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Income Taxes
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company calculates its interim income tax provision in accordance with ASC 270, Interim Reporting, and ASC 740, Accounting for Income Taxes (together, “ASC 740”). At the end of each interim period, the Company estimates its annual effective tax rate and applies that rate to its ordinary quarterly earnings to calculate the tax related to ordinary income. The tax effects for other items that are excluded from ordinary income are discretely calculated and recognized in the period in which they occur.
On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted into legislation, which includes a broad range of provisions affecting businesses. The Tax Act significantly revises how companies compute their U.S. corporate tax liability by, among other provisions, reducing the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017, implementing a territorial tax system, and requiring a mandatory one-time tax on U.S.-owned undistributed foreign earnings and profits known as the transition tax.
For the three months ended September 30, 2018, the Company recognized an insignificant amount of income tax benefit. For the three months ended September 30, 2017, the Company recognized an income tax expense of $0.2 million. The Company recognized income tax benefit of $1.1 million and income tax expense of $0.4 million for the nine months ended September 30, 2018 and 2017, respectively. The income tax benefit for the three and nine month periods ended September 30, 2018 differed from the income tax expense for the same periods in prior year due primarily to the reduction in the tax rate from the Tax Act, the impacts of the Company's full valuation allowance on U.S. earnings and higher discrete tax benefits recorded during the 2018 periods for excess tax benefits of stock-based compensation.
The Company is subject to periodic audits by domestic and foreign tax authorities. Due to the carryforward of unutilized net operating loss and credit carryovers, the Company's federal tax years from 2009 and forward are subject to examination by the U.S. authorities. The Company's state and foreign tax years for 2001 and forward are subject to examination by applicable tax authorities. The Company believes that it has appropriate support for the income tax positions taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations of tax laws applied to the facts of each matter.
On December 22, 2017, the Securities and Exchange Commissions issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. As of December 31, 2017, the Company was able to reasonably estimate certain effects of the Tax Act and, therefore, recorded provisional adjustments associated with the deemed repatriation transition tax and rate change revaluation of its deferred tax assets. During the nine months ended September 30, 2018, the Company has made additional provisional measurement-period adjustments related to the Tax Act for which clarifying legislation has been enacted. The primary impact of the measurement period adjustments resulted in a decrease to the Company's net operating loss carryforward as of December 31, 2017, offset by the Company's full evaluation allowance. The Company is still waiting for relevant guidance related to provisions in the Tax Act; therefore, the Company does not consider the measurement period closed as of September 30, 2018. The Company will continue to assess the impact of anticipated IRS guidance when issued, and plans to complete the accounting for the Tax Act within the prescribed measurement period. Any subsequent adjustment to the amounts previously recorded in 2017 (the period of enactment of the Tax Act) will be a tax expense or benefit in the fourth quarter of 2018 when the analysis is complete.