LOGM 2017 Annual Report

The Company has deferred tax assets related to temporary differences and operating loss carryforwards as fol- lows (in thousands): December 31, 2016 2017 Deferred tax assets: Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,190 $ 8,117 Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,161 709 Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 756 3,808 Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,903 9,165 Accrued bonus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,409 717 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,989 11,611 Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,408 34,127 Deferred tax asset valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,708) (3,112) Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,700 31,015 Deferred tax liabilities: Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,314) (3,247) Goodwill amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,542) (2,838) Intangible assets not deductible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,814) (241,517) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (59) (4,290) Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,729) (251,892) Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,029) $(220,877) As a result of the U.S. Tax Act, the U.S. statutory tax rate was lowered from 35% to 21%, effective January 1, 2018. The Company is required to remeasure its U.S. deferred tax assets and liabilities to the new tax rate. The Company recorded $105.1 million of income tax benefit for the remeasurement of the U.S. net deferred tax liabilities primarily associated with indefinite-lived intangible assets that will reverse at the new 21% rate. Deferred tax assets, related valuation allowances, current tax liabilities, and deferred tax liabilities are determined separately by tax jurisdiction. In making these determinations, the Company estimates deferred tax assets, current tax liabilities, and deferred tax liabilities, and the Company assesses temporary differences resulting from differ- ing treatment of items for tax and accounting purposes. As of December 31, 2017, the Company maintained a full valuation allowance against the deferred tax assets of its Hungarian subsidiary. This entity has historical tax losses and the Company concluded it was not more likely than not that these deferred tax assets are realizable. During the years ended December 31, 2015 and 2016, the valuation allowance decreased by $0.4 million and $0.2 million, respectively, as a result of a tax return provision adjustment, which decreased the Hungarian sub- sidiary’s net operating loss carryforwards. During 2017, as a result of the Merger, the valuation allowance increased by $1.4 million primarily due to the recording of a valuation allowance for California and Massachu- setts state net operating losses. For U.S. tax return purposes, net operating losses and tax credits are normally available to be carried forward to future years, subject to limitations as discussed below. As of December 31, 2017, the Company had federal and state net operating loss carryforwards of $5.7 million and $20.0 million, respectively, which expire on various dates from 2033 through 2036. The Company has performed an analysis of its ownership changes as defined by Section 382 of the Internal Revenue Code and has determined that the net operating loss carryforwards acquired from its 2014 and 2015 acquisitions are subject to limitation. The Company also analyzed the historical LogMeIn net operating loss carryforwards due to the Merger. As of December 31, 2017, all net operating loss carryforwards (except for Massachusetts and California) generated by the Company, including those subject to limitation, are available for 77