Note

The provision for income taxes is comprised of the following components:

The deferred tax assets and liabilities, consisting of temporary differences tax effected at the respective income tax rates, are as follows:

A reconciliation of income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes is as follows:

 

The exercise of non–qualified stock options results in state and federal income tax benefits to the Company related to the difference between the market price at the date of exercise and the option exercise price. During and $(), and respectively, attributable to the tax (expense) benefit of stock options exercised and restricted stock vested, was recorded. Beginning in such tax benefits are recorded in the income statement. In and prior years, such tax benefits were recorded to capital in excess of par value.

Our deferred tax assets have been evaluated for realization based on historical taxable income, tax planning strategies, the expected timing of reversals of existing temporary differences and future taxable income anticipated. Our deferred tax assets are more likely than to be realized in full due to the existence of sufficient taxable income of the appropriate character under the tax law. As such, there is need for a valuation allowance.

On the U.S. government enacted comprehensive tax reform legislation. The Tax Act makes broad and complex changes to the U.S. tax code that affects including, but limited to, accelerated depreciation that will allow for full expensing of qualified property. The Tax Act also establishes new tax laws that will affect and after, including a reduction in the U.S. federal corporate income tax rate from to

On the SEC staff issued Staff Accounting Bulletin (“SAB ), which provides guidance on accounting for the tax effects of the Tax Act.  SAB provides a measurement period that should extend beyond year from the Tax Act enactment date for companies to complete the accounting under ASC .  In accordance with SAB a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC is complete.  To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.

As a result of the reduction of the federal corporate income tax rate, we have revalued our net deferred tax liability as of   Based on this revaluation, we have recorded a provisional net tax benefit of to reduce our net deferred tax liability balance, which was recorded as income tax benefit for the year ended Our effective tax rate decreased from to primarily as a result of the revaluation of our net deferred tax liability. We have recorded provisional adjustments, but we have completed our accounting for income tax effects for certain elements of the Tax Act. We may make adjustments to the provisional amounts as we complete our analysis of the Tax Act, collect and prepare necessary data, and interpret any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies. Those adjustments may materially impact our provision for income taxes in the period in which the adjustments are made.

Uncertain tax positions arise where tax laws allow for alternative interpretations or where the timing of recognition of income is subject to judgment. We believe we have adequate provisions for unrecognized tax benefits related to uncertain tax positions. However, because of uncertainty of interpretation by various tax authorities and the possibility that there are issues that have been recognized by management, we cannot guarantee we have accurately estimated our tax liabilities. We believe that our liabilities reflect the anticipated outcome of known uncertain tax positions in conformity with ASC Topic . Our liabilities for unrecognized tax benefits are presented in the consolidated balance sheets within other noncurrent liabilities.

 

Also, under ASC Topic tax positions are evaluated for recognition using a more–likely–than–not threshold, and those tax positions requiring recognition are measured at the largest amount of tax benefit that is greater than percent likely of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.

In accordance with current guidance, the Company has established a liability for unrecognized tax benefits, which are differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured. Generally, a liability is created for an unrecognized tax benefit because it represents a company’s potential future obligation to a taxing authority for a tax position that was recognized per above.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

During the year ended we have recognized a decrease in unrecognized tax benefits and an accompanying decrease of related interest and penalties due to the effect of statute of limitations lapse. The favorable impact on our tax provision was During the years ended and the favorable impact on our tax provision due to the effect of statute of limitations lapsing was and respectively.

Unrecognized tax benefits of net of federal benefit at attributable to permanent differences, would favorably impact our effective tax rate if recognized.  We do expect significant increases or decreases in unrecognized tax benefits within the months beginning except for the effect of decreases related to the lapse of statute of limitations estimated at

At the end of we remeasured the deferred tax asset associated with the liability for unrecognized tax benefits to reflect the change in federal tax rates. This change resulted in a reduction of deferred tax asset of and corresponding deferred tax expense of

Interest and penalties expense related to U.S. federal and state income tax returns are included within income tax expense. Interest and penalties expense was $(), and for the years ended and respectively.

The Company is longer subject to U.S. federal and state examinations by tax authorities for years before (with few state exceptions).