance	(24.6)	%	(29.9)	%
Other	(1.4)	%	0.2	%
Effective income tax rate	0.5	%	(0.1)	%

The effective tax rate of 1% differs from the U.S. Federal statutory rate of 21% primarily as a result of the valuation allowance maintained against our worldwide net deferred tax assets.

During 2018, the Company acquired Aushon. The Company analyzed the transaction from an income tax perspective and adjusted the deferred tax assets and liabilities related to the Aushon acquisition. Of the total goodwill recorded, approximately $0.4 million is amortizable related to historical tax basis that Aushon had related to a prior acquisition.

During 2019, the Company acquired Uman, a Swedish entity. The Company analyzed the transaction from an income tax perspective and found that there was no tax deductible goodwill or other identifiable intangible assets related to the transaction.

Deferred tax assets and liabilities reflect the net tax effects of net operating loss carryovers and temporary differences between the carrying amount of assets and liabilities for financial reporting and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):


	December 31,
	2019		2018
Deferred tax assets:
Net operating loss carryforwards	$	43,814	$	35,623
Tax credits		5,518		4,678
Deferred revenue		1,247		1,614
Depreciation		—		86
Amortization		928		792
Stock-based compensation		973		541
Deferred Rent		727		—
Lease incentive obligation		1,828		—
Other deferred tax assets		1,325		1,378
Total deferred tax assets		56,360		44,712
Less: Valuation allowances		(54,137)		(44,033)
Net deferred tax assets		2,223		679
Deferred tax liabilities:
Section 481(a) adjustment - accrued bonus		—		(59)
Depreciation		(1,769)		—
Amortization of acquired intangibles		(3,031)		(610)
Inventory		(212)		—
Goodwill		(31)		(17)
Other deferred tax liabitlies		(5)		—
Net deferred tax assets (liabilities)	$	(2,825)	$	(7)

The valuation allowance increased by $10.1 million during the year ended December 31, 2019, primarily as a result of the U.S. operating losses incurred, the research and development tax credit carryforwards generated during the year.

In determining the need for a valuation allowance, the Company has given consideration to the cumulative book income and loss positions of each of its entities as well as its worldwide cumulative book loss position. The Company has assessed, on a jurisdictional basis, the available means of recovering deferred tax assets, including the ability to carryback net operating losses, the existence of reversing taxable temporary differences, the availability of tax planning strategies and forecasted future taxable income. At December 31, 2019, the Company maintains a full valuation allowance against its worldwide net deferred tax assets.

As of December 31, 2019, the Company had U.S. federal net operating loss carryforwards of approximately $174.8 million. U.S. federal net operating loss carryforwards generated through December 31, 2017 of approximately $108.5 million expire at various dates through 2037, and U.S. federal net operating loss carryforwards generated in the tax years beginning after December 31, 2017 of approximately $66.3 million do not expire. As of December 31, 2019 the Company had $111.9 million of state net operating loss carryforwards that expire at various dates through 2039. As of December 2019, the Company had U.S. federal tax carryforwards of approximately $4.3 million that expire at various dates through 2039. As of December 31, 2019, the Company had U.S. state tax credit carryforwards of approximately $1.6 million that expire at various dates through 2034.

Under Sections 382 and 383 of the U.S. Internal Revenue Code, if a corporation undergoes an ownership change, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited. In general, an ownership change generally occurs if there is a cumulative change in its ownership by 5% stockholders that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under U.S. state tax laws. The Company may have experienced an ownership change in the past and may experience ownership changes in the future as a result of future transactions in its share capital, some of which may be outside of the control of the Company. As a result, if the Company earns net taxable income, its ability to use its pre-change net operating loss carryforwards, or other pre-change tax attributes, to offset U.S. federal and state taxable income and taxes may be subject to significant limitations.

The Company accounts for uncertain tax positions using a more likely than not threshold for recognizing uncertain tax positions. The evaluation of uncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company evaluates uncertain tax positions on an ongoing basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. The Company accounts for interest and penalties related to uncertain tax positions as a component of its provision for income taxes. For the years ended December 31, 2019, 2018, and 2017, the Company had no tax reserves accrued for uncertain tax positions and there are no accrued interest or penalties in the consolidated statements of operations.

The Company is subject to taxation in the United States as well as the Netherlands, Sweden, and China. At December 31, 2019, the Company is generally no longer subject to examination by taxing authorities in the United States for years prior to 2016. However, net operating loss carryforwards and credits in the United States may be subject to adjustments by taxing authorities in future years in which they are utilized. The Company’s foreign subsidiaries remain open to examination by taxing authorities from 2014 onward.

As of December 31, 2019, the Company’s foreign subsidiaries had immaterial undistributed earnings and the tax payable on the earnings that are indefinitely reinvested would be immaterial.