(5) Income Taxes
Income tax expense/(benefit) attributable to income from continuing operations for the years ended December 31, 2017, 2016 and 2015 consist of:
| Current | Deferred | Total | |||||
| Year ended December 31, 2017: | |||||||
| U.S. federal | $ | -- | (7,625) | (7,625) | |||
| State | -- | (1,815) | (1,815) | ||||
| $ | -- | (9,440) | (9,440) | ||||
| Year ended December 31, 2016: | |||||||
| U.S. federal | $ | -- | (6,973) | (6,973) | |||
| State | -- | (775) | (775) | ||||
| $ | -- | (7,748) | (7,748) | ||||
| Year ended December 31, 2015: | |||||||
| U.S. federal | $ | -- | 705 | 705 | |||
| State | -- | 78 | 78 | ||||
| $ | -- | 783 | 783 | ||||
On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the Act) which made significant changes that affect the Company, primarily due to the lower U.S. Federal tax rate and the repeal of the corporate alternative minimum tax. Beginning January 1, 2018, the Company will be taxed at a 21% federal corporate tax rate. The Company has reflected the impact of this rate on its deferred tax assets and liabilities at December 31, 2017, as it is required to reflect the change in the period in which the law is enacted. The impact of this change was a net benefit of $8,076 in the income tax provision for the period ended December 31, 2017.
The Act also repealed the corporate alternative minimum tax for tax years beginning after January 1, 2018 and provided that prior alternative minimum tax credits (AMT credits) would be refundable. The Company has AMT credits that are expected to be refunded between 2018 and 2021 as a result of the Act. The Company’s 2017 tax provision reflects the release of previously recorded valuation allowances against AMT credit carry-forwards of $2,594, as those credits will now be refundable, net of anticipated sequestration. The expected refundable tax credit of $2,594 has been reclassified to Other assets in the accompanying consolidated financial statements.
The Act is a comprehensive tax reform bill containing a number of other provisions that either currently or in the future could impact the Company, particularly the effect of certain limitations effective for the tax year 2018 and forward (prior losses remain subject to the prior 20 year carryover period) on the use of federal net operating loss carryforwards (NOLs) which will generally be limited to being used to offset 80% of future annual taxable income.
Income tax expense/(benefit) attributable to income from continuing operations differs from the amounts computed by applying the U.S. federal income tax rate of 35 percent effective for 2017 and prior years to pretax income from operations as a result of the following:
| 2017 | 2016 | 2015 | |||||
| Provision at statutory rate | $ | 444 | (8,540) | (959) | |||
| Federal NOLs utilized | (1,515) | -- | -- | ||||
| Federal NOLs generated | -- | 1,569 | 1,611 | ||||
| State NOLs utilized | (173) | -- | -- | ||||
| State NOLs generated | -- | 179 | 185 | ||||
|
Reversal of valuation allowance on AMT credits |
(2,594) | -- | -- | ||||
| Effect of Federal rate reduction | (5,504) | -- | -- | ||||
| Other | (98) | (956) | (54) | ||||
| Total | $ | (9,440) | (7,748) | 783 | |||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The deferred tax effects of temporary differences at December 31, 2017, 2016 and 2015 are as follows:
| December 31, | |||||||
| 2017 | 2016 | 2015 | |||||
| Deferred tax assets: | |||||||
|
Reserves related primarily to losses on divestitures |
$ | 3,337 | 5,101 | 5,386 | |||
| Loss carryforwards | 9,558 | 15,347 | 13,656 | ||||
| Tax credit carryforwards | -- | 2,777 | 2,777 | ||||
| Other, net | 346 | 573 | 614 | ||||
| Total deferred tax assets | 13,241 | 23,798 | 22,433 | ||||
| Less – valuation allowance | 9,558 | 18,124 | 16,433 | ||||
| Total deferred tax assets | 3,683 | 5,674 | 6,000 | ||||
| Deferred tax liabilities: | |||||||
|
Property, plant and equipment, principally due to purchase accounting adjustments, net of impairment charges |
10,385 | 16,930 | 17,065 | ||||
| Prepaid pension costs | 4,305 | 6,302 | 8,337 | ||||
| Total deferred tax liabilities | 14,690 | 23,232 | 25,402 | ||||
| Net deferred tax liability | $ | 11,007 | 17,558 | 19,402 | |||
As of December 31, 2017, the Company has a deferred tax asset related to federal net operating losses (NOLs) of $6,948, all of which has been subject to a valuation allowance. These NOLs originated in 2006 and later years and expire over 20 years. As of December 31, 2017, the Company has a deferred tax asset related to state NOLs of $2,610, all of which has been subject to a valuation allowance. The state NOLs expire in various years 2019 through 2035.
As of December 31, 2017, the Company has reclassified a deferred tax asset relating to federal AMT of $2,777 from the prior year that resulted from the expected refund of those credits. Accordingly, the previously recorded valuation allowance has been released. It should be noted that the Company has recorded an allowance for receivables at December 31, 2017 reflecting the anticipated 6.6% government sequestration of the refundable AMT credits. Although not anticipated to occur, a change in ownership of the Company greater than 50% could have a significant adverse effect on future utilization of net operating losses.
Federal tax return examinations have been completed for all years through 2005 and for the year 2013. The statutes of limitations have run for the tax years 2007 through 2011. The statutes of limitations with respect to the Company's taxes for 2014 through 2017 remain open, subject to possible utilization of loss carryforwards from earlier years. The Company believes adequate provisions for income tax have been recorded for all years, although there can be no assurance that such provisions will be adequate. To the extent that there is a shortfall, any such shortfall for which the Company may be liable could be material.