The Company provides for income taxes and the related accounts under the asset and liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to be in effect during the year in which the basis differences reverse. Valuation allowances are established when management determines it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.


	2020		2019
Income (loss) before income tax provision (benefit)
Domestic	$	13,990	$	40,742
Foreign	268		2,657
	$	14,258	$	43,399
Income tax provision (benefit)
Current income tax provision (benefit):
Federal	$	(7,859)	$	(6,473)
State	(408)		939
Foreign	215		603
Total current	(8,052)		(4,931)
Deferred income tax provision:
Federal	7,847		8,125
State	(330)		573

Total deferred	7,517		8,698
	$	(535)	$	3,767

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before the provision for income taxes. A reconciliation of the federal statutory and effective income tax rate for the years ended December 31 is as follows:


	2020			2019
Income before income tax provision	$	14,258		$	43,399
Statutory taxes at 21.0%	$	2,994		$	9,114
State and local income taxes	(626)			1,129
Non-deductible expenses	426			736
Percentage depletion	(3,744)			(4,451)
R&D and other federal credits	(367)			(255)
Settlements and uncertain tax positions	6,286			(2,377)
Coronavirus Aid, Relief, and Economic Security ("CARES") Act - carryback rate differential	(4,741)			—
Other, net	(763)			(129)
Income tax provision	$	(535)		$	3,767
Effective income tax rate	(3.8)		%	8.7		%

The Company recorded an income tax benefit of $0.5 million for the year ended December 31, 2020 on income before income tax of $14.3 million, or (3.8%), compared to income tax expense of $3.8 million on income before income tax of $43.4 million, or 8.7%, for the year ended December 31, 2019. The year ended December 31, 2020 includes $7.3 million of discrete tax charges primarily related to settlement of tax examinations, reserves for uncertain tax positions and return to provision adjustments partially offset by a benefit of $4.7 million, primarily due to the rate differential related to carrying back losses under the provisions of the CARES Act. The CARES Act allows net operating tax losses incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company generated a net tax operating loss in 2020 primarily due to the realization of certain deferred tax assets. Discrete tax items in the year ended December 31, 2019 were a benefit of $2.5 million primarily resulting from changes in prior year estimates and the effective settlement of certain discrete tax items from on-going examinations.

The Company’s effective income tax rate, excluding the CARES Act and discrete items, was (22.0%) and 14.5% for the years ended December 31, 2020 and 2019, respectively. The effective income tax rate differs from the U.S. federal statutory rate primarily due to the benefit from percentage depletion. The benefit of percentage depletion is not directly related to the amount of pre-tax income recorded in a period. Accordingly, as a result of the $29.1 million reduction in income before income tax in 2020 compared to 2019, the proportional effect of the benefit from percentage depletion on the effective income tax rate in 2020 resulted in a significantly lower effective tax rate in 2020 compared to 2019.

A detailed summary of the total deferred tax assets and liabilities in the Company's Consolidated Balance Sheets resulting from differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:


	December 31
	2020		2019
Deferred tax assets
Lease liabilities	$	27,800	$	30,875
Tax carryforwards	17,756		16,305
Inventories	3,742		1,704
Accrued liabilities	10,160		10,020
Employee benefits	2,747		4,853
Land valuation adjustment	5,536		4,304
Other	5,401		4,701
Total deferred tax assets	73,142		72,762
Less: Valuation allowance	11,549		12,296
	61,593		60,466
Deferred tax liabilities
Lease right-of-use assets	27,800		30,875
Depreciation and depletion	31,972		28,061
Partnership investment - development costs	11,686		9,949
Accrued pension benefits	7,685		3,919
Total deferred tax liabilities	79,143		72,804
Net deferred liability	$	(17,550)	$	(12,338)


	December 31, 2019
	Net deferred tax asset		Valuation allowance		Carryforwards expire during:
State net operating loss	$	16,531	$	13,668	2020-2039
Federal research credit	1,455		—		2034-2038
Federal foreign tax credit	463		463		2029
Alternative minimum tax ("AMT") credit	1,596		—		(1)
Total	$	20,045	$	14,131

(1) The Tax Cuts and Jobs Act provided that AMT credits can be utilized to offset income taxes owed in tax years 2018 through 2020 with any remaining AMT credit refundable in 2021. The CARES Act revised this to allow AMT credits to be refundable in 2018 and 2019. The Company has reclassified its AMT credits to the current receivable as of December 31, 2020.

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 has extended the statute of limitations to allow the U.S. taxing authorities to complete their examination.

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, 2020 and 2019. The increase in the gross unrecognized tax benefits in 2020 is primarily due to tax positions related to worthlessness losses for which the timing of deductibility is uncertain. Approximately $6.3 million and $2.3 million of the gross unrecognized tax benefits as of December 31, 2020 and 2019, 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 (1) the deferred tax asset which would be available if the position were not sustained upon audit and (2) the decrease in U.S. federal income taxes which would occur upon the recognition of the state tax benefits included herein.


	2020		2019
Balance at January 1	$	2,860	$	1,280
Additions based on tax positions related to prior years	2,774		1,172
Decreases based on settlements with tax authorities	(803)		—
Additions based on tax positions related to the current year	5,628		408
Balance at December 31	$	10,459	$	2,860

The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The Company recognized net benefit of less than $0.1 million and net expense of less than $0.1 million in interest and penalties related to uncertain tax positions during 2020 and 2019, respectively. The total amount of interest and penalties accrued was $0.1 million as of December 31, 2020 and 2019, respectively.