Income Taxes

The provision for income taxes consisted of the following:



	For the years ended
(dollars in thousands)	December 31, 2017			December 31, 2016			December 31, 2015
Current tax provision:
Federal	$	91,762		$	57,605		$	60,826
State	12,274			6,933			7,164
Foreign	66			41			11
Total current provision	104,102			64,579			68,001

Deferred tax provision:
Federal	(6,833		)	9,391			(9,855		)
State	2,532			2,644			(2,216		)
Foreign	(5		)	(47		)	—
Total deferred (benefit) provision	(4,306		)	11,988			(12,071		)
Total provision	$	99,796		$	76,567		$	55,930

Components of income (loss) before income taxes are as follows:



	For the years ended
	December 31, 2017			December 31, 2016			December 31, 2015

United States	$	298,994		$	211,419		$	147,427
Foreign	(5,669		)	(4,611		)	(2,109		)
Total income before income taxes	$	293,325		$	206,808		$	145,318

A reconciliation of the federal statutory rate to our effective rate is as follows:



	For the years ended
	December 31, 2017		December 31, 2016		December 31, 2015

Federal statutory income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal income tax benefit	3.4		3.3		2.5
Non-deductible expenses	0.3		0.7		2.0
Domestic manufacturing deduction	(1.6	)	(1.4	)	(1.3	)
Unrecognized tax benefits	1.3		0.5		0.8
Valuation allowance	—		0.5		0.5
Stock option exercises	(2.6	)	(0.7	)	—
Impact of Tax Act	(1.8	)	—		—
Other	—		(0.9	)	(1.0	)
Total	34.0	%	37.0	%	38.5	%

The Company and its subsidiaries file income tax returns in the United States and various state and local, and foreign jurisdictions.

In the normal course of business, the Company is subject to examination by taxing authorities and as of December 31, 2017, the Company's 2012 through 2013 income tax returns were being audited by the Internal Revenue Service ("IRS”). There are also various state tax examinations in progress primarily attributable to state nexus matters relating to prior year amended tax returns which have been considered in the Company’s position for uncertain tax benefits. In general, tax years 2011 through 2017 are subject to an examination for U.S. Federal and tax years 2011 through 2017 for some state and local taxing jurisdictions.

As of December 31, 2017, 2016, and 2015 the liability for income taxes associated with uncertain tax positions was $12.4 million, $9.7 million, and $8.7 million, respectively, which if recognized, would affect our effective tax rate. The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits (which excludes federal benefits of state taxes, interest, and penalties):



(dollars in thousands)
Balance at December 31, 2014	$	7,518
Increases in uncertain tax benefits as a result of tax positions taken in the current year	1,845
Decreases in uncertain tax benefits from a lapse of applicable statute of limitations	(156		)
Balance at December 31, 2015	$	9,207
Increases in uncertain tax benefits as a result of tax positions taken in a prior year	287
Increases in uncertain tax benefits as a result of tax positions taken in the current year	1,367
Decreases in uncertain tax benefits from a lapse of applicable statute of limitations	(233		)
Decreases in uncertain tax benefits as a result of tax positions taken in a prior year	(2,028		)
Balance at December 31, 2016	$	8,600
Increases in uncertain tax benefits as a result of tax positions taken in a prior year	1,013
Increases in uncertain tax benefits as a result of tax positions taken in the current year	545
Decreases in uncertain tax benefits from a lapse of applicable statute of limitations	(739		)
Decreases in uncertain tax benefits as a result of tax positions taken in a prior year	(93		)
Balance at December 31, 2017	$	9,326

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. For the years ended December 31, 2017 and 2016, the Company recorded approximately $0.2 million and $0.8 million, respectively, of interest and $1.1 million and $0.4 million, respectively, of penalties related to its unrecognized tax benefits.

Based upon the expiration of statutes of limitations and possible settlements in several jurisdictions, we believe it is reasonably possible that the total amount of previously unrecognized tax benefits may decrease by approximately $0.1 million within twelve months after the year ended December 31, 2017.

Components of deferred tax assets and liabilities were as follows:



(dollars in thousands)	December 31, 2017			December 31, 2016
Deferred tax assets:
Inventories	$	2,010		$	1,440
Accrued liabilities	249			413
Stock-based compensation	1,587			2,544
Long-term incentive plan	849			1,600
State net operating loss carryforwards	317			1,509
Foreign net operating loss carryforwards	2,740			1,380
State tax credits	1,514			1,447
Federal benefit related to uncertain tax positions	1,922			2,724
Other	664			1,057
Deferred tax assets, gross	11,852			14,114
Valuation allowance	(3,489		)	(1,772		)
Total deferred tax assets, net	8,363			12,342

Deferred tax liabilities:
Property, plant, and equipment	(14,910		)	(22,173		)
Other	(496		)	(1,518		)
Total deferred tax liabilities	(15,406		)	(23,691		)

Net deferred tax liabilities	$	(7,043	)	$	(11,349	)

As of December 31, 2017, the Company has Missouri state NOLs of $0.2 million and Connecticut NOLs of $4.7 million; these NOLs begin to expire in 2034, 2027, respectively. The Company also has Connecticut research and development tax credit carryforwards of approximately $0.3 million as of December 31, 2017; these credits will begin to expire in 2026. As of December 31, 2017 the Company has Japan NOLs of $7.8 million, Mexico NOLs of $2.8 million and Canada NOLs of $0.1 million; these NOLs will begin to expire in 2024, 2024 and 2034, respectively.

As of December 31, 2017, the Company had a valuation allowance of $3.5 million to reduce our deferred tax assets to an amount more likely than not to be realized. This valuation allowance relates to state tax credits and foreign net operating losses. In evaluating the Company’s ability to realize its deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. Management also considers the projected reversal of deferred tax liabilities and projected future taxable income in making this assessment. Based upon this assessment, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of valuation allowance. There was a $1.8 million valuation allowance recorded as of December 31, 2016.

The Company has not provided deferred taxes on undistributed earnings from its foreign subsidiaries, as the Company anticipates that these earnings will be reinvested indefinitely. The Company does not currently plan to initiate any action that would result in these earnings being repatriated to fund its U.S. operations.

On December 22, 2017 President Donald Trump signed into law The Tax Cuts and Job Act of 2017 (“Tax Act”). The legislation created many changes in the current tax law. However; the key areas that are expected to impact the Company include: the reduction in the Federal tax rate to 21% effective January 1, 2018, the removal of the Domestic Activities Production Deduction (“DPAD”) effective January 1, 2018, the deemed repatriation of foreign unremitted earnings, and the allowance for 100% bonus depreciation for fixed assets placed in service after September 27, 2017. The Company has revalued its deferred tax liability as of December 31, 2017, and determined that the liability will be reduced by about $5.4 million. This adjustment has been included in tax expense for the period ending December 31, 2017, and impacted the rate by about (1.8%). The Company has also looked at its cumulative foreign earnings in its various subsidiaries and determined that at this time the impact of the deemed repatriation of foreign unremitted earnings is immaterial. Going forward the Company anticipates that the increase in bonus depreciation, removal of DPAD and decrease in the Federal tax rate will impact the company’s tax expense and effective tax rate. The Company expects additional guidance to be issued with respect to the Tax Act in future periods, however, such guidance is not expected to have a material impact on the provisional amount recorded for the year ended December 31, 2017. The Company will continue to monitor such clarifying guidance as issued and reassess the potential impact as necessary in future periods.