Income tax for 2016 and 2015 consisted of an expense of $93 and a benefit of $12, respectively, of federal and state income taxes.

The actual expense differs from the expected tax provision (benefit) as computed by applying the U.S. federal statutory income tax rate of 34 percent for 2016 and 2015, as follows:

	2016	2015

Income tax provision (benefit) at U.S. federal statutory rate	$624	$(440)
State tax provision (benefit), net of federal income tax	48	14
Change in valuation allowance attributable to operations	(936)	(4,146)
Change in effective tax rate	-	4,064
Pension settlement	(213)	466
Adjustments to federal tax carryforwards / deductions	548	-
Other, net	22	30
Income tax provision (benefit)	$93	$(12)

The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities as of December 31, 2016 and 2015 are as follows:

	2016	2015

Property and equipment, principally due to differences in depreciation	$(643)	$(722)
Inventory reserves and other inventory-related temporary basis differences	614	696
Warranty, vacation, deferred rent and other liabilities	687	883
Retirement liabilities	1,032	1,088
Net operating loss carryforwards	62,484	62,194
Credit carryforwards	36	817
Other	1,037	1,227
Total deferred income tax	65,247	66,183
Less valuation allowance	(65,247)	(66,183)
Net deferred income tax	$-	$-

	2016	2015

United States	$1,836	$(1,296)
International	-	-
Total	$1,836	$(1,296)

	2016	2015
Current
U.S. federal	$10	$-
State	83	(12)
Total current expense (benefit)	$93	$(12)
Deferred
U.S. federal	$937	$4,068
State	(1)	78
Total	936	4,146
Valuation allowance increase	(936)	(4,146)
Total deferred expense (benefit)	-	-

Total income tax expense (benefit)	$93	$(12)

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

E&S has total federal net operating loss carryforwards of approximately $169,300 which expire from 2020 through 2036. The Company has federal minimum tax credit carryforwards of approximately $36 which do not expire. The Company has $3,200 of federal research credits that begin to expire in 2019 and $2,400 of state research credits that begin to expire in 2017. The Company has not recorded a benefit for these research credits in the financial statements because it does not meet the more-likely-than-not position recognition threshold. E&S also has state net operating loss carryforwards of approximately $149,300 that expire at various dates depending on the rules of the states to which the loss or credit is allocated.

The Company evaluates its deferred tax assets for realizability based on all of the available positive and negative evidence. Due to cumulative losses and the significance of the carryforwards, the Company determined that it is more likely than not that the deferred tax assets will not be realized. Accordingly, a valuation allowance has been established to offset the net deferred tax assets. During the years ended December 31, 2016 and 2015, the valuation allowance on deferred tax assets decreased by $936 and $4,146, respectively.

Pursuant to the guidelines of the recently issued ASU 2015-17 ("the Update"), all deferred tax assets and liabilities are to be classified as non-current. The effective date of the Update for public companies is for annual periods beginning after December 15, 2016 and later dates for all other entities. Early adoption is permitted. To comply with the guidance, the Company elected to adopt this Update for the annual period ending December 31, 2016. The guidance indicates that the Update may be applied either prospectively or retrospectively. The Company chose to apply the Update prospectively.

The Company is subject to audit by the IRS and various states for tax years dating back to 2013. No federal or state tax return are currently under audit. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.