Income Taxes
The Tax Cuts and Jobs Act of 2017 (“the 2017 Tax Act”) was signed into law on December 22, 2017. The 2017 Tax Act significantly revises the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21%, eliminating certain deductions and introducing new tax regimes. The 2017 Tax Act also enhanced and extended through 2026 the option to claim accelerated depreciation deductions on qualified property. The Company has not completed its determination of the accounting implications of the 2017 Tax Act on its tax accruals. However, management has reasonably estimated the effects of the 2017 Tax Act and recorded provisional amounts in the Company’s financial statements as of December 31, 2017, including a provisional tax benefit for the impact of the 2017 Tax Act of approximately $13.5 million. This amount is primarily comprised of the remeasurement of federal net deferred tax liabilities resulting from the permanent reduction in the U.S. statutory corporate tax rate to 21% from 35%. Additional information that may affect the Company’s provisional amounts would include further clarification and guidance on how the IRS will implement tax reform, further clarification and guidance on how state taxing authorities will implement tax reform, including the related effect on the Company’s state income tax returns, completion of the Company’s 2017 tax return filings and the potential for additional guidance from the SEC or the FASB related to tax reform. Management may make adjustments to the provisional amounts as a result this additional information and those adjustments may materially impact the Company’s provision for income taxes in the period in which the adjustments are made.
The provisions for income tax expense are summarized as follows for the years ended December 31:
|
| | | | | | | | | | | |
In Thousands | 2017 | | 2016 | | 2015 |
Current: | | | | | |
Federal | $ | 24,421 |
| | $ | 17,139 |
| | $ | 7,918 |
|
State | 1,411 |
| | 1,098 |
| | 546 |
|
Deferred: | | | | | |
Federal | (13,289 | ) | | (905 | ) | | 16,486 |
|
State | 316 |
| | (357 | ) | | (171 | ) |
Total Income Tax Expense | $ | 12,859 |
| | $ | 16,975 |
| | $ | 24,779 |
|
The differences between the provision for income taxes and income taxes computed using the federal income tax rate are as follows for the years ended December 31:
|
| | | | | | | | | | | |
In Thousands | 2017 | | 2016 | | 2015 |
Amount computed using the statutory rate | $ | 27,956 |
| | $ | 17,769 |
| | $ | 25,334 |
|
State income taxes, net of federal tax benefit | 1,166 |
| | 482 |
| | 244 |
|
Qualified domestic production activity deduction | (2,464 | ) | | (1,712 | ) | | (859 | ) |
Effect of 2018 deferred rate change | (13,463 | ) | | — |
| | — |
|
Other | (336 | ) | | 436 |
| | 60 |
|
Total Income Tax Expense | $ | 12,859 |
| | $ | 16,975 |
| | $ | 24,779 |
|
The domestic production activity deduction reduced the Company’s effective tax rate 3.1%, 3.4% and 1.2% in 2017, 2016 and 2015, respectively. The 2017 Tax Act eliminated the qualified domestic production activities deduction beginning in 2018.
The tax effect of each type of temporary difference giving rise to the net deferred tax liability at December 31, 2017 and 2016 is as follows:
|
| | | | | | | |
In Thousands | 2017 | | 2016 |
Depreciation | $ | (22,121 | ) | | $ | (30,845 | ) |
Inventory | (486 | ) | | (5,807 | ) |
Allowance for doubtful accounts | 457 |
| | 738 |
|
Uniform capitalization rules | 610 |
| | 932 |
|
Other | 541 |
| | 1,009 |
|
Deferred income tax liability | $ | (20,999 | ) | | $ | (33,973 | ) |
The Company made income tax payments of $30.0 million in 2017, $6.7 million in 2016 and $14.0 million in 2015.
The Company was audited by the IRS for the year 2015. The audit concluded with no adjustments. The Company’s federal income tax returns for the years subsequent to December 31, 2015 remain subject to examination. The Company’s income tax returns in major state income tax jurisdictions remain subject to examination for various periods subsequent to December 31, 2012. The Company has no reserves for uncertain tax positions as of December 31, 2017 and 2016. Interest and penalties resulting from audits by tax authorities have been immaterial and are included in the provision for income taxes in the consolidated statements of income.