INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of components of income tax expense

The components of income before income taxes were as follows (in thousands):



	Year Ended December 31,
	2017		2016		2015
Domestic	$	18,188	$	16,375	$	8,325
Foreign	181		129		102
	$	18,369	$	16,504	$	8,427

The components of the income tax expense are as follows (in thousands):



	Year Ended December 31,
	2017			2016		2015
Current income tax expense:
Federal	$	—		$	197	$	1,492
State	6			179		65
Foreign	43			31		24
Total current expense	$	49		$	407	$	1,581
Deferred income tax expense (benefit):
Federal	$	9,736		$	3,545	$	1,043
State	(872		)	387		284
Foreign	—			—		—
Total deferred expense	8,864			3,932		1,327
Total income tax expense	$	8,913		$	4,339	$	2,908

Temporary differences to the components of deferred tax assets

Temporary differences that give rise to the components of net deferred tax assets are as follows (in thousands):



	December 31,
	2017			2016
Inventory	$	1,321		$	1,172
Accrued compensation	103			114
Stock options	914			811
Research and development	442			438
Alternative minimum tax credit	—			543
Deferred revenue	2,002			2,934
Property and equipment	2,531			2,750
Net operating loss carryforwards – domestic	22,627			34,706
Foreign tax credit carryforward	54			—
Capital leases	(3,757		)	(2,833		)
Unremitted earnings for controlled foreign corporations	(50		)	—
Other	194			34
	26,381			40,669
Valuation allowance	(14,504		)	(19,547		)
Total net deferred tax assets	$	11,877		$	21,122

Effective income tax rate

The Company's income tax expense (benefit) relating to income (loss) for the periods presented differs from the amounts that would result from applying the federal statutory rate to that income (loss) as follows:



	Year Ended December 31,
	2017		2016		2015
Statutory federal tax rate	34	%	34	%	34	%
State income taxes, net of federal benefit	(5	)%	2	%	3	%
Non-controlling interest in Heska Imaging US, LLC	1	%	(3	)%	(1	)%
Non-temporary stock option benefit	(30	)%	(7	)%	(1	)%
Other permanent differences	1	%	(1	)%	—	%
Change in tax rate	32	%	—	%	(1	)%
Change in valuation allowance	16	%	—	%	(14	)%
Other	—	%	1	%	15	%
Effective income tax rate	49	%	26	%	35	%