7.	Income Taxes

(Loss) income before income taxes consists of the following (in thousands):

	Year Ended December 31,
	2017			2016			2015
Domestic	$	(15,887	)	$	(2,090	)	$	(8,133	)
Foreign		13,641			8,132			6,642
(Loss) income before income taxes	$	(2,246	)	$	6,042		$	(1,491	)

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

	Year Ended December 31,
	2017			2016		2015
Current:
Federal	$	(46	)	$	80	$	(9	)
State		—			11		14
Foreign		—			—		—
Total current		(46	)		91		5
Deferred:
Foreign		(140	)		—		—
Total deferred		(140	)		—		—
(Benefit) provision for income taxes	$	(186	)	$	91	$	5

The reconciliation of the federal statutory rate to Juniper’s effective tax rate is as follows:

	Year Ended December 31,
	2017			2016			2015
Federal income tax rate		34.0	%		34.0	%		34.0	%
Foreign rate differential		182.7	%		(49.6	)%		151.5	%
State tax, net of federal benefit		10.1			13.4			(0.9	)
Permanent Items:
Incentive stock options		(2.5	)		1.0			(14.9	)
Dividend from foreign subsidiary		(165.8	)		53.5			(79.8	)
Amortization of technical rights		—			(34.5	)		23.4
Deferred adjustments		15.9			30.6			6.6
Foreign research and development relief		26.3			—			—
Change in U.S. Federal rate		(970.4	)		—			—
Other		(2.6	)		(1.1	)		(0.5	)
Effect of permanent differences		(1,099.1	)		49.5			(65.2	)
Effective income tax rate		(872.3	)		47.3			119.4
Change in valuation allowance		880.6			(45.8	)		(119.7	)
Effective income tax rate		8.3	%		1.5	%		(0.3	)%

The Company recorded an income tax benefit of $0.2 million as of December 31, 2017. This benefit is primarily attributable to an adjustment to its foreign income inclusion for U.S. tax purposes, which reduced the amount of alternative minimum tax recorded in the Company’s 2016 tax provision and the release of valuation allowance with respect to Alternative Minimum Tax (“AMT”) credit carryover in connection with the Tax Cuts and Jobs Act of 2017.

Effects of the Tax Cuts and Jobs Act

On December 22, 2017 President Donald Trump signed into U.S. law the Tax Cuts and Jobs Act of 2017 (“Tax Reform”). ASC Topic 740, Accounting for Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment even though the effective date for most provisions is for tax years beginning after December 31, 2017, or in the case of certain other provisions of the law, January 1, 2018.

Given the significance of the legislation, the U.S. Securities and Exchange Commission (the "SEC") staff issued Staff Accounting Bulletin ("SAB") No. 118 (“SAB 118”), which allows registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations. However, the measurement period is deemed to have ended prior to the one year term when the registrant has obtained, prepared, and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared, or analyzed.

SAB 118 summarizes a three-step process to be applied at each reporting period to account for and qualitatively disclose: (1) the effects of the change in tax law for which accounting is complete; (2) provisional amounts (or adjustments to provisional amounts) for the effects of the tax law where accounting is not complete, but that a reasonable estimate has been determined; and (3) a reasonable estimate cannot yet be made and therefore taxes are reflected in accordance with the law prior to the enactment of the Tax Cuts and Jobs Act.

ASC Topic 740, Income Taxes (ASC 740) requires the tax effects of changes in tax laws must be recognized in the period in which the law is enacted, or December 22, 2017 for the Tax Reform. ASC 740 also requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. Thus, at the date of enactment, the Company’s deferred taxes were re-measured utilizing the new federal income tax rate of 21% which resulted in a $22.0 million decrease to the Company’s deferred tax assets. The re-measurement calculation is provisional as the Company continues to evaluate the provisions of the Tax Reform.

As part of the Tax Reform, the U.S. corporate income tax rate applicable to the Company decreased from 34% to 21%. This rate change resulted in the remeasurement of the Company’s net deferred tax assets and liabilities as of December 31, 2017, the effect of which was completely offset by a change in the Company’s valuation allowance.

The Tax Reform includes a one-time mandatory repatriation transition tax on the net accumulated earnings and profits of a U.S. taxpayer’s foreign subsidiaries. The Company has performed an estimated earnings and profits analysis. The current estimate of the transition tax results in no income inclusion to the Company. To the extent that a refinement is made that materially changes the estimate calculation, the inclusion should be fully offset by tax losses incurred by the Company. There should be no income tax effect in the current period. The calculation of earnings and profits is provisional and further time is needed for detailed refinement.

Pursuant to the Tax Reform, AMT credit carryforwards will be eligible for a 50% refund through tax years 2018 through 2020. Beginning in tax year 2021, any remaining AMT credit carryforwards would be 100% refundable. As a result of these new regulations, the Company has released its valuation allowance of $0.1 million formerly reserved against its AMT credit carryforwards. The Company has recorded a current income tax receivable of $0.1 million and a non-current income tax receivable of $0.1 million in connection with this valuation allowance release in which the entire benefit of $0.2 million is being recorded as a component of Income tax (benefit) expense for the year ended December 31, 2017. The calculation related to AMT credit carryforwards is provisional as the Company continues to evaluate the provisions of the Tax Reform.

Other significant provisions that are not yet effective but may impact income taxes in future years include: an exemption from U.S. tax on dividends of future foreign earnings, limitation on the current deductibility of net interest expense in excess of 30% of adjusted taxable income, a limitation of net operating losses generated after fiscal 2018 to 80% of annual income, an incremental tax (base erosion anti-abuse tax or “BEAT”) on excessive amounts paid to foreign related parties, and a minimum tax on certain foreign earnings in excess of 10% of the foreign subsidiaries tangible assets (i.e., global intangible low-taxed income or “GILTI”). Because of the complexity of the new provisions, the Company is continuing to evaluate how the provisions will be accounted for under the U.S. generally accepted accounting principles wherein companies are allowed to make an accounting policy election of either (i) account for GILTI as a component of tax expense in the period in which the Company is subject to the rules (the “period cost method”), or (ii) account for GILTI in the Company’s measurement of deferred taxes (the “deferred method”). Currently, the Company has not elected a method and will only do so after its completion of the analysis of the GILTI provisions and its election method will depend, in part, on analyzing its global income to determine whether the Company expects to have future U.S. inclusions in its taxable income related to GILTI and, if so, the impact that is expected.

The Company operates in multiple countries. Accordingly, separate tax filings are required based on jurisdiction. Due to the separate tax filings of our U.S., U.K. and France jurisdictions, the Company has evaluated the need for a valuation allowance on a separate jurisdiction basis. As of December 31, 2017, the Company continues to maintain a full valuation allowance against all net deferred tax assets.

The components of the Company’s net deferred tax assets and liabilities are as follows (in thousands):

	December 31, 2017			December 31, 2016
Deferred Tax Asset
Net Operating Loss	$	37,168		$	55,521
Tax Credits		1,846			2,034
Stock Based Compensation		900			997
Intangibles		489			843
Other		290			337
Subtotal		40,693			59,732

Less:
Valuation Allowance		(39,072	)		(58,983	)
Total Deferred Tax Assets		1,621			749

Deferred Tax Liabilities
Fixed Assets		(1,621	)		(749	)
Total Deferred Tax Liabilities		(1,621	)		(749	)
Net Deferred Tax Asset	$	—		$	—

In assessing the realizability of deferred tax assets, management considers positive and negative evidence to determine whether it is more likely than not that some portion or all 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. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax-planning strategies in making this assessment. Management believes it is more likely than not that the results of future operations will not generate sufficient taxable income in the U.S., U.K. and France in order to realize the full benefits of the deferred tax assets in the respective jurisdictions.

As of December 31, 2017, the Company has federal and state U.S. tax net operating loss carryforwards of approximately $164.0 million and $20.0 million, respectively, which begin to expire in 2020 and 2018, respectively. The Company also has federal research and development credit carryforwards of approximately $1.8 million, which begin to expire in 2018.

As of December 31, 2017, the Company has non-U.S., net operating loss carryforwards of approximately $11.5 million, with no expiration period. The Company also has non-U.S. research and development credit carryforwards of approximately $0.3 million, with no expiration period.

Under Section 382 of the Internal Revenue Code of 1986, as amended, substantial changes in the Company's ownership may limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset taxable income. Specifically, this limitation may arise in the event of a cumulative change in ownership of the Company of more than 50% within a three-year period. Any such annual limitation may significantly reduce the utilization of net operating loss carryforwards before they expire. The Company performed an analysis through June 30, 2014, and determined any potential ownership change under Section 382 during the year would not have a material impact on the future utilization of US net operating losses and tax credits. However, future transactions in the Company's common stock could trigger an ownership change for purposes of Section 382, which could limit the amount of net operating loss carryforwards and other attributes that could be utilized annually in the future to offset taxable income, if any. Any such limitation, whether as the result of sales of common stock by our existing stockholders or sales of common stock by the Company, could have a material adverse effect on results of operations in future years.

The Company follows the provisions of FASB ASC 740, Accounting for Uncertainty in Income Taxes – An Interpretation of FASB No. 109. FASB ASC 740 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements in accordance with ASC 740-20. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of FASB ASC 740 and in subsequent periods. Juniper recognizes interest and penalties, if any, related to uncertain tax positions in general and administrative expenses. No uncertain tax positions or interest and penalties related to uncertain tax positions were accrued as of December 31, 2017 or 2016.

The Company files tax returns in the United States, United Kingdom, France and various state jurisdictions. All of the Company’s tax years remain open to examination by major taxing jurisdictions to which the Company is subject, as carryforward attributes generated in past years may still be adjusted upon examination by the Internal Revenue Service or state and foreign tax authorities if they have or will be used in future periods. The Internal Revenue Service has concluded their audit of the 2011 and 2012 tax years. There were no material findings resulting from their audit.

As of December 31, 2017, outside of Columbia Bermuda, the Company does not maintain accumulated earnings and profits in the foreign jurisdictions that it currently does business. The Company has repatriated current earnings from one of its foreign subsidiaries to the United States in 2017 and 2016. To the extent the Company has positive accumulated foreign earnings in the future, the Company will further assess its global business needs and decide whether or not it will permanently reinvest those earnings.