Income Taxes

The components of income (loss) from continuing operations before income tax provision (benefit) and the income tax provision (benefit) for the years ended December 31 are as follows:



	2017			2016			2015
Income (loss) before income tax provision (benefit)
Domestic	$	31,454		$	(4,251	)	$	(4,894	)
Foreign	(2,352		)	(2,442		)	(2,343		)
	$	29,102		$	(6,693	)	$	(7,237	)
Income tax provision (benefit)
Current income tax provision (benefit):
Federal	$	(3,885	)	$	(20,847	)	$	(4,526	)
State	435			288			278
Total current	(3,450		)	(20,559		)	(4,248		)
Deferred income tax provision (benefit):
Federal	6,588			10,935			(6,230		)
State	(2,499		)	(25		)	968
Total deferred	4,089			10,910			(5,262		)
	$	639		$	(9,649	)	$	(9,510	)

The Company made income tax payments from continuing operations of $5.2 million, $0.4 million and $9.0 million during 2017, 2016 and 2015, respectively. During the same periods, income tax refunds totaled $0.3 million, $2.4 million and $0.1 million, respectively.

On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (“TCJA”), which significantly revises U.S. tax law. The TCJA will positively impact the Company’s ongoing effective tax rate due to the reduction of the U.S. corporate tax rate from 35 percent to 21 percent, effective January 1, 2018.

In addition to the reduction of the U.S. federal corporate tax rate mentioned above, other significant changes to existing tax law include (1) elimination of the alternative minimum tax regime for corporations; (2) limitations on the deductibility of certain executive compensation for publicly traded companies; (3) accelerated expensing of capital investment, subject to phase-out beginning in 2023; (4) a new limitation on deductible interest expense; and (5) changes in utilization of net operating losses generated after December 31, 2017, specifically, elimination of ability to carryback losses against prior years’ income, limited to offsetting 80 percent of taxable income in the year of utilization, and may be indefinitely carried forward to future tax years.

Subsequent to the enactment of the TCJA, the SEC staff issued Staff Accounting Bulletin 118 (“SAB 118”), which provides a measurement period of up to one year after the enactment date for companies to finalize the recognition of the income tax effects of the TCJA.

As a result of the TCJA and pursuant to SAB 118, the Company has provisionally recorded a discrete net tax benefit of $3.1 million in the period ending December 31, 2017. This net benefit is attributable to the corporate rate reduction on existing deferred tax assets and liabilities. The Company has also provisionally recorded $0 for sequestration on refundable alternative minimum tax credits, as the Company expects to use the available credits to offset tax liability so that sequestration would not apply. Further, the Company has provisionally recorded $0 for excess executive remuneration expense disallowance of its long-term incentive plan payments in future years, as the covered employee recipients are not expected to exceed the $1 million disallowance threshold. The ultimate impact of TCJA may differ from these provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions, additional regulatory guidance that may be issued, and the computation of state income taxes as there is uncertainty on conformity to the federal tax system following the TCJA. The Company expects it will be able to finalize these provisional amounts at the time it files its 2017 federal income tax return in the fourth quarter of 2018.

A reconciliation of the federal statutory and effective income tax rate from continuing operations for the years ended December 31 is as follows:



	2017			2016			2015
Income (loss) from continuing operations before income tax provision (benefit)	$	29,102		$	(6,693	)	$	(7,237	)
Statutory taxes (benefit) at 35.0%	$	10,186		$	(2,343	)	$	(2,533	)
State and local income taxes	493			(1,676		)	(1,332		)
Valuation allowances	(1,453		)	2,432			2,480
Non-deductible expenses	224			1,334			424
Percentage depletion	(6,253		)	(6,373		)	(8,406		)
R&D and other federal credits	301			278			(896		)
Tax settlements	74			(3,161		)	551
Provisional effect of the TCJA	(3,132		)	—			—
Other, net	199			(140		)	202
Income tax provision (benefit)	$	639		$	(9,649	)	$	(9,510	)
Effective income tax rate from continuing operations	2.2		%	144.2		%	131.4		%

The Company applies the intraperiod tax allocation rules as described in ASC 740-20 “Intraperiod Tax Allocation” to allocate the provision for income taxes between continuing operations and discontinued operations. As a result of the spin-off of HBBHC, the Company used the “with and without” approach to compute total tax income expense (benefit). The Company calculated income tax expense from all financial statement components (continuing operations and discontinued operations), the “with” approach, and compared that to the income tax expense (benefit) attributable to continuing operations, the “without” approach. The difference between the “with” and “without” was allocated to discontinued operations. While intraperiod tax allocations do not change the overall tax provision, it resulted in a gross-up of the individual components, thereby changing the amount of tax provision included in each category of income.

A detailed summary of the total deferred tax assets and liabilities in the Company's Consolidated Balance Sheets resulting from differences in the book and tax basis of assets and liabilities follows:



	December 31
	2017		2016
Deferred tax assets
Tax carryforwards	$	22,035	$	21,527
Inventories	1,878		3,389
Accrued expenses and reserves	11,723		18,750
Partnership investment - development costs	—		3,719
Other employee benefits	4,640		5,130
Other	8,933		14,737
Total deferred tax assets	49,209		67,252
Less: Valuation allowance	13,579		12,881
	35,630		54,371
Deferred tax liabilities
Depreciation and depletion	23,029		42,512
Partnership investment - development costs	4,069		—
Accrued pension benefits	2,570		983
Total deferred tax liabilities	29,668		43,495
Net deferred asset	$	5,962	$	10,876

The following table summarizes the tax carryforwards and associated carryforward periods and related valuation allowances where the Company has determined that realization is uncertain:



	December 31, 2017
	Net deferred tax asset		Valuation allowance		Carryforwards expire during:
Non-U.S. net operating loss	$	1,438	$	1,438	2024-2025
State losses	16,948		13,054		2018-2037
Research credit	1,870		—		2034-2037
Alternative minimum tax credit	5,335		—		(1)
Total	$	25,591	$	14,492

(1) The TCJA repealed the corporate alternative minimum tax for tax years beginning after December 31, 2017. This credit is refundable in 2021, if not fully utilized prior to 2021.



	December 31, 2016
	Net deferred tax asset		Valuation allowance		Carryforwards expire during:
Non-U.S. net operating loss	$	732	$	732	2024
State losses	15,299		13,350		2017-2036
Research credit	2,754		—		2034-2036
Alternative minimum tax credit	8,035		—		Indefinite
Total	$	26,820	$	14,082

The Company has a valuation allowance for certain state and foreign deferred tax assets. Based upon the review of historical earnings and the relevant expiration of carryforwards, including utilization limitations in the various state taxing jurisdictions, the Company believes the valuation allowances are appropriate and does not expect to release valuation allowances within the next twelve months that would have a significant effect on the Company's financial position or results of operations.

The tax returns of the Company and certain of its subsidiaries are under routine examination by various taxing authorities. The Company has not been informed of any material assessment for which an accrual has not been previously provided and the Company would vigorously contest any material assessment. Management believes any potential adjustment would not materially affect the Company's financial condition or results of operations.

The following is a reconciliation of the Company's total gross unrecognized tax benefits, defined as the aggregate tax effect of differences between tax return positions and the benefits recognized in the financial statements for the years ended December 31, 2017 and 2016. Approximately $0.8 million and $0.8 million of these gross amounts as of December 31, 2017 and 2016, respectively, relate to permanent items that, if recognized, would impact the effective income tax rate. This amount differs from the gross unrecognized tax benefits presented in the table below due to the decrease in U.S. federal income taxes which would occur upon the recognition of the state tax benefits included herein.



	2017		2016			2015
Balance at January 1	$	915	$	3,671		$	3,285
Additions based on tax positions related to prior years	—		181			(256		)
Additions based on tax positions related to the current year	82		211			642
Reductions due to settlements with taxing authorities	—		(1,330		)	—
Reductions due to lapse of the applicable statute of limitations	—		(1,818		)	—
Balance at December 31	$	997	$	915		$	3,671

The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The Company recognized net (benefit)/expense of $(0.7) million and $0.2 million in interest and penalties related to uncertain tax positions during 2016 and 2015, respectively. The total amount of interest and penalties accrued was $0.1 million and $0.1 million as of December 31, 2017 and 2016, respectively.

The Company expects the amount of unrecognized tax benefits will change within the next 12 months; however, the change in unrecognized tax benefits, which is reasonably possible within the next 12 months, is not expected to have a significant effect on the Company's financial position, results of operations or cash flows.

In general, the Company operates in taxing jurisdictions that provide a statute of limitations period ranging from three to five years for the taxing authorities to review the applicable tax filings. The examination of the 2013-2015 U.S. federal tax returns is ongoing. The Company does not have any additional material taxing jurisdictions in which the statute of limitations has been extended beyond the applicable time frame allowed by law.