Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Loss Before Income Tax Provision (Benefit)

The Company’s income before income tax provision was subject to taxes in the following jurisdictions for the following periods (in thousands):



	Years Ended December 31,
	2018		2017		2016⁽¹⁾
United States	$	100,031	$	50,706	$	38,268
Foreign	31,241		17,349		20,125
	$	131,272	$	68,055	$	58,393

Expense Benefit for Income Taxes

The expense (benefit) for income taxes is comprised of (in thousands):



	Years Ended December 31,
	2018		2017			2016⁽²⁾
Current tax provision:
Federal	$	736	$	610		$	541
State	1,880		1,259			543
Foreign	6,577		6,135			7,289
	9,193		8,004			8,373
Deferred tax expense (benefit):
Federal	14,844		20,746			(129,405		)
State	1,086		(1,127		)	(10,693		)
Foreign	895		(1,235		)	(836		)
	16,825		18,384			(140,934		)
Income tax provision	$	26,018	$	26,388		$	(132,561	)


(1)	Income before income taxes in 2016 includes a gain of $17,662,000 that was recognized in connection with the sale of preferred shares of the Company's investment in Topgolf. See Note 7 for further discussion.


(2)	The income tax benefit for 2016 includes the reversal of a significant portion of the valuation allowance on the Company's deferred tax assets in the U.S. See further discussion below.

Components of Deferred Tax Assets and Liabilities

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2018 and 2017 are as follows (in thousands):



	December 31,
	2018			2017
Deferred tax assets:
Reserves and allowances not currently deductible for tax purposes	$	13,495		$	12,783
Basis difference related to fixed assets	5,342			5,946
Compensation and benefits	8,416			7,807
Basis difference for inventory valuation	1,784			1,612
Compensatory stock options and rights	3,988			3,869
Deferred revenue and other	120			175
Operating loss carryforwards	7,191			21,799
Tax credit carryforwards	54,219			62,668
Basis difference related to intangible assets with a definite life	12,767			7,061
Other	5,678			634
Total deferred tax assets	113,000			124,354
Valuation allowance for deferred tax assets	(13,408		)	(11,114		)
Deferred tax assets, net of valuation allowance	$	99,592		$	113,240
Deferred tax liabilities:
Prepaid expenses	(1,181		)	(773		)
Basis difference related to intangible assets with an indefinite life	(25,128		)	(22,891		)
Total deferred tax liabilities	(26,309		)	(23,664		)
Net deferred tax assets	$	73,283		$	89,576
Net deferred tax assets (liabilities) are shown on the accompanying consolidated balance sheets as follows:
Non-current deferred tax assets	$	75,079		$	91,398
Non-current deferred tax liabilities	(1,796		)	(1,822		)
Net deferred tax assets	$	73,283		$	89,576

Credit Carryforward Expiry

At December 31, 2018, the Company had federal and state income tax credit carryforwards of $62,806,000 and $18,335,000, respectively, which will expire if unused at various dates beginning on December 31, 2024. Such credit carryforwards expire as follows (in thousands):



U.S. foreign tax credit	$	47,407	2024 - 2028
U.S. research tax credit	$	15,374	2030 - 2038
U.S. business tax credits	$	25	2030 - 2038
State investment tax credits	$	1,031	Do not expire
State research tax credits	$	17,304	Do not expire

Net Operating Losses Expiry

The Company has recorded a deferred tax asset reflecting the benefit of operating loss carryforwards. The net operating losses expire as follows (in thousands):



U.S. loss carryforwards	$	—	N/A
State loss carryforwards	$	105,771	2021 - 2035

Reconciliation of Effective Tax Rate on Income or Loss and Statutory Tax Rate

A reconciliation of the effective tax rate on income or loss and the statutory tax rate is as follows:



	Years Ended December 31,
	2018		2017		2016
Statutory U.S. tax rate	21.0	%	35.0	%	35.0	%
State income taxes, net of U.S. tax benefit	2.0	%	2.6	%	3.1	%
Federal and State tax credits, net of U.S. tax benefit	(6.0	)%	(4.1	)%	(5.0	)%
Foreign income taxed at other than U.S. statutory rate	1.7	%	(0.2	)%	1.8	%
Effect of foreign rate changes	(0.1	)%	0.2	%	0.5	%
Foreign tax credit	(0.8	)%	(1.3	)%	(11.3	)%
Basis differences of intangibles with an indefinite life	—	%	0.1	%	0.1	%
Change in deferred tax valuation allowance	0.5	%	(1.9	)%	(262.4	)%
Accrual for interest and income taxes related to uncertain tax positions	1.8	%	2.2	%	2.9	%
Income (loss) from flowthrough entities	0.6	%	1.0	%	(0.2	)%
Meals and entertainment	0.6	%	1.1	%	1.5	%
Group loss relief	(0.4	)%	(0.6	)%	(1.6	)%
Stock option compensation	(1.1	)%	(2.0	)%	0.2	%
Foreign dividends and earnings inclusion	0.2	%	0.7	%	9.9	%
Foreign tax withholding	0.5	%	0.9	%	0.6	%
Executive compensation limitation	0.7	%	0.5	%	0.7	%
Intra-entity asset transfers	0.8	%	(6.3	)%	—	%
Enactment of the Tax Cuts and Jobs Act	0.3	%	11.1	%	—	%
Foreign Derived Intangible Income Deduction	(2.7	)%	—	%	—	%
Other	0.2	%	(0.2	)%	(2.8	)%
Effective tax rate	19.8	%	38.8	%	(227.0	)%

Reconciliation of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):



	2018			2017			2016
Balance at January 1	$	9,300		$	8,256		$	7,090
Additions based on tax positions related to the current year	1,354			1,061			969
Additions for tax positions of prior years	1,624			233			542
Reductions for tax positions of prior years	(148		)	(192		)	(80		)
Settlement of tax audits	—			(33		)	—
Reductions due to lapsed statute of limitations	(298		)	(25		)	(265		)
Balance at December 31	$	11,832		$	9,300		$	8,256

Major Jurisdictions No Longer Subject to Income Tax Examinations by Tax Authorities

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is generally no longer subject to income tax examinations by tax authorities in its major jurisdictions as follows:



Major Tax Jurisdiction	Years No Longer Subject to Audit
U.S. federal	2010 and prior
California (U.S.)	2008 and prior
Canada	2010 and prior
Japan	2011 and prior
South Korea	2012 and prior
United Kingdom	2014 and prior