Income Taxes

(Loss) earnings before income taxes is comprised of the following amounts:



	For The Years Ended December 31,
(In thousands)	2018			2017		2016
United States	$	(133,462	)	$	40,954	$	80,666

The income tax provision (benefit) is comprised of the following:



	For The Years Ended December 31,
(In thousands)	2018		2017			2016
Current
Federal	$	1,073	$	(16,729	)	$	7,434
State	2,148		933			5,351
Total current	3,221		(15,796		)	12,785
Deferred
Federal	3,569		(36,810		)	15,573
State	3,515		(3,779		)	2,754
Total deferred	7,084		(40,589		)	18,327
Income tax provision (benefit)	$	10,305	$	(56,385	)	$	31,112

The income tax provision or benefit differs from the amount computed by applying the statutory federal income tax rate of 21.0% in 2018 and 35.0% in 2017 and 2016 to earnings before income taxes due to the following:



	For The Years Ended December 31,
(In thousands)	2018			2017			2016
Tax at the statutory rate	$	(28,027	)	$	14,334		$	28,233
Goodwill impairment	40,966			—
Federal rate change	—			(70,055		)	—
State and local taxes, net of federal income tax impact	4,433			(1,201		)	3,046
Federal credits and net operating losses	(10,889		)	(3,158		)	(2,850		)
Stock compensation	712			2,207			—
Other, net¹	3,110			1,488			2,683
Income tax provision (benefit)	$	10,305		$	(56,385	)	$	31,112


¹	Includes $2.9 million of expense associated with the write-off of goodwill as part of our divestiture discussed in Note 4, "Asset Divestiture" for the year ended December 31, 2018.

During 2018, the valuation allowance for deferred tax assets remained comparable to the prior year. In 2017, the valuation allowance for deferred tax assets decreased by $0.7 million compared to 2016.

In March 2016 the FASB issued ASU 2016-09, Improvements to Employee Share Based Payment Accounting. We adopted the standard during the first quarter of 2017. The standard requires all excess tax benefits and deficiencies to be recognized as income tax expense or benefit discretely in the reporting period in which they occur. During 2018 and 2017, we recognized tax expense of $0.7 million and $2.2 million, respectively, for stock based compensation.

We use the flow-through method to account for investment tax credits earned on eligible expenditures. Under this method, the investment tax credits are recognized as a reduction to income tax expense in the year they are earned. During 2018 and 2017, we recognized a benefit of $10.0 million and $2.4 million, respectively, related to energy investment tax credits.

The tax effects of significant temporary differences creating deferred tax assets and liabilities at December 31 were:



(In thousands)	2018			2017
Deferred tax assets:
Employee benefits	$	4,202		$	3,940
Postretirement employee benefits	15,850			17,132
Incentive compensation	4,338			5,194
Inventories	6,227			7,959
Pensions	7,380			2,516
State credit carryforwards	10,705			11,752
State net operating losses	1,987			3,088
Other	5,562			1,949
Total deferred tax assets	$	56,251		$	53,530
Valuation allowance	(3,764		)	(3,733		)
Deferred tax assets, net of valuation allowance	$	52,487		$	49,797
Deferred tax liabilities:
Plant and equipment	$	(161,832	)	$	(153,885	)
Intangible assets	(5,643		)	(7,577		)
Total deferred tax liabilities	(167,475		)	(161,462		)
Net deferred tax liabilities	$	(114,988	)	$	(111,665	)

Net deferred tax assets (liabilities) consist of:



(In thousands)	2018			2017
Non-current deferred tax assets¹	$	6,194		$	6,863
Non-current deferred tax liabilities	(121,182		)	(118,528		)
Net non-current deferred tax liabilities	(114,988		)	(111,665		)
Net deferred tax liabilities	$	(114,988	)	$	(111,665	)


¹	Included in "Other assets, net" on our accompanying December 31, 2018 and 2017 Consolidated Balance Sheets.

Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and our effective tax rate in the future. On December 22, 2017, the United States government enacted the Tax Cuts and Jobs Act which significantly impacted our financial statements. For the year ended December 31, 2017, we recorded a tax benefit for the impact of the Act of approximately $70 million which represents the remeasurement of our net deferred tax liabilities.

We have net investment tax credits associated with state jurisdictions totaling $8.9 million, which expire between 2019 and 2037.

The following presents a roll forward of our unrecognized tax benefits and associated interest and penalties, $2.8 million of which is included in the "Accrued taxes" line item in non-current liabilities in our Consolidated Balance Sheets. The remaining $0.6 million consists of certain tax attributes that are uncertain.



(In thousands)	Gross Unrecognized Tax Benefits, Excluding Interest and Penalties			Interest and Penalties			Total Gross Unrecognized Tax Benefits
Balance at December 31, 2016	$	4,903		$	237		$	5,140
Change in prior year tax positions	(1,149		)	48			(1,101		)
Change in current year tax positions	320			—			320
Balance at December 31, 2017	$	4,074		$	285		$	4,359
Change in prior year tax positions	(560		)	61			(499		)
Reductions as a result of a lapse of the applicable statute of limitations	(645		)	(56		)	(701		)
Change in current year tax positions	280			—			280
Balance at December 31, 2018	$	3,149		$	290		$	3,439

Unrecognized tax benefits net of related deferred tax assets at December 31, 2018, if recognized, would favorably impact our effective tax rate by decreasing our tax provision by $2.8 million. For each of the years ended December 31, 2017 and 2016, if recognized, the balance of unrecognized tax benefits would favorably impact our effective tax rate by $3.6 million and $4.1 million, respectively. We reflect accrued interest related to tax obligations, as well as penalties, in our provision for income taxes. For each of the years ended December 31, 2018, 2017, and 2016, we accrued interest of less than $0.1 million each year in our income tax provision. We recorded no penalties in the years ended December 31, 2018, 2017, and 2016.

The company has certain state benefits related to filing positions taken which have not been recognized on the balance sheet. Although the uncertain tax position was not reflected in the balance sheet as a recorded liability, it is disclosed in the tabular roll forward for unrecognized tax benefits.

We have operations in many states within the U.S. and are subject, at times, to tax audits in these jurisdictions. With a few exceptions, we are no longer subject to U.S. federal, state and local, or foreign income tax examinations by tax authorities for years prior to 2015. We expect that the outcome of any examination will not have a material effect on our consolidated financial statements. Although the timing of resolution of audits is not certain, we evaluate all audit issues in the aggregate, along with the expiration of applicable statutes of limitations, and estimate that it is reasonably possible the total gross unrecognized tax benefits could decrease by approximately $0.7 million within the next 12 months.