Income tax expense attributable to income from operations consists of the following for the fiscal years ended in thousands):

 

		2018				2017				2016
Current:
Federal		$	10,289			$	15,265			$	27,660
State			1,689				1,585				2,898
Foreign			824				445				88
Total current			12,802				17,295				30,646
Deferred:
Federal			174				3,413				(237	)
State			(124	)			85				207
Foreign			(156	)			8				703
Total deferred			(106	)			3,506				673
Income Tax Expense (Benefit)		$	12,696			$	20,801			$	31,319

 

The following is a reconciliation of expected income tax expense (benefit) (computed by applying the federal statutory income tax rate to income before taxes) to actual income tax expense (benefit) (in thousands):

 

		2018								2017								2016
Expected Income Tax Expense		$	13,739				28.0	%		$	19,947				35.0	%		$	30,785				35.0	%
State income taxes, net of federal income tax			1,263				2.6	%			1,403				2.5	%			2,514				2.9	%
Valuation allowance			42				0.1	%			329				0.6	%			339				0.4	%
Re-measurement of deferred taxes			(2,651	)			-5.4	%			-				-				-				-
Section 199 Qualified Production Activities deduction			(678	)			-1.4	%			(999	)			-1.8	%			(1,513	)			-1.7	%
Unrecognized tax expense (benefit)			55				0.1	%			(48	)			-0.1	%			(479	)			-0.5	%
Stock compensation - Cancelations & exercises			570				1.2	%			-				-				-				-
Other, net			356				0.7	%			169				0.3	%			(327	)			-0.4	%
Actual income tax expense (benefit)		$	12,696				25.9	%		$	20,801				36.5	%		$	31,319				35.6	%

 

The deferred income tax asset and liability balances at in thousands) include:

 

		2018				2017
Deferred tax assets:
Employee compensation accruals			2,729				4,395
Stock based compensation			933				2,878
Deferred rent credits			4,407				7,290
Net operating loss carryforwards			3,959				3,687
Inventories			62				1,254
Goodwill			328				953
Other, net			1,645				2,396
Total deferred tax assets			14,063				22,853
Less: Valuation allowance			(2,527	)			(2,485	)
Net deferred tax assets		$	11,536			$	20,368

 

		2018				2017
Deferred tax liabilities:
Property, plant and equipment			2,827				5,360
Intangible assets other than goodwill			8,951				14,166
Commissions			2,230				3,420
Total deferred tax liability			14,008				22,946
Total net deferred tax asset (liability)		$	(2,472	)		$	(2,578	)

 

The deferred tax balances are classified in the Consolidated Balance Sheets as follows at in thousands):

 

		2018				2017
Current assets			-			$	3,916
Non-current assets			1,688				1,167
Current liabilities			-				-
Non-current liabilities			4,160				7,661
Total net deferred tax asset (liability)		$	(2,472	)		$	(2,578	)

 

Commencing with fiscal the Company is prospectively reporting its deferred tax assets and liabilities as non-current in conformance with ASU - “Balance Sheet Classification of Deferred Tax Assets. For fiscal , current deferred tax assets and liabilities and non-current deferred tax assets and liabilities have been presented net in the Consolidated Balance Sheets.

 

We evaluate our deferred taxes to determine if the “more likely than standard of evidence has been met thereby supporting the need for a valuation allowance. A valuation allowance must be established for deferred tax assets when it is less than likely that assets will be realized. At of and such an allowance was in place against the Belgian foreign tax assets, and at this valuation allowance was approximately million.

 

The Company’s deferred income tax assets at with respect to the net operating losses expire as follows (in thousands):

 

		Deferred				Net Operating
		Income				Loss
		Tax Assets				Carryforwards
United States (State), expiring between 2025 and 2032		$	1,340			$	23,831
Foreign, expiring between 2034 and 2038			2,619				7,745

 

Deferred U.S. federal income taxes were previously provided for unremitted foreign earnings of our foreign subsidiaries because we expected those earnings to be permanently reinvested. As part of the Tax Act the Company must report The Deemed Repatriation Transition Tax (the “Transition Tax”) on previously untaxed accumulated earnings and profits (“E&P”) of certain of our foreign subsidiaries. To determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of post- E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. We are able to make a reasonable estimate and recorded a provisional Transition Tax obligation of

 

On H.R. originally known as the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted. Among the significant changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (“Federal Tax Rate”) from to effective introduces a limitation on the deduction of certain interest expenses, introduces a deduction for certain business capital expenditures and introduces a system of taxing foreign-sourced income from multinational corporations. The Company will compute its income tax expense for the fiscal year using a blended Federal Tax Rate of The Federal Tax Rate will apply to fiscal years ending and each year thereafter.

 

The Company must re-measure its net deferred tax assets and liabilities using the Federal Tax Rate that will apply when these amounts are expected to reverse. As of the Company can determine a reasonable estimate for the effects of tax reform. The re-measurement of the deferred tax assets and liabilities resulted in a discrete tax benefit million at which lowered the effective tax rate by for the fiscal year.

 

 

We recognize interest and penalties related to income tax matters as a component of income tax expense. If the million of unrecognized tax benefits and related interest and penalties as of were recognized, approximately million would be recorded as a benefit to income tax expense. A reconciliation of the beginning and ending amount of unrecognized tax benefits including related interest and penalties as of and is as follows (in thousands):

 

		2018				2017
Beginning balance		$	2,106			$	2,170
Additions for tax positions taken			467				646
Reductions for tax positions taken in prior years			(386	)			(694	)
Settlements			-				(16	)
Ending balance		$	2,187			$	2,106

 

It is reasonably possible that various issues relating to approximately million of the total gross unrecognized tax benefits as of will be resolved within the next months as exams are completed or statutes expire. If recognized, approximately million of unrecognized tax benefits would reduce our tax expense in the period realized. However, actual results could differ from those currently anticipated.

 

The Company conducts business globally and, as a result, the Company or or more of its subsidiaries files income tax returns in the U.S., various state, and foreign jurisdictions. In the normal course of business, the Company is subject to examination by the taxing authorities in such major jurisdictions as the U.S. Canada, Mexico, Belgium and Honduras. As of the Company and certain subsidiaries are currently under audit from through in the U.S. While the amount of uncertain tax benefits with respect to the entities and years under audit change within the next months, it is anticipated that any of the changes will be significant.