(Benefit)/provision for income taxes during the years ended September 30, 2018 and 2017 follows:



	Years Ended
Income Tax Provision	September 30, 2018			September 30, 2017
(in thousands)
Current tax:
State	$	6		$	53
Federal	12			9

Deferred tax:
State	(103		)	—
Federal	5,088			—
Valuation allowance	(13,840		)	—
(Benefit)/provision for income taxes	$	(8,837	)	$	62

Differences between the federal statutory rate and IEC’s effective tax rates for fiscal 2018 and fiscal 2017 are explained by the following reconciliation.



	Years Ended
Taxes as Percent of Pretax Income	September 30, 2018		September 30, 2017

Federal statutory rate	24.2	%	34.0	%

Decrease in valuation allowance	(880.0	)	(164.4	)
Deferred tax adjustment	(21.2	)	65.8
Decrease in state deferred tax rate	(6.6	)	—
State income taxes, net of federal benefit	0.4		26.8
Rate change due to Tax Reform	316.6		—
Stock-based compensation	7.3		57.6
Non-deductible expenses	0.6		23.5
Other	(3.2	)	—

Income tax provision as percent of pretax income	(561.9	)%	43.3	%

The following table displays deferred tax assets by category:



	As of
	September 30, 2018			September 30, 2017
(in thousands)
Deferred tax assets:
Federal and state net operating loss carryforward	$	6,366		$	11,367
Alternative minimum tax credit carryforward	1,031			1,010
Depreciation and fixed assets	306			289
Amortization and impairment of intangibles	27			28
New York State investment tax and other credits	1,308			1,186
Inventories	382			585
Deferred gain on sale-leaseback	431			271
Other	312			412
Total before allowance	10,163			15,148
Valuation allowance	(1,308		)	(15,148		)
Deferred tax assets, net	$	8,855		$	—

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, lowering U.S. corporate income tax rates and implementing a territorial tax system. As the Company has a September 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal tax rate of approximately 24.2% for fiscal 2018, and 21% for subsequent fiscal years. The Tax Act eliminates the domestic manufacturing deduction and moves to a territorial system. In addition, previously paid federal AMT will now be refundable regardless of whether there is future income tax liability before AMT credits.

The Company has concluded that the Tax Act has caused the Company’s U.S. deferred tax assets and liabilities to be revalued. Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their reported basis in the financial statements that will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are revalued and any change is adjusted through the provision for income tax expense in the reporting period of the enactment. As of September 30, 2018, the Company has completed its analysis of the impact of the Tax Act under SAB 118.

For the year ended September 30, 2018, the impact of the Tax Act resulted in the Company recording a tax expense of approximately $4.7 million due to the change in the tax rate. This was offset by a corresponding decrease to the valuation allowance of approximately $5.8 million, resulting in a net tax benefit of approximately $1.0 million related to the release of the valuation allowance on the Company’s AMT credits.

As of September 30, 2018, the Company’s deferred tax assets were primarily the result of U.S. federal net operating loss carryforwards (“NOLs”) and tax credit carryforwards. A valuation allowance of $1.3 million and $15.1 million was recorded against our gross deferred tax asset balance as of September 30, 2018, and September 30, 2017, respectively. During the year ended September 30, 2018, management evaluated both positive and negative evidence to consider the reversal of the valuation allowance on the Company's net deferred income tax assets and determined in the fourth quarter of fiscal 2018 that there was sufficient positive evidence to conclude that it is more likely than not that the Company's deferred income tax assets are realizable. As a result, in the fourth quarter of fiscal 2018 the Company recorded a $7.8 million income tax benefit to release most of the valuation allowance against the Company's net deferred income tax assets.

Management performs an assessment of positive and negative evidence regarding the realization of the Company's net deferred income tax assets as required by ASC 740. For the year ended September 30, 2017, we determined that a valuation allowance was needed for all of our net deferred income tax assets, based on the required weight of positive and negative evidence under ASC 740, including consideration of the Company's three-year cumulative losses at that time.

IEC has NOLs for income tax purposes of approximately $29.7 million at September 30, 2018, expiring mainly in years 2022 through 2025 and 2031 through 2035. The Company also has additional state NOLs available in several jurisdictions in which it files.

Recent New York state corporate tax reform has resulted in the reduction of the business income base rate for qualified manufacturers in New York state to 0% beginning in fiscal 2016 for IEC. At September 30, 2018, the Company had $1.6 million of New York State investment tax and other credit carryforwards, expiring in various years through 2031. The credits cannot be utilized unless the New York state tax rate is no longer 0%, and as such, the Company has recorded a valuation allowance against the full amount of these credit carryforwards (net of the federal benefit).