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font-family: 'Times New Roman', Times, serif; text-align: justify; line-height: 10.25pt;">On December 22, 2017, the United States enacted significant changes to U.S. tax law following the passage and signing of the Tax Reform Act. The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a one-time repatriation tax on undistributed foreign earnings. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. Income tax effects resulting from changes in tax laws are accounted for by the Company in accordance with authoritative guidance, which requires that these tax effects be recognized in the period in which the law is enacted.</div><div style="line-height: 10.25pt;"><br style="line-height: 10.25pt;" /></div><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; text-align: justify; line-height: 10.25pt;">On December 22, 2017, the Securities and Exchange Commission ("SEC") staff issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations where a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. SAB 118 provides a measurement period, not to exceed one year from the enactment of the Tax Reform Act. In accordance with SAB 118, the Company is required to reflect the income tax effects of those aspects of the Tax Reform Act for which the accounting is complete. To the extent there are areas that are incomplete, but are capable of reasonable estimates, a provisional amount is required to be recorded by the Company. If a reasonable estimate is unable to be calculated, the Company is required to disclose why. The Company has recognized provisional tax impacts related to the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions, additional regulatory guidance from Treasury, the Internal Revenue Service and State Governments, and actions the Company may take as a result of the Tax Reform Act.</div><div style="line-height: 10.25pt;"><br style="line-height: 10.25pt;" /></div><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; text-align: justify; line-height: 10.25pt;">The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. As a result of the reduction of TransAct's U.S. corporate income tax rate from 34% to 21% under the Tax Reform Act, the Company revalued its ending net deferred tax assets at December 31, 2017 and recognized a provisional $1,315,000 charge to income tax expense in the Company's consolidated statement of income for the year ended December 31, 2017.</div><div style="line-height: 10.25pt;"><br style="line-height: 10.25pt;" /></div><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; text-align: justify; line-height: 10.25pt;">The Tax Reform Act also provided for a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits ("E&amp;P") through the year ended December 31, 2017. The Company has no undistributed foreign E&amp;P subject to the one-time mandatory repatriation and therefore has not recognized any income tax expense related to undistributed foreign subsidiary E&amp;P for the year ended December 31, 2017.</div><div style="line-height: 10.25pt;"><br style="line-height: 10.25pt;" /></div><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; text-align: justify; line-height: 10.25pt;">While the Tax Reform Act provides for a territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion provisions, the global intangible low-taxed income ("GILTI") provisions and the base-erosion and anti-abuse tax ("BEAT") provisions. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary's tangible assets. The BEAT provisions in the Tax Reform Act eliminate the deduction of certain base-erosion payments made to related foreign corporations, and impose a minimum tax if greater than regular tax. The Company does not expect it will be subject to these taxes and therefore has not included any tax impacts of GILTI or BEAT in its consolidated financial statements for the year ended December 31, 2017. Starting January 1, 2018, the Company will account for GILIT and BEAT in the period in which it is incurred to the extent these expectations change.</div><div style="line-height: 10.25pt;"><br style="line-height: 10.25pt;" /></div><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; text-align: justify; line-height: 10.25pt;">Our effective tax rates were 52.6%, 30.0%, and 30.4% for 2017, 2016, and 2015, respectively.&#160;&#160;The effective tax rate in 2017 was unusually high due to the impact of the Tax Reform Act. As explained above we recognized a provisional $1,315,000 charge to income tax expense for the year ended December 31, 2017 as a result of revaluing our net deferred tax assets using the new U.S. corporate tax rate of 21%.</div><div style="line-height: 10.25pt;"><br style="line-height: 10.25pt;" /></div><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; text-align: justify; line-height: 10.25pt;">At December 31, 2017, we have no federal or state net operating loss carryforwards and no R&amp;D credit carryforwards or state tax credit carryforwards as of December 31, 2017.&#160;&#160;Foreign loss before taxes was $563,000, $235,000, and $174,000 in 2017, 2016, and 2015, respectively.</div><div style="line-height: 10.25pt;"><br style="line-height: 10.25pt;" /></div><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; text-align: justify; line-height: 10.25pt;">Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the Consolidated Financial Statements.&#160;&#160;Our deferred tax assets and liabilities were comprised of the following:</div><div style="line-height: 10.25pt;"><br style="line-height: 10.25pt;" /></div><table cellpadding="0" cellspacing="0" style="font-size: 9pt; 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Description of business</div><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; text-align: justify; line-height: 10.25pt;">&#160;</div><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; text-align: justify; line-height: 10.25pt;">TransAct Technologies Incorporated ("TransAct" or the "Company"), which has its headquarters in Hamden, CT and its primary operating facility in Ithaca, NY, operates in one operating segment: software-driven technology and printing solutions for high growth markets including restaurant solutions, casino and gaming, lottery, POS automation and banking, oil and gas and mobile markets.&#160;&#160;Our solutions are designed based on market-specific requirements and are sold under the AccuDate&#8482; Ithaca&#174;, RESPONDER&#174;, Epic, EPICENTRAL^TM and Printrex&#174; product brands.&#160;&#160;We distribute our products through OEMs, value-added resellers, selected distributors, and directly to end-users.&#160;&#160;Our product distribution spans across the Americas, the Middle East, Africa, Asia, Australia, the Caribbean Islands and the South Pacific.&#160;&#160;We also generate revenue from the after-market side of the business, providing printer and terminal service, supplies and spare parts in addition to revenue from our software solution, the EPICENTRAL^TM Print System ("EPICENTRAL^TM"), that enables casino operators to create promotional coupons and marketing messages and print them in real-time at the slot machine.</div><div style="line-height: 10.25pt;"><br style="line-height: 10.25pt;" /></div></div> -5964000 -1919000 -3242000 -955000 -600000 -985000 5918000 5551000 4624000 3092000 3617000 3211000 0 0 0 0 0 0 0 0 3092000 3617000 0 0 0 3211000 0 867000 1813000 1356000 943000 753000 -412000 625000 883000 <div style="font-family: 'Times New Roman', Times, serif; font-size: 9pt;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; font-weight: bold; text-align: left; line-height: 10.25pt;">16. Accounting pronouncements</div><div style="line-height: 10.25pt;"><br style="line-height: 10.25pt;" /></div><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; text-align: justify; line-height: 10.25pt;">In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers." This ASU is intended to clarify the principles for recognizing revenue by removing inconsistencies in revenue requirements; providing a more robust framework for addressing revenue issues; improving comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets; and providing more useful information to users of financial statements through improved revenue disclosure requirements. In applying the amended guidance, an entity will (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the contract's performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.&#160; Entities have the option of using either a full retrospective approach or modified retrospective approach to adopt the amended guidance.&#160; The amended guidance applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification.&#160;</div><div style="line-height: 10.25pt;"><br style="line-height: 10.25pt;" /></div><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; text-align: justify; line-height: 10.25pt;">In the first quarter of 2018, the Company will complete its adoption activities, including the integration of the standard update into our financial reporting process and systems.&#160; The Company will adopt the amended guidance using the modified retrospective transition approach, with any cumulative effect of initially adopting this standard recognized through retained earnings at the date of adoption.&#160; The provisions of this standard are effective for interim and annual periods beginning after December 15, 2017.&#160; We will adopt the amended guidance on January 1, 2018, at which time it becomes effective for the Company.&#160; The new standard will change revenue practices for testing service contracts reported as part of our TSG market.&#160; Revenue will now be recognized at a point in time as our performance obligation is completed as opposed to our current practice of recognizing based on percentage-of-completion.&#160; As of Decemeber 31, 2017 we have no open testing service contracts that will require adjustment to retained earnings.&#160; While we are still finalizing our evaluation of the impact of the new revenue standard, the impact is not expected to be material.</div><div style="line-height: 10.25pt;"><br style="line-height: 10.25pt;" /></div><div style="font-size: 10pt; 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