INCOME TAXES
The provision for income tax expense (benefit) by fiscal year consists of the following (in thousands):
|
| | | | | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
Current | | | | | | |
Federal | | $ | 2,715 |
| | $ | 3,298 |
| | $ | 4,296 |
|
Foreign | | 23 |
| | 15 |
| | (40 | ) |
State | | 577 |
| | 1,051 |
| | 1,081 |
|
Current Income Tax Total | | 3,315 |
| | 4,364 |
| | 5,337 |
|
Deferred | | | | | | |
Federal | | 335 |
| | (3,277 | ) | | (2,242 | ) |
Foreign | | 40 |
| | 174 |
| | 68 |
|
State | | 63 |
| | (517 | ) | | (362 | ) |
Deferred Income Tax Total | | 438 |
| | (3,620 | ) | | (2,536 | ) |
Total Income Tax Expense | | $ | 3,753 |
| | $ | 744 |
| | $ | 2,801 |
|
Principal reasons for variations between the statutory federal rate and the effective rates by fiscal year were as follows:
|
| | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
U.S. federal income tax rate | | 35.0 | % | | 35.0 | % | | 35.0 | % |
Depletion deductions allowed for mining | | (12.8 | ) | | (13.8 | ) | | (9.5 | ) |
State income tax expense, net of federal tax expense | | 2.9 |
| | 2.5 |
| | 3.4 |
|
Difference in effective tax rate of foreign subsidiaries | | — |
| | 1.2 |
| | 2.2 |
|
Prior year income taxes | | 2.4 |
| | 1.7 |
| | (2.9 | ) |
Valuation allowance decrease | | — |
| | (11.7 | ) | | (11.7 | ) |
Change in federal tax rate applied to deferred tax assets and liabilities | | — |
| | (2.5 | ) | | — |
|
Deduction for domestic production activities | | (1.4 | ) | | (2.7 | ) | | (1.8 | ) |
Other | | (0.3 | ) | | (4.5 | ) | | 5.1 |
|
Effective income tax rate | | 25.8 | % | | 5.2 | % | | 19.8 | % |
The Consolidated Balance Sheets included the following tax effects of cumulative temporary differences as of July 31 (in thousands):
` |
| | | | | | | | | | | | | | | | |
| | 2017 | | 2016 |
| | Assets | | Liabilities | | Assets | | Liabilities |
Depreciation | | $ | — |
| | $ | 5,888 |
| | $ | — |
| | $ | 5,924 |
|
Deferred compensation | | 5,018 |
| | — |
| | 4,684 |
| | — |
|
Postretirement benefits | | 10,419 |
| | — |
| | 11,935 |
| | — |
|
Allowance for doubtful accounts | | 163 |
| | — |
| | 172 |
| | — |
|
Deferred marketing expenses | | — |
| | 508 |
| | 365 |
| | — |
|
Other assets | | 427 |
| | — |
| | 923 |
| | — |
|
Accrued expenses | | 2,930 |
| | — |
| | 3,100 |
| | — |
|
Tax credits | | 926 |
| | — |
| | 1,060 |
| | — |
|
Amortization | | 301 |
| | — |
| | 216 |
| | — |
|
Inventories | | 251 |
| | — |
| | 247 |
| | — |
|
Depletion | | — |
| | 464 |
| | — |
| | 476 |
|
Stock-based compensation | | 343 |
| | — |
| | 252 |
| | — |
|
Reclamation | | 418 |
| | — |
| | 364 |
| | — |
|
Other assets – foreign | | 853 |
| | — |
| | 890 |
| | — |
|
Valuation allowance | | (793 | ) | | — |
| | (1,170 | ) | | — |
|
Total deferred taxes | | $ | 21,256 |
| | $ | 6,860 |
| | $ | 23,038 |
| | $ | 6,400 |
|
The decrease in deferred taxes related to postretirement benefits was driven by a higher liability for these obligations. See Note 8 of the Notes to the Consolidated Financial Statements for further information about the assumptions used for the actuarial calculation of the postretirement benefits liability.
We recorded a $793,000 valuation allowance for the amount of the deferred tax benefit related to our foreign net operating loss carryforwards as of July 31, 2017 since we believe it is unlikely we will realize the benefit of these tax attributes in the future. An allowance of $1,170,000 was recorded as of July 31, 2016 for the amount of the deferred tax benefit related to both foreign net operating loss carryforwards and domestic state tax credits based on our assessment at that time of the likelihood of realizing these benefits.
We determined during the fourth quarter of fiscal year 2016 that we expected to fully utilize our deferred tax asset for domestic AMT credits in future years. Therefore, we concluded it was appropriate to release the $1,680,000 valuation allowance that had been established in prior years for the full amount of this tax benefit, which resulted in a lower effective federal income tax rate for fiscal year 2016. The same conclusion was reached based upon our review as of July 31, 2017 and no valuation allowance for this tax benefit was established.
Our foreign subsidiaries in the United Kingdom and China have not generated any untaxed foreign income, therefore we have not provided for any related income taxes.
We had no liability for unrecognized tax benefits based on tax positions related to the current and prior fiscal years for the fiscal years ended 2017, 2016 and 2015; correspondingly, no related interest and penalties were recognized as income tax expense and there were no accruals for such items in any of these fiscal years.
We are subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. No federal income tax returns were under examination as of July 31, 2017 and returns for fiscal years 2014, 2015 and 2016 remain open for examination. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from three to five years. The state impact of any federal income tax changes remains subject to examination by various states for a period of up to one year after formal notification to the states. There are a limited number of open state and local income tax audits in which no material issues have been preliminarily identified. There are no material open or unsettled foreign income tax audits. We believe our accrual for tax liabilities is adequate for all open audit years.