10. INCOME TAXES

For financial reporting purposes, (Loss) income before income taxes includes the following components:


	Fiscal Year Ended June 30,
	2018		2017		2016
	(Amounts in thousands)
United States	$	(39,662)	$	15,253	$	(230)
Foreign		(64,917)		103,613		(21,528)
	$	(104,579)	$	118,866	$	(21,758)

The Company’s Income tax expense consisted of:


	Fiscal Year Ended June 30,
	2018		2017		2016
	(Amounts in thousands)
Current:
Federal	$	24,621	$	13,975	$	45,878
State		253		308		135
Foreign		22,741		10,602		19,650
	$	47,615	$	24,885	$	65,663
Deferred and others:
Federal	$	(2,253)	$	(1,443)	$	(6,986)
State		(223)		(18)		(78)
Foreign		(30,367)		3,017		2,081
	$	(32,843)	$	1,556	$	(4,983)
Total income tax expense	$	14,772	$	26,441	$	60,680

The provision for income taxes for the fiscal years ended June 30, 2018, 2017 and 2016, differs from the amount of income tax determined by applying the applicable United States statutory federal income tax rate to pre‑tax income (net of non‑controlling interest in income of consolidated subsidiary and loss from equity investment) from operations as a result of the following differences:


	Fiscal Year Ended June 30,
	2018		2017		2016
	(Amounts in thousands)
Total expense computed by applying federal rates	$	(29,343)	$	41,603	$	(7,615)
State and provincial income taxes, net of federal benefit		(104)		78		(1)
Excess depletion		(1,440)		(1,517)		(882)
Estimates for uncertain tax positions		8,574		2,870		1,866
Statutory tax attributable to non-controlling interest		1,736		3,162		1,838
Effect of foreign earnings		1,230		3,046		61,576
Effect of foreign earnings indefinitely reinvested		(19,004)		(22,922)		3,406
Realized foreign exchange gains		18,330		—		—
Unrealized foreign exchange gains		(1,610)		(746)		(2,439)
Effects of US income tax reform		30,675		—		—
Changes in estimates		(70)		(3,676)		1,641
Valuation allowance		6,337		4,374		849
Other		(539)		169		441
	$	14,772	$	26,441	$	60,680

The effective tax rate includes the impact of U.S. tax legislation, as discussed below, the effects of a non-cash functional currency election to file certain Canadian income tax returns in U.S. dollars, and the effects of the royalty impairments. Prior to the functional currency election, certain deferred tax liabilities were measured on the difference between adjusted Canadian dollar acquisition cost and Canadian dollar tax basis. These deferred tax liabilities were then marked-to market every quarter, for income tax expense (benefit) purposes, to account for changes in the Canadian dollar to U.S. dollar exchange rate. Post-election, the applicable deferred tax liabilities will be measured on the difference between U.S. GAAP value and U.S. dollar tax basis.

On December 22, 2017, H.R. 1, originally known as the Tax Cuts and Jobs Act (the “Act”), was enacted and is effective for tax years including January 1, 2018. Certain other aspects of the Act are not effective for fiscal June 30 companies until July 1, 2018.

The Act, among other things, reduced the U.S. corporate income tax rate to 21% starting January 1, 2018. As the Company is a fiscal year tax payer, we applied a blended U.S. federal income tax rate of approximately 28.1% for the fiscal year ending June 30, 2018. The blended percentage was calculated on a pro-rata percentage of the number of days before and after January 1, 2018. The Company’s U.S. federal corporate income tax rate will be 21% for the fiscal year commencing on July 1, 2018 and all future years.

ASC 740, Income Taxes, requires recognition of the effects of tax law changes in the period of enactment. As a result, the Company recorded a net charge (expense) of $30.7 million for the year ended June 30, 2018. This amount is included in Income tax expense on our consolidated statements of operations and comprehensive (loss) income. The tax expense consists of three components: (i) a $12.3 million charge relating to the one-time mandatory tax on the net accumulated post-1986 untaxed earnings and profits of the Company’s foreign subsidiaries, which we will elect to pay over an eight-year period, (ii) a $1.2 million charge resulting from the re-measurement of the Company’s net deferred tax assets and liabilities, and (iii) a $17.2 million charge related to re-measurement of the U.S. income tax impacts resulting from foreign uncertain tax positions.

The net $30.7 million charge represents what the Company believes is a reasonable estimate of the impact of the Act. As the net charge is based on currently available information and interpretations, which are continuing to evolve, all amounts should be considered provisional. The Company will continue to analyze additional information and guidance related to the Act as supplemental legislation, regulatory guidance, or evolving technical interpretations become available. The final impacts may differ from the recorded amounts as of June 30, 2018 and the Company will continue to refine such amounts within the measurement period provided by Staff Accounting Bulletin No. 118 (“SAB 118”). The Company expects to complete its analysis no later than the second quarter of fiscal year 2019.

The Company is in the process of assessing the Act’s impact, if any, on its indefinite reinvestment assertion. If there are any changes to the indefinite reinvestment assertion as a result of our analysis of the Act, the Company will disclose any tax impacts in the appropriate period, pursuant to SAB 118.

The tax effects of temporary differences and carryforwards, which give rise to our deferred tax assets and liabilities at June 30, 2018 and 2017, are as follows:


	2018		2017
	(Amounts in thousands)
Deferred tax assets:
Stock-based compensation	$	805	$	5,979
Net operating losses		1,933		5,341
Foreign tax credits		11,172		19,869
Other		7,346		7,382
Total deferred tax assets		21,256		38,571
Valuation allowance		(12,811)		(6,474)
Net deferred tax assets	$	8,445	$	32,097
Deferred tax liabilities:
Mineral property basis	$	(74,274)	$	(122,870)
Unrealized foreign exchange gains		(664)		(1,097)
2019 Notes		(2,631)		(8,634)
Investment in Peak Gold joint venture		(4,359)		(5,475)
Other		(213)		(595)
Total deferred tax liabilities		(82,141)		(138,671)
Total net deferred taxes	$	(73,696)	$	(106,574)

The Company reviews the measurement of its deferred tax assets at each balance sheet date. The Company’s analysis indicates a cumulative three-years of historical losses primarily as the result of fiscal year 2018 and 2016 impairments of certain non-producing assets. Considering all available positive and negative evidence, including but not limited to recent earnings history and forecasted future results, the Company believes it is more likely-than-not that all net deferred tax assets not currently burdened with a valuation allowance will be fully realized. As of June 30, 2018 and 2017, the Company had $12.8 million and $6.5 million of valuation allowances recorded, respectively. The valuation allowance remaining at June 30, 2018 is attributable to US foreign tax credits and capital loss carryforwards in non‑US subsidiaries.

At June 30, 2018 and 2017, the Company had $7.1 million and $32.1 million of net operating loss carry forwards, respectively. The decrease in the net operating loss carry forwards is primarily attributable to the utilization of net operating losses by non‑U.S. subsidiaries. The majority of the tax loss carry forwards are in jurisdictions that allow a twenty year carry forward period. As a result, these losses do not begin to expire until the 2036 tax year, and the Company anticipates the losses will be fully utilized.

As of June 30, 2018 and 2017, the Company had $36.3 million and $28.5 million of unrecognized tax benefits, respectively. If recognized, these unrecognized tax benefits would positively impact the Company’s effective income tax rate. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:


	2018		2017		2016
	(Amounts in thousands)
Total gross unrecognized tax benefits at beginning of year	$	28,542	$	26,960	$	26,120
Additions / Reductions for tax positions of current year		1,624		1,394		840
Additions / Reductions for tax positions of prior years		6,180		188		—
Reductions due to settlements with taxing authorities		—		—		—
Reductions due to lapse of statute of limitations		—		—		—
Total amount of gross unrecognized tax benefits at end of year	$	36,346	$	28,542	$	26,960

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal, state and local, and non‑U.S. income tax examinations by tax authorities for fiscal years before 2014. As a result of (i) statutes of limitation that will begin to expire within the next 12 months in various jurisdictions, (ii) possible settlements of audit‑related issues with taxing authorities in various jurisdictions with respect to which none of the issues are individually significant, and (iii) additional accrual of exposure and interest on existing items, the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits will not decrease in the next 12 months.

The Company’s continuing practice is to recognize interest and/or penalties related to unrecognized tax benefits as part of its income tax expense. At June 30, 2018 and 2017, the amount of accrued income‑tax‑related interest and penalties was $9.8 million and $6.8 million, respectively. The gross unrecognized tax benefits reflected in the tabular reconciliation do not include interest and penalties and are not reduced by advanced deposits of $12.8 million made to taxing authorities.