INCOME TAXES

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

6. INCOME TAXES

The Tax Cuts and Jobs Act (TCJA) was signed into law by the President in 2017. The TCJA created a territorial tax system, which generally allows companies to repatriate future foreign earnings without incurring additional U.S. taxes. It also includes a reduction in the corporate tax rate from a top rate of 35% to a flat rate of 21%, changes in business deductions, and many international provisions.

One of the main provisions of the TCJA requires the Company to compute a tax based on a deemed repatriation of deferred foreign income, whether or not actually distributed. At December 31, 2017, the Company had computed a reasonable estimate of this amount to be $1,102, net of foreign tax credits, and reflected it as a component of income tax provision in the consolidated statements of income during 2017. During 2018, the Company gathered additional information which demonstrated that the Company had over-accrued for this tax at December 31, 2018. Due to the inherent complexity of the calculation for the deemed repatriation tax, the Company followed elective guidance in SEC Staff Accounting Bulletin (SAB) 118, which allows for measurement period adjustments to be reflected in the current reporting period and reduced the liability to $625 for this tax, which amount was paid during 2018.

Additional provisions of the TCJA are the Global Intangible-Low Taxed Income tax, or "GILTI" and the Foreign Derived Intangible Income deduction, or “FDII”. The provisions are effective for tax years beginning after December 31, 2017. The Company has implemented a policy to account for the impact of book to tax differences resulting from GILTI in the period in which the tax applies to the Company. The impact of GILTI and FDII were considered in the calculation of income tax for the year ended December 31, 2018.

Income before income taxes includes the following components:

	2018		2017		2016
United States	$	34,220	$	22,695	$	25,038
Foreign		7,443		7,644		6,039
Total	$	41,663	$	30,339	$	31,077

The provision for income taxes on income consisted of the following in 2018, 2017 and 2016:

	2018			2017			2016
Current:
Federal	$	5,480		$	4,871		$	5,016
Federal – Deemed Repatriation		(477	)		1,102			—
State		(380	)		(1,435	)		955
Foreign		2,719			3,653			1,965
		7,342			8,191			7,936
Deferred:
Federal		571			(919	)		3,057
State		(55	)		150			205
Foreign		59			(99	)		(43	)
		575			(868	)		3,219
	$	7,917		$	7,323		$	11,155

The principal differences between the federal statutory tax rate and the income tax expense in 2018, 2017 and 2016:

	2018			2017			2016
Federal statutory tax rate		21.0	%		35.0	%		35.0	%
State taxes, net of federal tax benefit		(0.8	)%		1.0	%		3.8	%
Excess of (decreases in) foreign tax over US tax on foreign income		2.9	%		2.9	%		(0.5	)%
Remeasurement of deferred taxes under TCJA		—	%		(7.7	)%		—	%
Deemed repatriation tax		(1.1	)%		3.6	%		—	%
Domestic tax deductions and credits		(0.4	)%		(3.1	)%		(2.7	)%
Foreign Derived Intangible Income deduction		(1.3	)%		—	%		—	%
Release of unrecognized tax benefit		—	%		(5.8	)%		—	%
Other		(1.3	)%		(1.8	)%		0.2	%
Effective tax rate		19.0	%		24.1	%		35.8	%

Deferred tax assets and liabilities are determined based on the differences between the financial and tax basis of existing assets and liabilities using the currently enacted tax rates in effect for the year in which the differences are expected to reverse.

Deferred income tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting and income tax reporting purposes. Temporary differences and carry forwards which give rise to deferred tax assets and liabilities at December 31, 2018 and 2017 are as follows:

	2018			2017
Deferred tax assets:
Allowance for doubtful accounts	$	213		$	181
Accruals and reserves		1,963			1,673
Other		811			644
Total deferred tax assets		2,987			2,498
Deferred tax liabilities:
Property, plant, and equipment		4,686			3,579
Other		1			—
Total deferred tax liabilities		4,687			3,579
Valuation Allowance		—			(44	)
Net deferred tax asset/(liability)	$	(1,700	)	$	(1,125	)

Deferred tax assets represent the future tax benefit of future deductible differences and, if it is more likely than not that a tax asset will not be realized, a valuation allowance is required to reduce the recorded deferred tax assets to net realizable value. The Company has evaluated positive and negative evidence to assess the realizability of its deferred taxes. Based on the evidence, the Company believes it is more likely than not that its deferred tax assets will be realizable. Accordingly, the Company has not included a valuation allowance against its deferred tax assets at this time. During 2018, the Company released $44 from its valuation allowance related to a deferred tax asset on a state net operating loss carryforward.

We do not currently have plans to repatriate undistributed foreign earnings to the United States and have not determined any timeline or amount for any such future distributions.

As of December 31, 2018, the Company had no federal net operating loss carryforwards, but had a state net operating loss carryforward of $834.

Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being recognized.

A summary of the activity of the unrecognized tax benefits for the years ended December 31, 2018, 2017 and 2016, is presented below:

	2018		2017			2016
Unrecognized tax benefits – January 1		—		1,037			792
Gross increases – tax positions in prior period		—		120			245
Gross decreases – tax positions in prior period		—		(1,157	)		—
Unrecognized tax benefits – December 31	$	—	$	—		$	1,037

During 2016, the Company accrued interest of $19 and penalties of $198 related to the unrecognized tax benefits in the chart above. The liability in total for the interest and penalties at December 31, 2016 was $217. During 2017, the Company accrued additional interest of $1 and penalties of $61 related to the unrecognized tax benefit, but subsequently released the $1,157 liability for the unrecognized tax benefits in full, including all related interest and penalties, due to changes in judgment resulting from the evaluation of new information not previously available.

The Company is subject to United States federal income taxes, as well as income taxes in various states and foreign jurisdictions. The Company’s 2016 and later tax years remain open to examination by the tax authorities. With few exceptions, as of December 31, 2018, the Company is no longer subject to U.S. federal, state or non-U.S. income tax examinations prior to 2015.