NOTE G — INCOME TAXES

The income tax provision is comprised of the following:


	Year Ended January 31,
	2019		2018		2017
	(In thousands)
Current
Federal	$	23,463	$	28,723	$	22,925
State and city		5,907		2,592		4,034
Foreign		10,989		12,532		6,150
		40,359		43,847		33,109
Deferred
Federal		4,419		4,084		(4,776)
State and city		191		1,285		(2,807)
Foreign		794		(1,291)		298
		5,404		4,078		(7,285)
Income tax expense	$	45,763	$	47,925	$	25,824
Income before income taxes
United States	$	137,748	$	93,691	$	55,363
Non-United States		46,082		16,358		22,399
	$	183,830	$	110,049	$	77,762

On December 22, 2017, the U.S. government enacted comprehensive tax legislation regime commonly referred to as the TCJA. The TCJA included a broad range of complex provisions impacting the taxation of multi-national companies including the Company. Specifically, the Company is impacted by the change in the U.S. Federal corporate income tax rate from 35% to 21% (effective January 1, 2018). Further, the new regime includes a one-time transition tax on foreign earnings that were previously deferred, taxation of certain performance-based compensation paid to the Company’s top executive officers that was previously deductible, full expensing of fixed assets and the deductibility of certain costs, and GILTI.

In accordance with TCJA, the Company recorded $6.9 million as additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted. The total expense primarily comprised of approximately $3.3 million related to the transition tax and approximately $4.4 million tax expense related to revaluing U.S. deferred tax assets and liabilities using the new U.S. corporate tax rate of 21%. Other provisional impacts were primarily related to the state tax impact of the prorated reduced federal tax rate. SAB 118 was issued to address the application of U.S. GAAP in situations when a company does not have the necessary information available, prepared, or analyzed to complete the accounting for certain income tax effects of the TCJA. December 22, 2018 marked the end of the measurement period for purposes of SAB 118. As such, the Company has completed its analysis based on legislative updates relating to TCJA, which resulted in an immaterial impact to the Company’s overall financial results.

Effective January 1, 2018, the TCJA subjects a U.S. parent company to current tax on its GILTI. We elected to account for any tax on GILTI in the period in which it was incurred. At January 31, 2019, the Company incurred a GILTI tax impact of $0.2 million.

The significant components of the Company’s net deferred tax asset at January 31, 2019 and 2018 are summarized as follows:


	2019		2018
	(In thousands)
Deferred income tax assets:
Compensation	$	10,605	$	10,783
Inventory		2,244		—
Straight-line lease		6,642		6,856
Provision for bad debts and sales allowances		33,221		17,819
Supplemental employee retirement plan		401		415
Inventory write-downs		—		—
Net operating loss		3,362		2,983
Other		2,891		212
Gross deferred income tax assets		59,366		39,068
Less: valuation allowance		(2,303)		(1,648)
Net deferred income tax assets		57,063		37,420
Deferred income tax liabilities:
Depreciation and amortization		(25,617)		(16,234)
Intangibles		(21,742)		(22,804)
Prepaid expenses and other		(2,405)		(2,585)
Inventory		—		(246)
Total deferred income tax liabilities		(49,764)		(41,869)
Net deferred tax assets (liabilities)	$	7,299	$	(4,449)

As of January 31, 2019 and 2018, deferred tax liabilities of $15.1 million and $15.8 million, respectively, relate to intangible assets in Switzerland. The remaining intangible assets relate primarily to the U.S.

The total undistributed earnings of the Company’s foreign subsidiaries are approximately $78.0 million for the fiscal year ended January 31, 2019. Those earnings are considered indefinitely reinvested. Even though the undistributed earnings can be distributed back generally without U.S. federal income tax as a result of the one-time transition tax under the TCJA regime, the Company will not change its indefinite reinvestment assertion with respect to those earnings. Upon distribution of those earnings in the form of dividends, the Company does not anticipate any material tax costs. As such, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of undistributed foreign earnings.

The following is a reconciliation of the statutory federal income tax rate to the effective rate reported in the financial statements for the years ended January 31:


	2019		2018		2017
Provision for Federal income taxes at the statutory rate	21.0	%	33.8	%	35.0	%
State and local income taxes, net of Federal tax benefit	2.4		0.5		1.0
Permanent differences resulting in Federal taxable income	6.6		8.8		9.6
Tax reform	—		7.5		—
Foreign tax rate differential	0.5		0.2		(1.7)
Share-based payments	(0.6)		(1.2)		(3.8)
Foreign tax credit	(5.5)		(7.7)		(6.5)
Valuation allowance	0.2		1.5		—
Other, net	0.3		0.2		(0.4)
Actual provision for income taxes	24.9	%	43.6	%	33.2	%

Valuation allowances represent deferred tax benefits where management is uncertain if the Company will have the ability to recognize those benefits in the future. As of January 31, 2019, the Company recorded an additional valuation allowance of $0.4 million against its deferred tax assets.

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (excluding interest and penalties) is as follows:


	2019		2018		2017
	(In thousands)
Balance at February 1,	$	82	$	1,094	$	1,094
Additions based on tax positions related to the current year		—		—		—
Additions for tax positions of prior years		—		—		—
Reductions for tax positions of prior years		—		—		—
Settlements		—		—		—
Lapses of statues of limitations		(82)		(1,012)		—
Balance at January 31,	$	—	$	82	$	1,094

The Company accounts for uncertain income tax positions in accordance with ASC 740 — Income Taxes. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of January 31, 2019, there was a decrease in the unrecognized tax position reserve of $0.1 million for lapses in the statute of limitations in the uncertain income tax positions reserves.

The Company’s policy on classification is to include interest in interest and financing charges, net and penalties in selling, general and administrative expenses in the accompanying Consolidated Statements of Income and Comprehensive Income. The Company and certain of its subsidiaries are subject to U.S. Federal income tax as well as income tax of multiple state, local, and foreign jurisdictions. One of its foreign subsidiaries, T.R.B. International S.A., has a ruling with the Swiss government that taxes commercial foreign sourced income at an 11.6% rate. The ruling was extended to the year ending December 31, 2019.

Of the major jurisdictions, the Company and its subsidiaries are subject to examination in the United States and various foreign jurisdictions for fiscal year 2014 and forward. The Company is currently under audit examination by New York and Canada for fiscal year 2014 and 2015. The Company believes that it is reasonably possible there will be no change to its unrecognized income tax position reserves during the next twelve months due to the applicable statues of limitations.