Entity information:
INCOME TAXES
Income before income tax expense consists of the following (in thousands):
 
2017
 
2016
 
2015
U.S. operations
$
62,609

 
$
107,803

 
$
77,996

Foreign operations
15,983

 
19,735

 
25,423

Total
$
78,592

 
$
127,538

 
$
103,419


Income tax (benefit) expense is comprised of the following (in thousands):
 
2017
 
2016
 
2015
Current:
 
 
 
 
 
Federal
$
11,712

 
$
11,980

 
$
24,988

State
2,404

 
2,840

 
6,101

Foreign
3,918

 
4,588

 
6,224

Total current
18,034

 
19,408

 
37,313

Deferred:
 
 
 
 
 
Federal
(20,595
)
 
23,814

 
(1,098
)
State
2,541

 
2,347

 
505

Foreign
(1,580
)
 
(145
)
 
751

Total deferred
(19,634
)
 
26,016

 
158

Income tax (benefit) expense
$
(1,600
)
 
$
45,424

 
$
37,471


The following table sets forth the tax effects of temporary differences that give rise to the deferred tax assets and liabilities (in thousands):
 
December 31,
2017
 
December 31,
2016
Deferred tax assets
 
 
 
Accounts receivable, principally due to allowance for doubtful accounts
$
858

 
$
2,985

Inventories
5,939

 
8,294

Net operating loss carryforwards
7,460

 
6,664

Accrued pension
5,591

 
7,637

Stock-based compensation
2,972

 
6,493

Compensation-related accruals
3,063

 
4,928

Warranty
1,779

 
3,222

Obligation for post-employment benefits other than pension
1,312

 
2,267

Accrued liabilities and other items
3,886

 
8,537

Gross deferred tax assets
32,860

 
51,027

Valuation allowance
(4,789
)
 
(6,161
)
Net deferred tax assets
28,071

 
44,866

Deferred tax liabilities:
 
 
 
Intangibles
(58,701
)
 
(86,961
)
Plant and equipment
(24,041
)
 
(34,759
)
Gross deferred tax liabilities
(82,742
)
 
(121,720
)
Net deferred tax liabilities
$
(54,671
)
 
$
(76,854
)

Income taxes paid, net of refunds received, by the Company during 2017, 2016, and 2015, totaled $22.4 million, $27.4 million, and $40.8 million, respectively.
As of December 31, 2017, the Company had net operating loss carryforwards totaling approximately $30.0 million in the United Kingdom, Germany and Brazil. The net operating loss carryforwards may be carried forward indefinitely. The Company regularly evaluates positive and negative evidence as it relates to realizability of deferred tax assets in each jurisdiction. As a result of this analysis, the Company determined that the valuation allowance related to United Kingdom net operating losses should be reversed in the current period as a history of positive earnings and anticipated future earnings supports the realization of the deferred tax asset. The result of this reversal was an income tax benefit of $2.6 million. The Company still provides a valuation allowance against Germany and Brazil net foreign deferred tax assets (principally the net operating loss carryforwards) due to the uncertainty that they can be realized.
The following table sets forth a reconciliation of the statutory federal income tax rate to the effective income tax rate:
 
2017
 
2016
 
2015
Federal statutory tax rate
35.0
 %
 
35.0
 %
 
35.0
 %
Increase (decrease) in the tax rate resulting from:
 
 
 
 
 
State taxes, net of federal effect
5.2
 %
 
3.3
 %
 
4.4
 %
Effect of tax rates of other countries
(1.8
)%
 
(1.4
)%
 
(2.4
)%
Section 199 deduction
(0.7
)%
 
(0.8
)%
 
(0.9
)%
Change in contingency reserve
—
 %
 
(0.2
)%
 
(0.2
)%
  Limitation on deduction of officer’s compensation
1.3
 %
 
0.6
 %
 
0.5
 %
Tax Act
(33.9
)%
 
—
 %
 
—
 %
Valuation Allowance Release
(3.3
)%
 
—
 %
 
—
 %
Other
(3.8
)%
 
(0.9
)%
 
(0.2
)%
Effective tax rate
(2.0
)%
 
35.6
 %
 
36.2
 %

On December 22, 2017, the Tax Cuts and Jobs Acts (“Tax Act”) was enacted into law. The new tax legislation represents a fundamental and dramatic shift in U.S. taxation. The new legislation contains several key tax provisions that will impact the Company, including the reduction of the corporate income tax rate from 35% to 21% effective January 1, 2018. The new legislation also includes a variety of other changes, such as a one-time transition tax on unrepatriated accumulated foreign earnings, a limitation on the tax deductibility of interest expense, repeal of the Section 199 domestic production activities deduction, acceleration of business asset expensing, and reduction in the amount of executive pay that could qualify as a tax deduction, among others. ASC 740 requires the Company to recognize the effect of the tax law changes in the period of enactment.
At December 31, 2017 the Company had not completed the accounting for the tax effects of enactment of the Tax Act; however, as described below the Company made a reasonable estimate of the effects on existing deferred tax balances and the one-time transition tax. The Company recorded an estimated benefit as a result of the new legislation of $26.6 million in the fourth quarter of 2017. The revaluation of deferred tax assets and liabilities at the lower corporate rate of 21% resulted in a benefit of $28.3 million, offset by a one-time transition tax on unrepatriated accumulated foreign earnings of $0.2 million and a withholding tax on distribution of those earnings in the amount of $1.5 million. The ultimate impact of the Tax Act may differ from this estimate, possibly materially, due to changes in interpretations and assumptions, and guidance that may be issued and actions taken in response to the Tax Act. The Tax Act is highly complex and the Company continues to assess the impact that various provisions will have on the business. However, the SEC staff has issued SAB 118 which will allow the Company to record provisional amounts during a one year remeasurement period. The Company will continue to assess the impact of the recently enacted tax law on our business and our consolidated financial statements.
The following table summarizes the activity related to the Company's unrecognized tax benefits during 2017, 2016, and 2015 (in thousands):
 
2017
 
2016
 
2015
Balance, beginning of the year
$
875

 
$
4,407

 
$
4,922

Additions for tax position related to the current year
125

 
125

 
125

Additions for tax position related to the prior year
—

 
56

 
134

Decreases for tax position related to the prior year
—

 
(250
)
 
(774
)
Prior year reductions:
 
 
 
 
 
Lapse of statute of limitations
(125
)
 
(125
)
 
—

Settlements
—

 
(3,338
)
 
—

Balance, end of the year
$
875

 
$
875

 
$
4,407


All of the unrecognized tax benefits as of December 31, 2017, if recognized, would affect the Company's effective tax rate. During 2017, 2016, and 2015, respectively, the Company recognized zero, $0.1 million and $0.1 million of interest and penalties. The Company has paid all accrued interest and penalties recognized prior to December 31, 2017, therefore the Company has no accruals for the payment of interest and penalties as of December 31, 2017 and 2016.
As of December 31, 2017, the Company is subject to U.S. Federal Income Tax examination for the tax years 2007 through 2017, and to non-U.S. income tax examination for the tax years 2010 to 2017. In addition, the Company is subject to state and local income tax examinations for the tax years 2007 through 2017.