Entity information:
Earnings (loss) from continuing operations before income taxes consist of the following (in thousands):
 
2017
 
2016
 
2015
Domestic
$
(96,343
)
 
$
(68,949
)
 
$
(54,812
)
Foreign
30,093

 
39,392

 
43,072

 
$
(66,250
)
 
$
(29,557
)
 
$
(11,740
)


The company has provided for income taxes (benefits) from continuing operations as follows (in thousands):
 
2017
 
2016
 
2015
Current:
 
 
 
 
 
Federal
$
(125
)
 
$
(360
)
 
$
(167
)
State
(437
)
 
(115
)
 
(150
)
Foreign
15,223

 
12,873

 
11,439

 
14,661

 
12,398

 
11,122

Deferred:
 
 
 
 
 
Federal
(2,164
)
 
—

 
3,222

State
—

 
—

 
318

Foreign
(2,206
)
 
901

 
48

 
(4,370
)
 
901

 
3,588

Income Taxes
$
10,291

 
$
13,299

 
$
14,710



Included in the 2015 Federal current tax benefit is a benefit of $140,000 related to an intra-period allocation to continuing operations. A charge in an equal amount is in discontinued operations.

Reduction of U.S. federal corporate tax rate: The US Tax Cuts and Jobs Act of 2017 reduces the corporate rate to 21%, effective January 1, 2018. Consequently, the company has provisionally recorded a decrease related to deferred tax assets and liabilities of $64,440,000 and $20,034,000, respectively, and has recorded a decrease to the valuation allowance of $45,986,000 with a corresponding net adjustment to deferred tax benefit of $1,580,000 for the year-ended December 31, 2017.

Deemed Repatriation Transition Tax: The Deemed Repatriation Transition tax (Transition Tax) is a tax on previously untaxed accumulated and current earnings and profit (E&P) of certain of our foreign subsidiaries. To determine the amount of Transition Tax, a company must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries as well as the amount of non-U.S. income taxes paid on such earnings. The company believes it has an overall foreign E&P deficit and accordingly has not recorded any provisional Transition Tax obligation as of December 31, 2017. However, the company is continuing to gather additional information to more precisely compute the amount of any Transition Tax.

We determined that the provisional calculations will be finalized after the underlying timing differences and foreign earnings and profits are finalized with our 2017 federal tax return filing.  Furthermore, we are still analyzing certain aspects of the US Tax Act and refining our calculations which could potentially affect the measurement of these balances or potentially give rise to new or additional deferred tax amounts.


A reconciliation to the effective income tax rate from the federal statutory rate is as follows:
 
2017
 
2016
 
2015
Statutory federal income tax rate
(35.0
)%
 
(35.0
)%
 
(35.0
)%
State and local income taxes, net of federal income tax benefit
(0.4
)
 
(0.3
)
 
0.9

Tax credits
(0.2
)
 
(1.7
)
 
(61.8
)
Foreign taxes at less than the federal statutory rate (including tax holidays)
(1.3
)
 
(7.1
)
 
(46.1
)
Federal and foreign valuation allowance
48.3

 
83.0

 
168.0

Withholding taxes
0.1

 
1.1

 
3.0

Unremitted earnings
(1.1
)
 
5.8

 
(3.7
)
Dividends
5.7

 
3.0

 
100.1

Life insurance
(0.1
)
 
(0.2
)
 
(2.7
)
Foreign branch activity
(1.2
)
 
(3.1
)
 
(8.1
)
Uncertain tax positions
0.1

 
(2.0
)
 
6.7

Effects of US Tax Reform
(2.4
)
 
—

 
—

Other, net
3.0

 
1.5

 
4.0

Effective federal income tax rate
15.5
 %
 
45.0
 %
 
125.3
 %

 
At December 31, 2017, total deferred tax assets were $168,706,000, total deferred tax liabilities were $29,875,000 and the tax valuation allowance total was $167,203,000 for a net deferred income tax liability of $28,372,000 compared to total deferred tax assets of $174,251,000, total deferred tax liabilities of $30,512,000 and a tax valuation allowance total of $173,981,000 for a net deferred income tax liability of $30,242,000 at December 31, 2016.

Significant components of long-term deferred income tax assets and liabilities at December 31, 2017 and 2016 are as follows (in thousands):
 
2017
 
2016
Bad Debt
$
1,237

 
$
2,952

Warranty
2,949

 
4,861

Other accrued expenses and reserves
1,419

 
1,263

Inventory
3,096

 
3,605

Goodwill and intangibles
(24,939
)
 
(24,694
)
Convertible debt
916

 
(319
)
Fixed assets
(4,158
)
 
(5,499
)
Compensation and benefits
9,206

 
8,491

Loss and credit carryforwards
118,374

 
124,901

Product liability
2,375

 
4,044

State and local taxes
29,134

 
21,692

Valuation allowance
(167,203
)
 
(173,981
)
Other, net
(778
)
 
2,442

Net Deferred Income Taxes
$
(28,372
)
 
$
(30,242
)

The company recorded a valuation allowance for its U.S. and certain foreign country net deferred tax assets where it is, or is projected to be in a three-year cumulative loss. The company made net payments for income taxes of $15,377,000, $26,663,000, and $7,966,000 during the years ended December 31, 2017, 2016 and 2015, respectively. 2016 net tax payments included a foreign tax payment for an item currently being contested in the courts.

At December 31, 2017, the company had foreign tax loss carryforwards of approximately $81,281,000 of which $7,667,000 expire by 2024 and the remaining are non-expiring all of which are offset by valuation allowances. At December 31, 2017, the company also had $659,065,000 of domestic state and local tax loss carryforwards, of which $220,585,000 expire between 2018 and 2021, $212,154,000 expire between 2022 and 2031 and $226,326,000 expire after 2031. The company has a federal domestic net operating loss carryforward of $287,138,000 which expires between 2034 and 2037 and federal tax credit carryforwards of $34,928,000 of which $23,290,000 expire between 2018 and 2020 and $10,029,000 expire between 2020 and 2027, $1,609,000 expire between 2031 and 2037.

As of December 31, 2017 and 2016, the company had a liability for uncertain tax positions, excluding interest and penalties of $1,896,000 and $2,337,000, respectively. The total liabilities associated with unrecognized tax benefits that, if recognized, would impact the effective tax rates were $1,896,000 and $2,337,000 at December 31, 2017 and 2016, respectively.

A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in thousands):
 
2017
 
2016
Balance at beginning of year
$
3,468

 
$
9,553

Additions to:
 
 
 
Positions taken during the current year
40

 
54

Positions taken during a prior year
49

 
280

Exchange rate impact
19

 
57

Deductions due to:
 
 
 
Exchange rate impact
—

 
(11
)
Positions taken during a prior year
(176
)
 
(42
)
Settlements with taxing authorities
—

 
(6,245
)
Lapse of statute of limitations
(535
)
 
(178
)
Balance at end of year
$
2,865

 
$
3,468



The company recognizes interest and penalties associated with uncertain tax positions in income tax expense. During 2017, 2016 and 2015 the expense for interest and penalties was $30,000, $288,000 and $315,000, respectively. The company had approximately $842,000 and $813,000 of accrued interest and penalties as of December 31, 2017 and 2016, respectively.































The company and its subsidiaries file income tax returns in the U.S. and certain foreign jurisdictions. The company is subject to U.S. federal income tax examinations for calendar years 2014 to 2017 with limited exceptions, and is subject to various U.S. state income tax examinations for 2013 to 2017. With regards to foreign income tax jurisdictions, the company is generally subject to examinations for the periods 2011 to 2017.