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:



	2018			2017
Income (loss) before income tax provision (benefit)
Domestic	$	45,170		$	31,454
Foreign	(3,007		)	(2,352		)
	$	42,163		$	29,102
Income tax provision (benefit)
Current income tax provision (benefit):
Federal	$	(2,296	)	$	(3,885	)
State	393			435
Total current	(1,903		)	(3,450		)
Deferred income tax provision (benefit):
Federal	8,585			6,588
State	696			(2,499		)
Total deferred	9,281			4,089
	$	7,378		$	639

The Company made income tax payments related to continuing operations of $0.5 million and $5.2 million during 2018 and 2017, respectively. During the same periods, income tax refunds totaled $0.1 million and $0.3 million, respectively.

During 2017, the U.S. government enacted the Tax Cuts and Jobs Act (“TCJA”), which significantly revised U.S. tax law. Effective January 1, 2018, the TCJA positively impacted the Company’s ongoing effective income tax rate due to the reduction of the U.S. corporate tax rate from 35 percent to 21 percent. In addition, 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.

As a result of the TCJA, the Company recorded a discrete net tax benefit of $3.1 million in the year ended December 31, 2017. This net benefit is attributable to the corporate rate reduction on existing deferred tax assets and liabilities.

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



	2018			2017
Income from continuing operations before income tax provision	$	42,163		$	29,102
Statutory taxes at 21.0% and 35.0%, respectively	$	8,854		$	10,186
State and local income taxes	1,241			493
Valuation allowances	640			(1,453		)
Non-deductible expenses	663			224
Percentage depletion	(4,199		)	(6,253		)
R&D and other federal credits	(37		)	301
Effect of the TCJA	—			(3,132		)
Other, net	216			273
Income tax provision from continuing operations	$	7,378		$	639
Effective income tax rate from continuing operations	17.5		%	2.2		%

The Company applied 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 in 2017. As a result of the spin-off of HBBHC during 2017, the Company used the “with and without” approach to compute total income tax expense for 2017. 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 bases of assets and liabilities follows:



	December 31
	2018			2017
Deferred tax assets
Tax carryforwards	$	19,058		$	22,035
Inventories	2,041			1,878
Accrued expenses and reserves	9,860			11,723
Other employee benefits	4,892			4,640
Other	9,347			8,933
Total deferred tax assets	45,198			49,209
Less: Valuation allowance	14,219			13,579
	30,979			35,630
Deferred tax liabilities
Depreciation and depletion	27,299			23,029
Partnership investment - development costs	5,146			4,069
Accrued pension benefits	1,380			2,570
Total deferred tax liabilities	33,825			29,668
Net deferred (liability) asset	$	(2,846	)	$	5,962

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, 2018
	Net deferred tax asset		Valuation allowance		Carryforwards expire during:
Non-U.S. net operating loss	$	2,340	$	2,340	2024-2026
State losses	16,624		13,182		2019-2038
Research credit	1,198		—		2034-2038
Alternative minimum tax credit	2,310		—		(1)
Total	$	22,472	$	15,522



	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.

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.

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 2013-2016 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.

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, 2018 and 2017. Approximately $1.1 million and $0.8 million of these gross amounts as of December 31, 2018 and 2017, 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.



	2018		2017
Balance at January 1	$	997	$	915
Additions based on tax positions related to prior years	283		—
Additions based on tax positions related to the current year	—		82
Balance at December 31	$	1,280	$	997

The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The Company recognized net expense of less than $0.1 million in interest and penalties related to uncertain tax positions during 2018 and 2017, respectively. The total amount of interest and penalties accrued was $0.1 million and $0.1 million as of December 31, 2018 and 2017, 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.