INCOME TAXES

The Company’s operations are conducted through various subsidiaries in a number of countries throughout the world. The Company has provided for income taxes based upon the tax laws and rates in the countries in which operations are conducted and income is earned.

Income tax benefit. Pre-tax loss for the years ended December 31, 2019, 2018 and 2017 consisted of the following (in thousands):



	2019			2018			2017
Canada operations	$	(60,372	)	$	(100,874	)	$	(87,143	)
Foreign operations	(8,703		)	(12,338		)	(31,601		)
Total	$	(69,075	)	$	(113,212	)	$	(118,744	)

The components of the income tax expense (benefit) for the years ended December 31, 2019, 2018 and 2017 consisted of the following (in thousands):



	2019			2018			2017
Current:
Canada	$	706		$	(1,151	)	$	(5,986	)
Foreign	266			1,189			1,472
Total	$	972		$	38		$	(4,514	)

Deferred:
Canada	$	(9,399	)	$	(31,403	)	$	(9,194	)
Foreign	(2,314		)	—			218
Total	$	(11,713	)	$	(31,403	)	$	(8,976	)

Net income tax benefit	$	(10,741	)	$	(31,365	)	$	(13,490	)

The net income tax benefit differs from an amount computed at Canadian statutory rates as follows for the years ended December 31, 2019, 2018 and 2017 (in thousands):



	2019					2018					2017
Canadian federal tax benefit at statutory rates	$	(10,361	)	15.0	%	$	(16,982	)	15.0	%	$	(17,812	)	15.0	%
Canadian provincial income tax	(5,158		)	7.5	%	(12,105		)	10.7	%	(10,457		)	8.8	%
Effect of foreign income tax, net	55			(0.1	)%	(1,756		)	1.6	%	(6,797		)	5.7	%
Valuation allowance – Other	2,257			(3.3	)%	(622		)	0.5	%	19,131			(16.1	)%
Enacted tax rate change - Canada	(2,452		)	3.5	%	—			—	%	598			(0.5	)%
U.S tax reform rate change	—			—	%	—			—	%	9,047			(7.6	)%
Valuation allowance - U.S. tax reform	—			—	%	—			—	%	(9,047		)	7.6	%
Goodwill impairment	4,689			(6.8	)%	—			—	%	—			—	%
Nondeductible compensation	1,203			(1.7	)%	181			(0.2	)%	—			—	%
Unrealized intercompany foreign currency translation gain	(1,451		)	2.1	%	—			—	%	—			—	%
Other, net	477			(0.7	)%	(81		)	0.1	%	1,847			(1.5	)%
Net income tax benefit	$	(10,741	)	15.5	%	$	(31,365	)	27.7	%	$	(13,490	)	11.4	%

Canadian Rate Change. Effective July 1, 2019, the Province of Alberta introduced a four-year graduated decrease in the income tax rate from 12% to 8% resulting in a decrease of our net deferred tax liability of $2.5 million. Our rate reconciliation for the years ended December 31, 2018 and 2017 has been recast to reconcile to the federal Canadian tax rate of 15% with the Canadian provincial income taxes reported separately from the federal income taxes.

US Tax Reform. The Tax Cuts and Jobs Act of 2017 (U.S. Tax Reform) was enacted in December 2017, resulting in a reduction to the corporate income tax rate from 35% to 21%. The impact of this reduction was a decrease of the U.S. net deferred tax asset of $9.0 million fully offset by a decrease in the U.S. valuation allowance of $9.0 million.

Deferred Tax Liabilities and Assets. The significant items giving rise to the deferred tax assets and liabilities as of December 31, 2019 and 2018 are as follows (in thousands):



	2019			2018
Deferred tax assets:
Net operating loss	$	97,920		$	92,600
Employee benefits	3,082			2,972
Deductible goodwill and other intangibles	26,030			20,142
Other reserves	6,150			6,903
Unearned revenue	441			868
Operating lease liabilities	6,499			—
Other	3,242			2,000
Deferred tax assets	143,364			125,485
Valuation allowance	(84,503		)	(82,833		)
Deferred tax assets, net	$	58,861		$	42,652
Deferred tax liabilities:
Depreciation and amortization	$	(62,296	)	$	(61,094	)
Operating lease right-of-use assets	(6,017		)	—
Deferred tax liabilities	(68,313		)	(61,094		)
Net deferred tax liability	$	(9,452	)	$	(18,442	)

NOL Carryforwards. The following table summarizes net operating loss (NOL) carryforwards at December 31, 2019 (in thousands):



	Amount		Expiration Period
Net operating loss carryforwards:
Canada – Federal and provincial	$	207,606	Begins to expire in 2035
Australia	109,355		Does not expire
U.S. – Federal	36,030		Begins to expire in 2036
U.S. – Federal	14,416		Does not expire
U.S. – State, tax effected	5,608		Begins to expire in 2020

Change in Valuation Allowance. Realization of our deferred tax assets is dependent upon, among other things, our ability to generate taxable income of the appropriate character in the future.

Changes in our valuation allowance for the years ended December 31, 2019 and 2018 are as follows (in thousands):



	Federal / State NOLs			Net Deferred Tax Assets			Other			Total
Balance as of December 31, 2017	$	(31,399	)	$	(58,518	)	$	(746	)	$	(90,663	)
Change in income tax provision	(1,464		)	2,086			—			622
Other change	(348		)	1,495			(28		)	1,119
Foreign currency translation	3,907			2,122			60			6,089
Balance as of December 31, 2018	(29,304		)	(52,815		)	(714		)	(82,833		)
Change in income tax provision	(456		)	(1,946		)	145			(2,257		)
Other change	1,095			(690		)	94			499
Foreign currency translation	52			68			(32		)	88
Balance as of December 31, 2019	$	(28,613	)	$	(55,383	)	$	(507	)	$	(84,503	)

During 2018, the addition of $51.5 million of deferred tax liabilities due to the Noralta Acquisition resulted in Canada no longer being considered a loss jurisdiction. Accordingly, a benefit of $4.9 million was recorded in the second quarter of 2018 to reverse the valuation allowance against the Canadian net deferred tax asset that was recorded in 2017.

Indefinite Reinvestment of Earnings. At December 31, 2019 and 2018, we had no undistributed earnings of foreign subsidiaries subject to income tax in Canada.

Unrecognized Tax Benefits. We file tax returns in the jurisdictions in which they are required. All of these returns are subject to examination or audit and possible adjustment as a result of assessments by taxing authorities. We believe that we have recorded sufficient tax liabilities and do not expect the resolution of any examination or audit of our tax returns to have a material adverse effect on our operating results, financial condition or liquidity.

Our Canadian federal tax returns subsequent to 2012 are subject to audit by the Canada Revenue Agency. Our Australian subsidiary’s federal income tax returns subsequent to 2015 are open for review by the Australian Taxation Office. Our U.S. subsidiary’s federal tax returns subsequent to 2017 are subject to audit by the US Internal Revenue Service.

The total amount of unrecognized tax benefits as of December 31, 2019, 2018 and 2017 was zero. Unrecognized tax benefits, if recognized, would affect the effective tax rate. We accrue interest and penalties related to unrecognized tax benefits as a component of our provision for income taxes. As of December 31, 2019, 2018 and 2017, we had accrued zero of interest expense and penalties.