(Dollars in thousands)	2018			2017			2016
Federal:
Current	$	9,174			21,448			19,236
Deferred		(22,943	)		628			(909	)
State and local:
Current		2,121			1,795			1,674
Deferred		2,972			(49	)		(222	)
Foreign:
Current		2,233			4,450			1,899
Deferred		2,330			(1,822	)		860
Total	$	(4,113	)		26,450			22,538

	2018			2017			2016
Federal corporate statutory rate		24.5	%		35.0	%		35.0	%
State and local, net of Federal benefits		3.0			2.4			2.0
Foreign		0.6			(0.1	)		(1.0	)
Research credit		(1.6	)		(1.1	)		(2.5	)
Domestic production deduction		(1.1	)		(2.7	)		(2.8	)
Change in uncertain tax positions		(0.1	)		–			–
Executive compensation		(0.1	)		(0.1	)		0.9
Valuation allowance		3.0			(0.3	)		1.8
Tax reform – impact on U.S. deferred tax assets and liabilities		(37.2	)		–			–
Tax reform – transition tax		1.5			–			–
Tax reform – taxes related to foreign unremitted earnings		2.8			–			–
Other, net		–			(0.1	)		(0.5	)
Effective income tax rate		(4.7	)%		33.0	%		32.9	%

On December 22, 2017, President Trump signed into law new tax legislation commonly referred to as the Tax Cut and Jobs Act (the “TCJA”). The TCJA includes broad and complex changes to the U.S. tax code that impacted the Company’s accounting and reporting for income taxes in the current year. These impacts primarily consist of the following:

Staff Accounting Bulletin No. 118 (SAB 118) was issued by the SEC effective December 22, 2017. SAB 118 allows registrants to record provisional amounts of the income tax effects of the TCJA where the information necessary to complete the accounting under ASC Topic 740 is not available but the amounts are based on reasonable estimates. SAB 118 permits registrants to record adjustments to its provisional amounts during the measurement period (which cannot exceed one year).

The statutory tax rate reduction of the TCJA reduced U.S. net deferred tax liabilities by $30.7 million. An additional $1.0 million benefit was recorded as a result of a $7.5 million pension contribution approved during the second quarter of 2018. In addition, a tax accounting method change was filed in the third quarter of 2018 which resulted in an additional favorable deferred tax liability adjustment of $1.0 million. The remeasurement of U.S. net deferred tax liabilities is complete as of September 30, 2018.

The Company recorded a provisional charge for the Transition Tax of $3.7 million for the year ended September 30, 2018. Certain technical aspects of the TCJA remain subject to varying degrees of uncertainty and the Company has therefore made interpretations of the enacted legislation in its provisional income tax computations based upon the best available guidance while it awaits expected technical guidance and clarification from the U.S. government. One such calculation requiring further guidance is the possible unintended benefit of the application of new Section 245A (dividend received deduction) as it relates to the Transition Tax for fiscal year companies. The Company believes there is insufficient clarity and significant uncertainty with respect to this issue as of September 30, 2018 and, therefore, has decided not to reduce its Transitional Tax provisional charge for the possible benefit at this time.

In addition, as a result of the Transition Tax, the Company recorded a charge of $2.4 million related to foreign withholding taxes in connection with the reversal of its indefinite reinvestment assertion related to cumulative undistributed foreign earnings as of December 31, 2017. This charge is complete as of September 30, 2018.

There are other impacts under the TCJA that are not effective for the Company until fiscal 2019. These primarily include a further reduction in the U.S. statutory rate to 21%, a new minimum tax on global intangible low-taxed income (“GILTI”) and the benefit of the deduction for Foreign-Derived Intangible Income (“FDII”). With respect to the new GILTI provision, U.S. GAAP allows companies to make an accounting policy election and record taxes as a period cost as incurred or factor such amounts in the measurement of deferred taxes. The Company has made an accounting policy election to record these taxes as a period cost.

(Dollars in thousands)	2018			2017
Deferred tax assets:
Inventories	$	5,834			9,639
Pension and other postretirement benefits		3,969			11,345
Net operating and capital loss carryforwards — domestic		639			501
Net operating loss carryforward — foreign		4,603			4,486
Foreign tax credit carryforward		2,377			–
Other compensation-related costs and other cost accruals		7,048			12,104
State credit carryforward		2,103			2,098
Total deferred tax assets		26,573			40,173

Deferred tax liabilities:
Goodwill		(969	)		(4,874	)
Acquisition assets		(62,841	)		(91,752	)
Depreciation, software amortization		(19,584	)		(24,092	)
Net deferred tax liabilities before valuation allowance		(56,821	)		(80,545	)
Less valuation allowance		(7,144	)		(4,440	)
Net deferred tax liabilities	$	(63,965	)		(84,985	)

The Company has a foreign net operating loss (NOL) carryforward of $19.0 million at September 30, 2018, which reflects tax loss carryforwards in Germany, India, Finland, China, South Africa, Japan, Canada and the United Kingdom. $16.7 million of the tax loss carryforwards have no expiration date while the remaining $2.3 million will expire between 2019 and 2027. The Company has deferred tax assets related to state NOL carryforwards of $0.6 million at September 30, 2018 which expire between 2025 and 2038. The Company also has net state research and other credit carryforwards of $2.1 million of which $1.7 million expires between 2025 and 2037. The remaining $0.4 million does not have an expiration date.

The valuation allowance for deferred tax assets as of September 30, 2018 and 2017 was $7.1 million and $4.4 million, respectively. The net change in the total valuation allowance for each of the years ended September 30, 2018 and 2017 was an increase of $2.7 million and a decrease of $1.3 million, respectively. In 2018 the Company established a valuation allowance for excess foreign tax credits that are not expected to be utilized in future periods of $2.4 million at September 30, 2018. The Company has established a valuation allowance against state credit carryforwards of $0.4 million at both September 30, 2018 and 2017. In addition, the Company has established a valuation allowance against state NOL carryforwards that are not expected to be realized in future periods of $0.6 million and $0.4 million at September 30, 2018 and 2017, respectively. Lastly, the Company has established a valuation allowance against certain NOL carryforwards in foreign jurisdictions which may not be realized in future periods of $3.8 million and $3.7 million at September 30, 2018 and 2017, respectively.

The Company’s subsidiary ETS-Lindgren Oy, Finland, has recorded a deferred tax asset of $0.2 million reflecting the benefit of $2.2 million in loss carryforwards, which expires in 2027. Realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, Management believes it is more likely than not that all of the deferred tax asset will be realized. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

The Company’s foreign subsidiaries have accumulated unremitted earnings of $3.5 million at September 30, 2018. No deferred taxes have been provided on these accumulated unremitted earnings because these funds are not needed to meet the liquidity requirements of the Company’s U.S. operations and it is the Company’s intention to indefinitely reinvest these earnings in continuing international operations. In the event these foreign entities’ earnings were distributed, it is estimated that approximately $0.3 million of foreign tax withholding would be paid. The Company does not expect that these taxes would be creditable against U.S. income tax, so they would correspondingly reduce the Company’s net earnings. No significant portion of the Company’s foreign subsidiaries’ earnings was taxed at a very low tax rate.

The Company had $0.1 million of unrecognized tax benefits as of both September 30, 2018 and 2017, which, if recognized, would affect the Company’s effective tax rate. The Company expects $0.1 million of unrecognized tax benefits to reverse in the next twelve months. The Company’s policy is to include interest related to unrecognized tax benefits in income tax expense and penalties in operating expense. As of September 30, 2018, 2017 and 2016, the Company had zero accrued interest related to uncertain tax positions on its Consolidated Balance Sheets. No significant penalties have been accrued.

The principal jurisdictions for which the Company files income tax returns are U.S. Federal and the various city, state, and international locations where the Company has operations. The U.S. Federal tax years for the periods ended September 30, 2015 and forward remain subject to income tax examination. Various state tax years for the periods ended September 30, 2014 and forward remain subject to income tax examinations. The Company is subject to income tax in many jurisdictions outside the United States, none of which is individually significant.