Income before taxes and the provision for taxes consisted of the following:

 

In Thousands		2017			2016			2015
Income before taxes:		$	15,517		$	15,542		$	15,674
Provision for taxes:
Current
Federal		$	4,191		$	4,060		$	1,670
State			212			363			237
			4,403			4,423			1,907
Deferred
Federal			(2,441)			1,453			1,909
State			(506)			(1,827)			252
			(2,947)			(374)			2,161
		$	1,456		$	4,049		$	4,068

 

The provision for income taxes was computed based on financial statement income. A reconciliation of the provision for income taxes to the amount computed using the statutory rate follows:

 

In Thousands		2017			2016			2015
Income tax at statutory rate		$	5,431		$	5,439		$	5,486
Increase (decrease) in income tax resulting from
State tax expense, net of federal effect			(191)			194			318
Federal true-ups			193			8			(38)
Federal tax credits			(242)			(189)			(802)
Effect of foreign tax rates			(399)			(443)			(474)
Valuation allowances (state and foreign)			(148)			19			—
Captive insurance earnings			(128)			311			(361)
Incentive stock options			(22)			20			57
Deferred state rate adjustments			—			(1,194)			—
Tax Cuts &; Jobs Act of 2017			(2,986)			—			—
Other			(52)			(116)			(118)
Recorded provision for income taxes		$	1,456		$	4,049		$	4,068

 

The provision for income taxes was computed based on financial statement income. In accordance with FASB ASC 740, the Company does not have any uncertain tax positions as of and for the years ended December 30, 2017 and December 31, 2016.

Interest costs and penalties related to income taxes are classified as interest expense and selling, general and administrative costs, respectively in the Company’s financial statements. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and multiple state and foreign jurisdictions. The Company is subject to future examinations by federal, state and other tax authorities for all years after 2013.

 

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “2017 U.S. Tax Reforms”) was signed into law, making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Company has calculated its best estimate of the impact of the 2017 U.S. Tax Reforms and as a result has recorded $3.0 million of income tax benefits during the year ended December 30, 2017. The provisional benefit related to the remeasurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future was $1.8 million. The provisional expense related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings was $0.6 million, based on cumulative foreign earnings of $22.8 million. The reversal of the deferred tax liability of unremitted earnings and the corresponding deferred tax asset for foreign tax credits was a net $1.8 million benefit.

 

On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 U.S. Tax Reforms. In accordance with SAB 118, the Company has recognized the provisional tax impacts related to deemed repatriated earnings and the benefit for the revaluation of deferred tax assets and liabilities in its consolidated financial statements for the year ended December 30, 2017. Additional work is necessary to determine the amount of accumulated foreign earnings and the corresponding foreign tax credit. The final impact may differ from these provisional amounts, possibly materially, due to, among other things, issuance of additional regulatory guidance, changes in interpretations and assumptions the Company has made, and actions the Company may take as a result of the 2017 U.S. Tax Reforms. Any subsequent adjustment to these amounts will be recorded to current tax expense in the quarter of 2018 when the analysis is complete.

 

The components of the net deferred tax liabilities are as follows:

 

In Thousands		2017			2016
Assets
Employee benefits		$	24		$	39
Valuation reserves			869			1,782
Property and equipment			(175)			(129)
Stock based compensation			178			224
Federal and state credits			382			287
Net operating loss carry forward			1			—
Total assets			1,279			2,203
Liabilities
Unrealized equity investment income			—			(2,025)
Goodwill and intangible assets			(3,465)			(4,697)
Prepaid insurance			(123)			(228)
Total liabilities			(3,588)			(6,950)
Valuation Allowance
Beginning balance			(411)			(435)
Decrease during period			251			24
Ending balance			(160)			(411)
		$	(2,469)		$	(5,158)

 

Deferred tax assets (liabilities) are included in the consolidated balance sheets as follows:

 

In Thousands		2017			2016
Deferred income tax asset - current		$	—		$	1,283
Deferred income tax asset (liability) – long-term			(2,469)			(6,441)
		$	(2,469)		$	(5,158)

 

The Company has utilized all state net operating losses during the year ended December 30, 2017.