12.

Income Taxes

Domestic and foreign income (loss) before income taxes is as follows:

(in thousands )	2016			2015		2014
Domestic	$	(9,563	)	$	1,313	$	35,264
Foreign		132,837			105,635		96,382
Income before income taxes	$	123,274		$	106,948	$	131,646

Federal, state and foreign income tax (benefit) expense consists of the following:

(in thousands )	2016			2015			2014
Current:
Federal	$	(3,992	)	$	(6,686	)	$	8,003
State		(648	)		2,078			1,275
Foreign		28,695			19,211			28,756
Subtotal		24,055			14,603			38,034
Deferred:
Federal and State		(1,594	)		11,330			(1,513	)
Foreign		(3,675	)		149			(2,975	)
Subtotal		(5,269	)		11,479			(4,488	)
Provision for income taxes	$	18,786		$	26,082		$	33,546

The current federal tax benefit for

2016

includes an estimated

million benefit as a result of the anticipated carry-back of the

2016

U.S. federal net operating loss to the

2014

tax year.

The current federal tax benefit for

2015

includes an

$11.7

million benefit reclassified from accumulated other comprehensive income as a result of the company’s termination of the U.S. defined benefit pension plan as described in Note

10,

Benefit Plans

A reconciliation between income taxes computed on income before income taxes at the federal statutory rate and the provision for income taxes is provided below:

(in thousands )	2016			2015			2014
Tax expense at statutory rate of 35%	$	43,146		$	37,432		$	46,076
State and local taxes, net of federal tax benefit		(415	)		1,907			1,186
Foreign income tax rate differential		(25,471	)		(18,253	)		(13,663	)
Impairment of goodwill without tax benefit		3,088			—			—
Tax on unremitted earnings		2,747			—			—
Mexico manufacturing operations restructuring		—			4,841			—
Nondeductible professional fees		313			1,011			—
Tax deduction for stock of foreign subsidiary		(3,896	)		—			—
Other, net		(726	)		(856	)		(53	)
Provision for income taxes	$	18,786		$	26,082		$	33,546

Deferred income taxes are provided for the tax effects of temporary differences between the financial reporting bases and the tax bases of the company’s assets and liabilities. Significant components of the company’s deferred tax assets and liabilities at

December

31,

2016

and

January

2016,

are as follows:

(in thousands )	2016			2015
Deferred tax assets:
Accrued expenses	$	31,770		$	19,738
Foreign tax credit carryforwards		6,472			1,529
Accrued restructuring		456			1,115
Capital losses		4,557			4,557
Domestic and foreign net operating loss carryforwards		2,223			684
Gross deferred tax assets		45,478			27,623
Less: Valuation allowance		(6,738	)		(4,557	)
Total deferred tax assets		38,740			23,066

Deferred tax liabilities:
Tax depreciation and amortization in excess of book		23,471			22,747
Foreign tax on unremitted earnings		1,750			—
Total deferred tax liabilities		25,221			22,747
Net deferred tax assets	$	13,519		$	319

The deferred tax asset valuation allowance is related to a U.S. capital loss carryover and, with respect to

2016,

tax attributes of certain foreign subsidiaries which are not expected to be realized. The remaining domestic and foreign net operating losses either have no expiration date or are expected to be utilized prior to expiration. The foreign tax credit carryforwards begin to expire in

2020.

The company paid income taxes of

$35.6

million,

$23.3

million, and

$26.6

million in

2016,

2015,

and

2014,

respectively.

U.S. income taxes were not provided on a cumulative total of approximately

$498

million of undistributed earnings for certain non-U.S. subsidiaries as of

December

31,

2016,

and accordingly, no deferred tax liability has been established relative to these earnings. The determination of the deferred tax liability associated with the distribution of these earnings is not practicable. The company accrued

$1.8

million for certain foreign taxes on unremitted earnings of non-U.S. subsidiaries because of anticipated distributions (no U.S. tax is expected to be incurred on such distributions). The company has

three

subsidiaries in China on “tax holidays.” The tax holidays begin to expire in

2017.

The company expects to be granted extensions. Such tax holidays contributed

$2.7

million in tax benefits

($0.12

per diluted share) during

2016

with similar amounts expected in future years while tax holidays are in effect.

A reconciliation of the beginning and ending amount of unrecognized tax benefits as of

December

31,

2016,

January

2016,

and

December

27,

2014

is as follows:

(in thousands)	Unrecognized Tax Benefits
Balance at December 27, 2014	$	2,550
Additions for tax positions taken in the current year		982
Balance at January 2, 2016		3,532
Additions for tax positions taken in the current year		2,696
Additions for tax positions taken in the pre-acquisition periods of acquired subsidiaries		2,491
Settlements		(102	)
Balance at December 31, 2016	$	8,617

The company recognizes accrued interest and penalties associated with uncertain tax positions as part of income tax expense. The company recognized interest expense of

$0.9

million,

$0.2

million, and

$0.3

million in

2016,

2015,

and

2014

respectively. Accrued interest was

$2.4

million,

$1.5

million, and

$1.3

million as of

December

31,

2016,

January

2016,

and

December

27,

2014,

respectively.

The amount of unrecognized tax benefits at

December

31,

2016

was

$8.6

million. This total represents the amount of tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The company does not expect a decrease in unrecognized tax benefits in the next

months. None of the positions included in unrecognized tax benefits are related to tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. The U.S. federal statute of limitations remains open for

2013

onward although the company has been audited for

2014

(during

2016)

and the audit has been concluded with no additional tax due. Foreign and U.S. state statute of limitations generally range from

three

seven

years. The German tax authority concluded the examination of the company’s tax years

2008

through

2010

with less than

$0.1

million of additional tax due and is currently conducting its examination for tax years

2011

through

2014.

The company does not expect to recognize a significant amount of additional tax expense as a result of concluding German tax examination.