Income Taxes

We recognize a liability or an asset for the deferred tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. These temporary differences will result in taxable or deductible amounts in future years when reported amounts of the assets or liabilities are recovered or settled. The deferred tax assets are periodically reviewed for recoverability.

There were no uncertain tax positions in fiscal 2016, 2015 and 2014.

At May 31, 2016 and 2015, we did not have any accrual for interest and penalties.

We are subject to taxation in the U.S., as well as various states and foreign jurisdictions. We have substantially settled all income tax matters for the United States federal jurisdiction for years through fiscal 2011. Major state jurisdictions have been examined through fiscal 2004 and 2005, and foreign jurisdictions have not been examined for their respective initial statutory periods of approximately 3 years.

For financial reporting purposes, income before income taxes comprised the following as of May 31:



	2016			2015		2014
Domestic	$	8,991		$	24,203	$	30,907
Foreign	(1,204		)	447		1,619
	$	7,787		$	24,650	$	32,526

The income tax provision consisted of the following for the fiscal years ended May 31:



	2016			2015			2014
Current
Federal	$	4,228		$	11,636		$	18,007
State	556			1,355			1,720
Foreign	95			387			319
Deferred
Federal	(1,285		)	(3,626		)	(7,553		)
State	(277		)	(248		)	(500		)
Foreign	(314		)	(286		)	125
	$	3,003		$	9,218		$	12,118

The following reconciles the statutory federal income tax rate to the effective tax rate for the fiscal years ended May 31:



	2016		2015		2014
Statutory federal rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	2.3		2.9		2.5
Foreign tax credit/refund	(3.0	)	(0.8	)	(0.6	)
Permanent differences resulting from valuation allowances	3.6		0.6		0.3
Other	0.7		(0.3	)	0.1
Effective tax rate	38.6	%	37.4	%	37.3	%

The higher tax rate in fiscal 2016 is primarily due to higher losses in our China operations for which we receive no tax benefit and lower consolidated pretax income. Our effective tax rate remained consistent between fiscal 2015 and fiscal 2014.

The tax effects of temporary differences that gave rise to significant portions of the net deferred tax liabilities consisted of the following at May 31:



	2016			2015
Deferred tax assets:
Allowance for doubtful accounts	$	130		$	113
Deferred compensation and benefits	5,193			4,588
Net operating losses	681			398
Valuation allowance	(681		)	(398		)
Other	1,640			1,890
	6,963			6,591
Deferred tax liabilities:
Accumulated depreciation	(41,392		)	(42,505		)
Deferred taxes on bargain purchase	(1,189		)	(1,583		)
Intangible asset	(158		)	(155		)
Net deferred tax liabilities	$	(35,776	)	$	(37,652	)

We determined that a valuation allowance was required in fiscal 2016, 2015 and 2014 of $681, $398 and $254, respectively, for our deferred tax assets related to certain foreign net operating loss carry forwards, which, if unused, will expire between fiscal 2017 and 2021. The change in the valuation allowance for fiscal 2016 as compared to fiscal 2015 was due to higher loss in China and lower consolidated pretax income. The change in the valuation allowance for fiscal 2015 and 2014 was not significant. As of May 31, 2016, 2015 and 2014, U.S. income taxes had not been assessed on approximately $7,322, $7,574 and $6,303, respectively, of undistributed earnings of foreign subsidiaries because we consider these earnings to be invested indefinitely.

We consider the undistributed earnings of our foreign subsidiaries as of May 31, 2016, to be indefinitely reinvested and, accordingly, no U.S. income taxes have been provided thereon. As of May 31, 2016, the amount of cash associated with indefinitely reinvested foreign earnings was approximately $5,702. We have not, nor do we anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.