INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2018

Components of Income Tax Expense

The components of income tax expense from our wholly owned operations and investments and our controlling interest in joint ventures with Carrier are as follows:

Years Ended December 31,	2018		2017			2016
U.S. Federal	$	54,345	$	69,079		$	86,719
State		11,631		10,643			9,801
Foreign		6,837		10,499			9,416
	$	72,813	$	90,221		$	105,936
Current	$	64,523	$	100,956		$	103,216
Deferred		8,290		(10,735	)		2,720
	$	72,813	$	90,221		$	105,936

Reconciliation of Effective Income Tax Rate

Following is a reconciliation of the effective income tax rate:

Years Ended December 31,	2018			2017			2016
U.S. federal statutory rate		21.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit and other		3.6			2.4			2.3
Excess tax benefits from share-based compensation		(2.0	)		(2.7	)		(1.0	)
Tax effects on foreign income		0.5			(1.0	)		(0.1	)
GILTI		0.3			—			—
Tax credits and other		—			(0.6	)		(0.2	)
Repatriation transition tax		(0.9	)		3.0			—
Deferred tax impact of enacted tax rate changes		0.3			(6.3	)		—
Effective income tax rate attributable to Watsco, Inc.		22.8			29.8			36.0
Taxes attributable to non-controlling interest		(3.1	)		(3.8	)		(5.0	)
Effective income tax rate		19.7	%		26.0	%		31.0	%

Significant Components of Net Deferred Tax Liabilities

The following is a summary of the significant components of our net deferred tax liabilities:

December 31,	2018			2017
Deferred tax assets:
Share-based compensation	$	21,517		$	18,977
Capitalized inventory costs and inventory reserves		2,151			2,107
Allowance for doubtful accounts		1,057			929
Self-insurance reserves		206			153
Other		2,486			2,423
Net operating loss carryforwards		484			291
		27,901			24,880
Valuation allowance		—			—
Total deferred tax assets		27,901			24,880
Deferred tax liabilities:
Deductible goodwill		(69,600	)		(67,246	)
Depreciation		(10,695	)		(5,519	)
Other		(8,516	)		(5,189	)
Total deferred tax liabilities		(88,811	)		(77,954	)
Net deferred tax liabilities (1)	$	(60,910	)	$	(53,074	)

(1) Net deferred tax liabilities have been included in the consolidated balance sheets in deferred income taxes and other liabilities.

Changes in Gross Unrecognized Tax Benefits

The changes in gross unrecognized tax benefits are as follows:

Balance at December 31, 2015	$	3,513
Additions based on tax positions related to the current year		547
Reductions due to lapse of applicable statute of limitations and tax assessments		(365	)
Balance at December 31, 2016		3,695
Additions based on tax positions related to the current year		801
Reductions due to lapse of applicable statute of limitations		(271	)
Balance at December 31, 2017		4,225
Additions based on tax positions related to the current year		960
Reductions due to lapse of applicable statute of limitations		(283	)
Balance at December 31, 2018	$	4,902