Note 10.  Income Taxes

The provision for income tax expense consisted of the following:

 

The components of our deferred tax assets and liabilities were as follows:

 

A reconciliation of income tax expense to the statutory federal tax rate of 34% is as follows:

 

Deferred income taxes result from temporary differences between the reporting of amounts for financial statement purposes and income tax purposes. These differences relate primarily to different methods used for income tax purposes including depreciation and amortization, warranty and vacation accruals, and deductions related to allowances for doubtful accounts receivable and inventory reserves.

As of December 31, 2017, we had no U.S. federal net operating loss (“NOL”) carry-forwards and approximately $5.6 million of state NOLs. The state NOL carry-forward amounts expire beginning in tax year 2024 if not utilized.

We are subject to income tax examinations in the U.S. federal jurisdiction as well as in various state jurisdictions. U.S. federal and state tax years prior to 2013 were closed to examination at December 31, 2017.

Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and our effective tax rate in the future. On December 22, 2017, the U.S. President signed into law the Tax Cuts and Jobs Act (the “Act”), which enacted significant tax law changes largely effective for tax years beginning after December 31, 2017. The Act reduces the corporate tax rate to 21 percent, effective January 1, 2018, for all corporations. Because GAAP requires the effect of a change in tax laws or rates to be recognized as of the date of enactment, we have revalued our deferred tax assets and liabilities as of December 22, 2017. As a result of the revaluation of our deferred tax assets and liabilities, we have accounted for $1.2 million of tax expense as a discrete item in our provision for income taxes for the year ended December 31, 2017.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. As of December 31, 2017, we had an unrecognized tax benefit ("UTB") with respect to state income taxes of approximately $0.2 million. The UTB represents estimated tax, interest, and penalties related to unfiled and unpaid income taxes in several state jurisdictions. We recognize interest and penalties accrued related to unrecognized tax benefits in tax expense. We are pursuing actions to settle outstanding liabilities and ensure we are compliant in all tax jurisdictions.

We are currently under examination by the U.S. Internal Revenue Service for tax year 2016. We are not under examination by any other taxing jurisdiction. In the event of any future tax assessments, we have elected to record the income taxes and any related interest and penalties as income tax expense on our Statements of Operations