MCBC Holdings, Inc.

11. INCOME TAXES

Earnings from continuing operations before income taxes and equity by jurisdiction were all in the U.S. except for a loss of $53 and income of $53 in 2017 and 2016, respectively.

For the years ended June 30, the components of the provision for income taxes are as follows:


	For the Years Ended June 30,
	2017		2016		2015
Current income tax expense:
Federal	$	5,803	$	10,530	$	436
State and other		1,584		2,020		96
Benefit of operating loss carryforwards		(118)		(319)		—
Total current tax expense		7,269		12,231		532
Deferred tax expense:
Federal		4,154		(3,583)		5,636
State and other		300		(340)		426
Total deferred tax expense		4,454		(3,923)		6,062
Income tax expense	$	11,723	$	8,308	$	6,594

The difference between the statutory and the effective federal tax rate for the periods below is attributable to the following:


	For the Years Ended June, 30
	2017		2016		2015
Statutory income tax rate	35.00	%	35.00	%	34.00	%
State taxes (net of federal income tax benefit and valuation allowance)	2.83		0.41		2.73
Valuation allowance	—		0.06		0.30
Tax credits	(0.62)		(2.82)		—
Other	0.04		(0.21)		(2.95)
Uncertain tax positions	1.93		6.06		(0.55)
Permanent differences	(1.72)		6.36		20.84
Effective income tax rate	37.46	%	44.86	%	54.37	%

As of June 30, 2017 and 2016, a summary of the significant components of the Company’s deferred tax assets and liabilities was as follows:


	2017		2016
Deferred tax assets:
Warranty reserves	$	4,392	$	4,301
Repurchase agreements		362		280
Other reserves		121		998
Unrecognized tax benefits		859		719
Stock Compensation		336		4,527
State net operating loss		130		130
Foreign net operating loss		104		117
Valuation allowance		(234)		(247)
Total deferred tax assets		6,070		10,825
Deferred tax liabilities:
Depreciation		(984)		(907)
Intangible asset basis difference		(6,037)		(6,406)
Other		(2)		(11)
Total deferred tax liabilities		(7,023)		(7,324)
Net deferred tax assets (liabilities)	$	(953)	$	3,501


	2017		2016
Noncurrent deferred tax assets		—		3,501
Noncurrent deferred tax liabilities		(953)		—
Net deferred tax assets (liabilities)	$	(953)	$	3,501

The Company has state net operating loss (NOL) carryforwards of $3,013 that expire in varying years ranging from June 30, 2024 to June 30, 2029, and foreign NOL carryforwards of $494 that can be carried forward indefinitely. However, the Company determined that it is more likely than not that the benefit from these state and foreign NOL carryforwards will not be realized. In recognition of this risk, the Company has provided a full valuation allowance on the deferred tax assets relating to these state and foreign NOL carryforwards.

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding accrued amounts for interest and penalties, is as follows:


	2017		2016
Balance at July 1	$	2,054	$	328
Additions based on tax positions related to the current year		413		623
Additions for tax positions of prior years		—		1,143
Reductions for tax positions of prior years		(25)		(40)
Balance at June 30	$	2,442	$	2,054

Of this total, $910 and $667 as of June 30, 2017 and 2016, respectively represent the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The total amount of interest and penalties recorded in the consolidated statements of operations for the years ended June 30, 2017, and 2016 were a benefit of $355 and $57, respectively. The amounts accrued for interest and penalties at June 30, 2017 and 2016 were $490 and $135 respectively.

In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. As of June 30, 2017, the Company has not made a provision for U.S. or additional foreign withholding taxes on investments in foreign subsidiaries that are indefinitely reinvested. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances.

The Company and its subsidiaries are subject to U.S. federal income tax, as well as various other income state taxes and foreign income taxes. The Company is no longer subject to examination by taxing authorities for years before June 30, 2011. The Company expects the total amount of unrecognized benefits to increase by approximately $845 in the next twelve months.