Income taxes. On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the 2017 Act), which revised the U.S. corporate income tax regime by, among other things, lowering the corporate tax rate from 35% to 21% effective on January 1, 2018 and imposing a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. In accordance with ASC 740, Income Taxes, changes in tax rates and tax laws are accounted for in the period of enactment, and the resulting effects are recorded as discrete components of the income tax provision related to continuing operations in the same period. As a result of the 2017 Act, the Company recorded (i) net income tax benefits of $7.8 million, consisting of a $7.2 million federal benefit and a $0.6 million state benefit, related to the remeasurement of deferred tax assets and liabilities and (ii) an income tax expense of $1.2 million related to the transition tax on deemed repatriation of deferred foreign income.

Also on December 22, 2017, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 118 (SAB 118), which provides guidance on accounting for tax effects of the 2017 Act. SAB 118 provides a measurement period that should not extend beyond one year from the enactment date of the 2017 Act for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the 2017 Act for which the accounting under ASC 740 is complete. To the extent that accounting for certain income tax effects of the 2017 Act is incomplete but a reasonable estimate is determinable, a provisional estimate must be recorded in the financial statements. The adjustments discussed above represent provisional amounts and are based on the Company's best estimates of the impact of the 2017 Act. The adjustment for the remeasurement of deferred tax assets and liabilities is provisional since it is based on certain estimated 2017 amounts. The adjustment for the transition tax on deemed repatriation of deferred foreign income is provisional as we continue to gather information and analyze existing and expected guidance from the Internal Revenue Service (IRS). The final determination of the impact may differ from these estimates, due to, among other things, changes in the Company's interpretations and assumptions, additional guidance that may be issued by the IRS, and actions that the Company may take. The Company expects to finalize its computation for both adjustments prior to filing its 2017 U.S. income tax return in the third quarter 2018.

Income tax expense consists of the following:



	2017		2016		2015
	($000 omitted)
Current income tax expense:
Federal	1,154		4,718		4,774
State	814		1,447		709
Foreign	4,625		5,983		5,967
	6,593		12,148		11,450
Deferred income tax expense (benefit):
Federal	4,088		6,262		(3,986	)
State	(254	)	(1,347	)	(1,375	)
Foreign	4,494		2,542		(439	)
	8,328		7,457		(5,800	)
Total income tax expense	14,921		19,605		5,650

The following reconciles income tax expense (benefit) computed at the federal statutory rate with income tax expense as reported:



	2017		2016		2015
	($000 omitted)
Expected income tax expense (benefit) at 35% ⁽¹⁾	22,253		26,279		(194	)
2017 Act impact from the U.S. corporate tax rate change	(7,196	)	—		—
Nondeductible expenses	2,610		2,772		2,768
Research and development credits	(2,158	)	(3,434	)	—
Federal net benefit offset to Canadian expense ⁽²⁾	(1,480	)	(639	)	—
2017 Act impact from deemed repatriation of deferred foreign income	1,213		—		—
Return-to-provision and true-up adjustments	923		(4,127	)	(1,329	)
Impairment of goodwill	—		—		7,099
Other – net ⁽³⁾	(1,244	)	(1,246	)	(2,694	)
Income tax expense	14,921		19,605		5,650
Effective income tax rate ⁽¹⁾	23.5	%	26.1	%	(1,019.4	)%

⁽¹⁾Calculated using income (loss) before taxes and after noncontrolling interests.

⁽²⁾For U.S. income tax purposes, the Company’s Canadian operation is a branch of Guaranty. As a result, the Canadian net deferred tax liability is offset in the U.S. as a deferred tax asset but not in an equal amount given differing tax rates in Canada and the U.S.

⁽³⁾Included within this line is $0.6 million of 2017 net income tax benefit from the remeasurement of the state deferred tax assets and liabilities relating to the 2017 Act.

Deferred tax assets and liabilities resulting from the same tax jurisdiction are netted and presented as either an asset or liability on the consolidated balance sheets. Deferred tax assets and liabilities resulting from different tax jurisdictions are not netted. Deferred tax assets and liabilities as of December 31 are detailed below.



	2017		2016
	($000 omitted)
Deferred tax assets:
Accrued expenses	14,435		26,835
Net operating loss (NOL) carryforwards	6,483		6,275
Federal offset to Canadian deferred tax liability ⁽¹⁾	6,300		4,335
Allowance for uncollectible amounts	1,133		3,454
Foreign currency translation adjustments	925		4,238
Investments	894		978
Tax credit carryforwards	1		6,154
Fixed assets	—		2,067
Other	711		476
Deferred tax assets – gross	30,882		54,812
Valuation allowance	(2,231	)	(2,457	)
Deferred tax assets – net	28,651		52,355
Deferred tax liabilities:
Amortization – goodwill and other intangibles	(18,155	)	(26,851	)
Title loss provisions	(17,889	)	(21,433	)
Deferred compensation on life insurance policies	(2,278	)	(3,345	)
Fixed assets	(1,968	)	—
Unrealized gains on investments	(1,826	)	(3,873	)
Other	(1,383	)	(849	)
Deferred tax liabilities – gross	(43,499	)	(56,351	)
Net deferred income tax liability	(14,848	)	(3,996	)

⁽¹⁾For U.S. income tax purposes, the Company’s Canadian operation is a branch of Guaranty. As a result, the Canadian net deferred tax liability is offset in the U.S. as a deferred tax asset but not in an equal amount given differing tax rates in Canada and the U.S.

At December 31, 2017 and 2016, net deferred tax liabilities for U.S. federal tax paying components totaled approximately $7.7 million and $1.2 million, respectively, and net deferred tax liabilities for foreign tax paying components totaled approximately $7.1 million and $2.8 million, respectively. The net (decrease) increase to the valuation allowance during 2017 and 2016 was $(0.2) million and $0.2 million, respectively.

The Company has no remaining foreign tax credit carryforwards at December 31, 2017. The Company's $6.5 million of deferred tax assets relating to NOL carryforwards include certain state amounts which expire in varying amounts from 2019 through 2037 and foreign amounts which expire in varying amounts from 2020 through 2027 or have unlimited carryforward periods. The future utilization of all NOL carryforwards is subject to various limitations. The remaining valuation allowance at December 31, 2017 relates principally to certain state and foreign NOL carryforwards.

The Company’s income tax returns are routinely subject to examinations by U.S. federal, foreign, and state and local tax authorities. The Company is involved in routine examinations by state and local tax jurisdictions for calendar years 2010 through 2013. The Company expects no material adjustments from any ongoing tax return examinations.