Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
INCOME TAXES
NOTE 15 — INCOME TAXES
Income tax benefit (provision) included in our reported net loss consisted of the following (in thousands):
 
Year Ended December 31,
 
2019
 
2018
 
2017
Current:
 
 
 
 
 
Federal
$

 
$

 
$

State

 

 

Foreign

 
190

 
(185
)
Total Current

 
190

 
(185
)
Deferred:
 
 
 
 
 
Federal

 

 

State

 

 

Foreign

 

 

Total Deferred

 

 

Total income tax benefit (provision)
$

 
$
190

 
$
(185
)

The sources of loss from operations before income taxes were as follows (in thousands):
 
Year Ended December 31,
 
2019
 
2018
 
2017
Domestic
$
(139,654
)
 
$
(115,137
)
 
$
(223,991
)
Foreign
(12,113
)
 
(10,798
)
 
(7,283
)
Total loss before income taxes
$
(151,767
)
 
$
(125,935
)
 
$
(231,274
)

The reconciliation of the federal statutory income tax rate to our effective income tax rate is as follows:
 
Year Ended December 31,
 
2019
 
2018
 
2017
Income tax benefit (provision) at U.S. statutory rate
$
31,871

 
$
26,446

 
$
80,946

Share-based compensation

 

 

Impairment

 

 
(27,969
)
Change in U.S. tax rate

 

 
(30,562
)
Change in valuation allowance due to change in U.S. tax rate

 

 
30,562

U.S. state tax
7,529

 
7,955

 

Change in valuation allowance
(38,953
)
 
(32,086
)
 
(51,030
)
Other
(447
)
 
(2,125
)
 
(2,132
)
Total income tax benefit (provision)
$

 
$
190

 
$
(185
)

Significant components of our deferred tax assets and liabilities are as follows (in thousands):
 
December 31,
 
2019
 
2018
Deferred tax assets:
 
 
 
Capitalized engineering costs
$
27,705

 
$
6,353

Capitalized start-up costs
17,747

 
19,290

Compensation and benefits
3,478

 
3,862

Net operating loss carryforwards and credits:
 
 
 
Federal
60,469

 
37,822

State
9,700

 
4,979

Foreign
4,087

 
2,392

Other, net
6,247

 
8,328

Deferred tax assets
129,433

 
83,026

Less valuation allowance
(121,980
)
 
(83,026
)
Deferred tax assets, net of valuation allowance
7,453

 

 
 
 
 
Deferred tax liabilities

 

Property and equipment
(7,453
)
 

Net deferred tax assets
$

 
$


The Tax Cuts and Jobs Act of 2017 (the “Act”) was enacted on December 22, 2017, and has several key provisions impacting the accounting for, and reporting of, income taxes. We incorporated the impact of the Act in our results of operations and, at December 31, 2017, we recorded a $30.6 million unfavorable impact on the Company’s gross U.S. deferred tax assets and a corresponding $30.6 million favorable impact to the valuation allowance. We have not recorded an adjustment to these amounts, and, as of December 31, 2018, our accounting for the impact of the Tax Act was complete.
As of December 31, 2019, we had federal, state and international net operating loss (“NOL”) carryforwards of $273.7 million, $191.3 million and $22.9 million, respectively. Approximately $205.1 million of these NOLs have an indefinite carryforward period. All other NOLs will expire between 2036 and 2037.
Due to our historical losses and other available evidence related to our ability to generate taxable income, we have established a valuation allowance to fully offset our net deferred tax assets as of December 31, 2019, and 2018. We will continue to evaluate the realizability of our deferred tax assets in the future. The increase in the valuation allowance was $39.0 million for the year ended December 31, 2019.
In addition, we experienced a Section 382 ownership change in April 2017. An analysis of the annual limitation on the utilization of our NOLs was performed in accordance with IRC Section 382. It was determined that IRC Section 382 will not
materially limit the use of our NOLs over the carryover period. We will continue to monitor trading activity in our shares which could cause an additional ownership change. If the Company experiences a Section 382 ownership change, it could further affect our ability to utilize our existing NOL carryforwards.
As of December 31, 2019, the Company determined that it has no uncertain tax positions, interest or penalties as defined within ASC 740-10. The Company does not have unrecognized tax benefits. The Company does not believe that it is reasonably possible that the total unrecognized benefits will significantly increase within the next 12 months.
We are subject to tax in the U.S. and various state and foreign jurisdictions. We are not currently under audit by any taxing authority. Federal and state tax returns filed with each jurisdiction remain open to examination under the normal three-year statute of limitations.
Pursuant to ASC 740-30-25-17, the Company recognizes deferred tax liabilities associated with outside basis differences on investments in foreign subsidiaries unless the difference is considered essentially permanent in duration. As of December 31, 2019, the Company has not recorded any deferred taxes on unremitted earnings as the Company has no undistributed earnings and profits. If circumstances change in the foreseeable future and it becomes apparent that some or all of the undistributed earnings and profits will not be reinvested indefinitely, or will be remitted in the foreseeable future, a deferred tax liability will be recorded for some or all of the outside basis difference.