Note 14 – Income Taxes

The components of income before income taxes were taxed under the following jurisdictions:

(In thousands)	2016		2015		2014

Domestic	$	103,576	$	121,614	$	135,445
Foreign		42,454		10,175		12,568

Income before income taxes	$	146,030	$	131,789	$	148,013

Income tax expense consists of the following:

(In thousands)	2016			2015			2014

Current tax expense:
Federal	$	32,262		$	50,272		$	45,723
Foreign		5,667			4,042			2,346
State and local		3,210			4,886			3,905

Current tax expense		41,139			59,200			51,974

Deferred tax expense (benefit):
Federal		2,004			(13,739	)		(2,469	)
Foreign		5,099			(1,180	)		890
State and local		(105	)		(899	)		(4,916	)

Deferred tax (benefit) expense		6,998			(15,818	)		(6,495	)

Income tax expense	$	48,137		$	43,382		$	45,479

No provision is made for U.S. income taxes applicable to undistributed earnings of foreign subsidiaries that are indefinitely reinvested in foreign operations. It is not practicable to compute the potential deferred tax liability associated with these undistributed foreign earnings. The Company has approximately $118.8 million of undistributed foreign earnings for which it has not recorded deferred tax liabilities.

The difference between the reported income tax expense and a tax determined by applying the applicable U.S. federal statutory income tax rate to income before income taxes is reconciled as follows:

(In thousands)	2016			2015			2014

Expected income tax expense	$	51,110		$	46,126		$	51,805
State and local income tax, net of federal benefit		1,982			2,673			3,355
Effect of foreign statutory rate different from U.S. and other foreign adjustments		(4,092	)		(654	)		(1,094	)
Valuation allowance changes		—			—			(5,732	)
U.S. production activities deduction		(3,063	)		(3,500	)		(4,025	)
Goodwill disposition		—			646			—
Investment in unconsolidated affiliates		1,030			—			—
Permanent adjustment to deferred tax liabilities		—			(4,218	)		—
Other, net		1,170			2,309			1,170

Income tax expense	$	48,137		$	43,382		$	45,479

During 2015, the Company had an adjustment to a deferred tax liability of $4.2 million, or seven cents per diluted share, resulting from the acquisition of a foreign subsidiary.

During 2014, the Company released a valuation allowance of $5.7 million, or 10 cents per diluted share, related to certain state income tax credits. As a result of legislative changes enacted in 2014, the Company expects to be able to use such credits within the foreseeable future.

The Company includes interest and penalties related to income tax matters as a component of income tax expense. The income tax expense related to penalties and interest was immaterial in 2016, 2015, and 2014.

The Internal Revenue Service completed its audit of the Company's 2013 tax return in 2016 and completed its audit of the Company's 2012 tax return during 2014, the results of which were immaterial to the Consolidated Financial Statements. The Company is currently under audit in various other jurisdictions.

The statute of limitations is still open for the Company's federal tax return and most state income tax returns for 2013 and all subsequent years. The statutes of limitations for certain state and foreign returns are also open for some earlier tax years due to differing statute periods. While the Company believes that it is adequately reserved for possible audit adjustments, the final resolution of these examinations cannot be determined with certainty and could result in final settlements that differ from current estimates.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

(In thousands)	2016			2015

Deferred tax assets:
Inventories	$	15,483		$	14,802
Other postretirement benefits and accrued items		13,180			15,294
Pension		-			2,349
Other reserves		9,821			9,823
Federal and foreign tax attributes		5,813			7,403
State tax attributes, net of federal benefit		22,572			21,716
Share-based compensation		2,416			3,397
Basis difference in unconsolidated affiliates		211			—

Total deferred tax assets		69,496			74,784
Less valuation allowance		(18,681	)		(17,650	)

Deferred tax assets, net of valuation allowance		50,815			57,134

Deferred tax liabilities:
Property, plant, and equipment		52,319			43,592
Pension		4,633			—
Other		—			1,546

Total deferred tax liabilities		56,952			45,138

Net deferred tax (liability) asset	$	(6,137	)	$	11,996

As of December 31, 2016, after consideration of the federal impact, the Company had state income tax credit carryforwards of $3.2 million, all of which expire by 2019, and other state income tax credit carryforwards of $10.2 million with unlimited lives. The Company had state net operating loss (NOL) carryforwards with potential tax benefits of $9.3 million expiring between 2018 and 2031. The state tax credit and NOL carryforwards are offset by valuation allowances totaling $12.5 million.

As of December 31, 2016, the Company had foreign tax attributes with potential tax benefits of $5.6 million which have an unlimited life. These attributes were offset by valuation allowances of $4.9 million.

Income taxes paid were approximately $40.1 million in 2016, $49.9 million in 2015, and $47.3 million in 2014.