INCOME TAXES

The domestic and foreign components of income (loss) before taxes for our operations consist of the following for the years ended December 31:



	2019		2018		2017
Domestic	$	33,837	$	9,399	$	(5,942	)
Foreign	22,865		25,208		(9,342		)

Total income (loss) before income taxes	$	56,702	$	34,607	$	(15,284	)

The components of the provision (benefit) for income taxes consist of the following for the years ended December 31:



	2019			2018			2017
Current – Federal	$	4,543		$	444		$	946
Current – State	557			371			91
Current – Foreign	13,272			6,972			3,088

Current income tax expense	18,372			7,787			4,125

Deferred – Federal	1,770			98			(393		)
Deferred – State	(290		)	—			(5		)
Deferred -– Foreign	2,809			(3,751		)	(158		)

Deferred income tax expense (benefit)	4,289			(3,653		)	(556		)

Income tax provision	$	22,661		$	4,134		$	3,569

Our deferred tax assets and liabilities consist of the following at December 31:



	2019			2018
Deferred tax assets:
Net operating loss carryforward	$	9,138		$	8,843
Inventory differences	721			695
Equity compensation	1,203			952
Investment in subsidiaries	2,300			2,861
Restructuring	7			12
Purchased goodwill	1,807			2,516
Accrued employee compensation and benefits	2,945			1,459
Lease liabilities	2,259			—
Other, net	134			57
Gross deferred tax assets	20,514			17,395
Less valuation allowances	(9,680		)	(9,143		)
Total deferred tax assets	10,834			8,252

Deferred tax liabilities:
Purchased intangible assets and goodwill	(987		)	(1,566		)
Depreciation and amortization	(7,366		)	(2,783		)
Right of use assets	(1,997		)	—
Other, net	(434		)	(281		)
Total deferred tax liabilities	(10,784		)	(4,630		)

Net deferred tax assets	$	50		$	3,622

As of December 31, 2019, we had loss carryforwards for tax purposes totaling approximately $60,834, comprised of $53,411 foreign and $7,423 domestic state loss carryforwards, which will be available to offset future taxable income in certain jurisdictions. Certain losses can be carried forward indefinitely, while the remainder generally have carryforward periods of 5 to 20 years, depending on jurisdiction. We have analyzed the net operating losses and placed valuation allowances on those where we have determined the realization is not more likely than not to occur.

We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use existing deferred tax assets. Additionally, a three-year cumulative loss at a Consolidated Financial Statement level may be viewed as negative evidence impacting a jurisdiction that by itself is not in a three-year cumulative loss position. At December 31, 2018, the Company was no longer in a consolidated three-year cumulative loss position. Accordingly, we evaluated deferred tax assets at the jurisdictional level and released valuation allowances of $5,818 in jurisdictions where we believe sufficient future taxable income will be generated to use existing deferred tax assets. We continue to record valuation allowances against deferred tax assets where we do not believe sufficient future taxable income will be generated to use existing deferred tax assets. Accordingly, in 2019 we recorded a net increase of $537 to the valuation allowance comprised of changes principally in Germany and Russia. The amount of the deferred tax assets considered realizable, however, could be adjusted in future periods if positive evidence such as current and expected future taxable income outweighs negative evidence.

A reconciliation of our income tax provision computed by applying the Federal statutory income tax rate of 21% in 2019 and 2018 and 35% in 2017 to income before taxes is as follows for the years ended December 31:



	2019			2018			2017
Statutory U.S. federal income tax	$	11,907		$	7,268		$	(5,350	)
U.S. state income tax, net of federal benefit	492			430			305
U.S. TCJA - net impact	—			(604		)	4,435
Foreign rate differential	4,257			3,054			(1,728		)
Tax audit adjustments	—			(11		)	426
Equity compensation	(1,469		)	(156		)	(52		)
Deemed repatriation of foreign earnings	187			281			—
Impairment of goodwill				—			239
Non-deductible penalties	—			1,686			1
DynaEnergetics Siberia shut down	6,193			—			—
Other	561			1,046			(95		)
Change in valuation allowances	533			(8,860		)	5,388

Provision for income taxes	$	22,661		$	4,134		$	3,569

The Tax Cuts and Jobs Act (“TCJA”) was enacted in December 2017. Among other things, the TCJA reduced the U.S. federal corporate tax rate from 35% to 21% beginning in 2018, required companies to pay a one-time transition tax on unremitted earnings of non-U.S. subsidiaries that were previously tax deferred, and created new taxes on certain foreign sourced earnings.

We recorded a provisional obligation and additional income tax expense of $946 in 2017, which was reduced to $343 in 2018 in response to additional guidance received from the Internal Revenue Service (“IRS”) and upon completion of certain E&P calculations. There were no additional changes in the fourth quarter of 2018 to the amount previously calculated. The Company has elected to pay this liability over eight years. As of December 31, 2019, we reflected $233 in other long term liabilities.

DMC files income tax returns in the U.S. federal jurisdiction, as well as various U.S. state and foreign jurisdictions. During the fourth quarter, our German operating entities commenced a tax audit for fiscal years 2015 through 2017. If any issues addressed in the audit are resolved in a manner not consistent with our expectations, the Company could be required to adjust its provision for income taxes in future periods.

DMC’s U.S. federal tax returns are open for examination for the tax years 2016 onward. Most of DMC’s state tax returns remain open to examination for the tax years 2015 onward. DMC’s foreign tax returns generally remain open to examination for the tax years 2015 onward, depending on jurisdiction.

At December 31, 2019 and 2018, the balance of unrecognized tax benefits was zero. We recognize interest and penalties related to uncertain tax positions in operating expense. As of December 31, 2019 and 2018, our accrual for interest and penalties related to uncertain tax positions was zero.

The TCJA provides that foreign earnings generally can be repatriated to the U.S. without federal tax consequence. We have reassessed the assertion that cumulative earnings by our foreign subsidiaries are indefinitely reinvested. We continue to permanently reinvest the earnings of our international subsidiaries and therefore we do not provide for U.S. income taxes or withholding taxes that could result from the distribution of those earnings to the U.S. parent. If any such earnings were ultimately distributed to the U.S. in the form of dividends or otherwise, or if the shares of our international subsidiaries were sold or transferred, we could be subject to additional U.S. federal and state income taxes. Due to the multiple avenues in which earnings can be repatriated, and because a large portion of these earnings are not liquid, it is not practical to estimate the amount of additional taxes that might be payable on these amounts of undistributed foreign income.