INCOME TAXES

12 Months Ended

Dec. 31, 2019

NOTE 9: INCOME TAXES

The Tax Cuts and Jobs Act (TCJA) was enacted in December 2017. The TCJA, among other changes, reduced the U.S. federal corporate income tax rate from 35% to 21%. This resulted in a $301,567,000 revaluation of deferred tax balances which was recognized as a net income tax benefit for the year ended December 31, 2017. Remeasuring certain deferred tax balances through income tax expense that were originally measured through other comprehensive income resulted in stranded tax effects in accumulated other comprehensive income. In the fourth quarter of 2018, we reclassified $29,629,000 of these stranded tax effects from retained earnings to other comprehensive income.

The components of earnings from continuing operations before income taxes are as follows:



in thousands	2019	2018	2017
Earnings from Continuing Operations
before Income Taxes
Domestic	$ 734,025	$ 593,446	$ 346,668
Foreign	23,676	29,844	14,648
Total	$ 757,701	$ 623,290	$ 361,316

Income tax expense (benefit) from continuing operations consists of the following:



in thousands	2019	2018	2017
Income Tax Expense (Benefit) from
Continuing Operations
Current
Federal	$ 31,234	$ 21,111	$ (7,416)
State and local	24,403	15,127	4,661
Foreign	3,304	4,278	3,109
Total	$ 58,941	$ 40,516	$ 354
Deferred
Federal	$ 67,810	$ 59,216	$ (202,184)
State and local	8,660	8,369	(30,052)
Foreign	(213)	(2,652)	(193)
Total	$ 76,257	$ 64,933	$ (232,429)
Total expense (benefit)	$ 135,198	$ 105,449	$ (232,075)

Income tax expense (benefit) differs from the amount computed by applying the federal statutory income tax rate to earnings from continuing operations before income taxes. The sources and tax effects of the differences are as follows:



dollars in thousands	2019		2018		2017
Income tax expense at the federal
statutory tax rate	$ 159,117	21.0%	$ 130,891	21.0%	$ 126,461	35.0%
Expense (Benefit) from
Income Tax Differences
Statutory depletion	(23,006)	-3.0%	(21,733)	-3.5%	(28,995)	-8.0%
State and local income taxes, net of federal
income tax benefit	26,119	3.4%	18,562	3.0%	8,115	2.2%
Share-based compensation	(17,277)	-2.3%	(16,551)	-2.7%	(20,740)	-5.7%
Uncertain tax positions	1,822	0.2%	(6,402)	-1.0%	1,062	0.3%
Revaluation - deferred tax balances	0	0.0%	0	0.0%	(301,567)	-83.5%
AL NOL valuation allowance release	0	0.0%	0	0.0%	(28,827)	-8.0%
Transition tax	0	0.0%	595	0.1%	12,301	3.4%
Research and development credit	(9,490)	-1.3%	0	0.0%	0	0.0%
Other, net	(2,087)	-0.2%	87	0.0%	115	0.1%
Total income tax expense (benefit)/
Effective tax rate	$ 135,198	17.8%	$ 105,449	16.9%	$ (232,075)	-64.2%

Deferred taxes on the balance sheet result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. The components of the net deferred income tax liability at December 31 are as follows:



in thousands	2019	2018
Deferred Tax Assets Related to
Employee benefits	$ 29,996	$ 24,407
Incentive compensation	66,488	62,829
Asset retirement obligations & other reserves	55,033	55,822
State net operating losses	67,354	68,436
Other	44,169	31,294
Total gross deferred tax assets	$ 263,040	$ 242,788
Valuation allowance	(29,650)	(29,680)
Total net deferred tax asset	$ 233,390	$ 213,108
Deferred Tax Liabilities Related to
Property, plant & equipment	$ 590,075	$ 510,604
Goodwill/other intangible assets	238,712	233,471
Other	37,642	36,316
Total deferred tax liabilities	$ 866,429	$ 780,391
Net deferred tax liability	$ 633,039	$ 567,283

Each quarter we analyze the likelihood that our deferred tax assets will be realized. A valuation allowance is recorded if, based on the weight of all available positive and negative evidence, it is more likely than not (a likelihood of more than 50%) that some portion, or all, of a deferred tax asset will not be realized. At December 31, 2019, we have Alabama state net operating loss (NOL) carryforward deferred tax assets of $64,778,000, against which we have a valuation allowance of $29,183,000. At this time, we do not expect any future adjustment to this valuation allowance. The Alabama NOL carryforward, if not utilized, would expire between 2023 and 2032.

Changes in our liability for unrecognized tax benefits for the years ended December 31 are as follows:



in thousands	2019	2018	2017
Unrecognized tax benefits as of January 1	$ 3,661	$ 11,643	$ 10,828
Increases for tax positions related to
Prior years	273	0	27
Current year	3,224	698	1,039
Decreases for tax positions related to
Prior years	0	(655)	(204)
Expiration of applicable statute of limitations	(1,716)	(8,025)	(47)
Unrecognized tax benefits as of December 31	$ 5,442	$ 3,661	$ 11,643

We classify interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense. Interest and penalties recognized as income tax expense (benefit) were $(11,000) in 2019, $(1,477,000) in 2018 and $420,000 in 2017. The balance of accrued interest and penalties included in our liability for unrecognized tax benefits as of December 31 was $301,000 in 2019, $312,000 in 2018 and $1,789,000 in 2017. Our liability for unrecognized tax benefits at December 31 in the table above include $5,292,000 in 2019, $3,481,000 in 2018 and $10,673,000 in 2017 that would affect the effective tax rate if recognized. We anticipate no single tax position generating a significant increase in our liability for unrecognized tax benefits within 12 months of this reporting date.

As of December 31, 2019, income tax receivables of $299,000 are included in other current assets in the accompanying Consolidated Balance Sheet. There were similar receivables of $922,000 recorded in other accounts and notes receivable as of December 31, 2018.