11. INCOME TAXES

The components of loss before income taxes consist of the following (in thousands):

The income tax expense consisted of the following (in thousands):

The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate:

Significant components of the Company’s deferred income tax assets and liabilities consist of the following (in thousands):

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized through future operations. As a result of the Company’s analysis of all available objective evidence, both positive and negative, as of December 31, 2018, management believes it is more likely than not that the deferred tax assets will not be fully realizable. Accordingly, the Company has provided a full valuation allowance against its deferred tax assets with the exception of deferred tax assets related to foreign entities in the U.K., China and Denmark.

For federal and state income tax reporting purposes, respective net operating loss carryforwards of $495.9 million and $408.3 million are available to reduce future taxable income, if any. These net operating loss carryforwards will begin to expire in 2028 for federal and state income tax purposes. The federal net operating loss generated in the current year can be carried forward indefinitely.

For U.K. income tax reporting purposes, the net operating loss carryforward of $3.0 million is available to reduce the future taxable income, if any. This net operating loss can be carried forward indefinitely. The Company also has U.K. research and development tax credit carryforwards of $0.1 million. The credit can be carried forward indefinitely.

As of December 31, 2018, the Company has research and development tax credit carryforwards of $33.9 million and $23.2 million for federal and state income tax purposes, respectively. If not utilized, the federal carryforwards will begin to expire in 2028. The state tax credits can be carried forward indefinitely.

The Internal Revenue Code of 1986, as amended (the “Code”), contains provisions that may limit the net operating loss and credit carryforwards available for use in any given period upon the occurrence of certain events, including a statutorily defined significant change in ownership. Utilization of the net operating loss and tax credit carryforwards is subject to an annual limitation due to an ownership change, as defined by section 382 of the Code. The Company completed a recent study to assess whether any section 382 ownership change has occurred since the Company’s formation. Based on the study, the Company had a section 382 ownership change on December 18, 2009 and tax attributes generated by the Company through the ownership change date are subject to the limitation. The Company has determined that there were no additional ownership changes after December 18, 2009.

The total amount of unrecognized tax benefits as of December 31, 2018 is $14.5 million which is fully composed of research and development credits. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of its income tax expense. As of December 31, 2018, there were no accrued interest and penalties related to uncertain tax positions.

None of the Company’s unrecognized tax benefit, if recognized, would affect its effective tax rate. The Company does not believe that the amount of unrecognized tax benefits will change significantly in the next 12 months.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities. These audits include questioning the timing and amount of deductions; the nexus of income among various tax jurisdictions; and compliance with federal, state, and local tax laws. The Company is not currently under audit by the Internal Revenue Service or other similar state and local authorities. All tax years remain open to examination by major taxing jurisdictions to which the Company is subject.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act reduces the US federal corporate tax rate from 35% to 21%, imposes a one-time repatriation tax, and numerous other provisions transitioning to a territorial system, including Global Intangible Low Taxed Income, or GILTI, tax and the base erosion anti-abuse tax, or BEAT. Under U.S. GAAP, the Company is allowed to make an accounting policy choice of either (i) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (ii) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”).

In December 2018, we completed our accounting for the effect of the 2017 Tax Act within the measurement period under the SEC guidance, and this resulted in no material change to the provisional amount recorded. The Company has adopted the approach of recording the consequences of the GILTI provision of the 2017 Tax act as a period cost when incurred. Based on the Company's analysis, since Roku's average annual gross receipts is less than $500 million for the three tax-year periods ending with the preceding tax year, the Company is not subject to BEAT.

The Tax Act enacted on December 22, 2017 modifies Section 162(m) by (1) expanding which employees are considered covered employees by including the chief financial officer, (2) providing that if an individual is a covered employee for a taxable year beginning after December 31, 2016, the individual remains a covered employee for all future years, and (3) removing the exceptions for commissions and performance-based compensation. The IRC Section 162(m) limits the Company’s ability to deduct compensation for the CEO, CFO and the three highest paid officers over $1 million. Roku will reevaluate its 162(m) limitation calculation upon release of additional IRS guidance on the 2017 Tax Act’s transition rule.

The Company will continue to indefinitely reinvest earnings from the rest of our foreign subsidiaries, which are not significant. While federal income tax expense has been recognized as a result of the Tax Act, the Company has not provided any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss. It is not practicable for the Company to determine the amount of unrecognized tax expense on these reinvested international earnings.