NOTE 9 —Income Taxes

In determining quarterly provisions for income taxes, the Company uses the annual estimated effective tax rate applied to the actual year-to-date profit or loss, adjusted for discrete items arising in that quarter. The Company’s annual estimated effective tax rate differs from the U.S. federal statutory rate primarily as result of the Company’s full valuation allowance related to U.S. federal and state operating losses. For the three months ended September 30, 2019 and 2018, the Company recorded provisions for income tax expense of $33 and income tax benefit of $14, respectively. For the nine months ended September 30, 2019 and 2018, the Company recorded provisions for income tax expense of $784, and $667, respectively.

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the Tax Act), which significantly changes existing U.S. tax laws, including a reduction in the corporate tax rate from 35% to 21%, and move from a worldwide tax system to a territorial system, as well as other changes.  The tax rate reduction was effective January 1, 2018.  Beginning in 2018, the Company became subject to the global intangible low-taxed income (GILTI) provisions of the Tax Act on the income of the Company’s foreign subsidiaries. The Company’s foreign subsidiaries are profitable for the three and nine months ended September 30, 2019 and forecast profits for all of 2019.  The GILTI subjects the income of the foreign subsidiaries to U.S. taxation.  The Company’s accounting policy related to the GILTI is to treat GILTI related book/tax differences as period costs and to use the incremental cash tax savings approach in evaluating the Company’s U.S. net operating loss valuation allowance assessment.

The Company's income tax returns are subject to examinations by the Internal Revenue Service and other tax authorities in various jurisdictions.  In accordance with the guidance on the accounting for uncertainty in income taxes, the Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes.  These assessments can require considerable estimates and judgments.  The gross amount of unrecognized tax benefits was approximately $5,985 as of September 30, 2019.  Our unrecognized tax benefits that, if recognized, would reduce the effective income tax rate in future periods totaled $735 as of September 30, 2019. If the Company's estimate of income tax liabilities proves to be less than the ultimate assessment, then a further charge to expense would be required.  If events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary.  The Company does not anticipate any material changes to its uncertain tax positions during the next twelve months.