In December 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”), which included a broad range of tax reform affecting businesses, including the reduction of the federal corporate tax rate from 35% to 21%, changes in the deductibility of certain business expenses, and the manner in which international operations are taxed in the U.S.  Although the majority of the changes resulting from the Act are effective beginning in 2018, U.S. GAAP requires that certain impacts of the Act be recognized in the income tax provision in the period of enactment.  In connection with the enactment of the Act, our income tax provision for the fourth quarter of 2017 included an increase of $17.5 million, reflecting an increase of $16.1 million for the remeasurement of our net deferred tax assets and an increase in tax of $1.4 million due to the deemed repatriation of earnings of our foreign subsidiaries.

As related to the deemed repatriation of earnings of foreign subsidiaries, the Act includes a mandatory one-time tax on accumulated earnings of foreign subsidiaries.  As a result, all previously unremitted earnings for which no U.S. deferred tax liability had been accrued are now subject to U.S. tax.  In accordance with the guidelines provided in the Act, we have aggregated the estimated untaxed foreign earnings and profits, and utilized participating exemption deductions and available foreign tax credits in deriving the $1.4 million repatriation tax, which will be payable currently.  Notwithstanding the U.S. taxation of these amounts, we intend to continue to invest most or all of these earnings indefinitely outside of the U.S., and do not expect to incur any significant additional taxes related to such amounts.

Although we believe that the impact of the Act has been properly reflected in the fourth quarter of 2017, there may be further adjustments in the coming quarters as the relevant authorities provide further guidance on the impacts of the Act. The following includes the impact of the Act on the year ended December 2017 disclosures.

The income tax provision (benefit) consists of the following (in thousands):

 

Reconciliations between taxes at the U.S. Federal income tax rate and taxes at our effective income tax rate on earnings from continuing operations before income taxes are as follows (in thousands):

 

The following is a summary of the components of the net deferred tax assets and liabilities recognized in the accompanying consolidated balance sheets (in thousands):

In assessing the realizability of the deferred tax assets, we consider whether it is more likely than not that some portion or the entire deferred tax asset will be realized.  Ultimately, the realization of the deferred tax asset is dependent upon the generation of sufficient taxable income in those periods in which temporary differences become deductible and/or net operating loss carryforwards can be utilized.  We consider the level of historical taxable income, scheduled reversal of temporary differences, carryback and carryforward periods, tax planning strategies and projected future taxable income in determining whether a valuation allowance is warranted.  We also consider cumulative losses in recent years as well as the impact of one-time events in assessing our pre-tax earnings. Assumptions regarding future taxable income require significant judgment. Our assumptions are consistent with estimates and plans used to manage our business.

 

The valuation allowance of $0.4 million as of December 31, 2017 is intended to provide for uncertainty regarding the ultimate realization of our U.S. foreign tax credit carryovers and foreign net operating loss carryovers.  Based on these considerations, we believe it is more likely than not that we would realize the benefit of the net deferred tax asset of $32.4 million as of December 31, 2017, which is net of the remaining valuation allowance.

 

At December 31, 2017, we have foreign tax credit carryforwards of approximately $0.3 million that will expire in varying amounts by 2020.

 

We are subject to taxation in the U.S. and various state, local and foreign jurisdictions.  As of December 31, 2017, the Company is no longer subject to U.S. Federal tax examinations for years before 2014.  We remain subject to examination by state and local tax authorities for tax years 2013 through 2016.  Foreign jurisdictions have statutes of limitations generally ranging from 2 to 6 years.  Years still open to examination by foreign tax authorities in major jurisdictions include Canada (2013 onward), Hong Kong (2012 onward), Mexico (2013 onward) and Poland (2012 onward).  We do not presently anticipate that our unrecognized tax benefits will significantly increase or decrease over the next 12 months; however, actual developments in this area could differ from those currently expected.