Note 7: Income Taxes
The income tax benefit attributable to continuing operations during the years ended December 31, 2017, 2016 and 2015 is as follows:
Components of the benefit from income taxes are as follows:
|
For the years ended December 31, |
|
2017 |
|
|
2016 |
|
|
2015 |
|
|
||||||
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current (benefit) provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
|
(28 |
) |
|
$ |
|
8 |
|
|
$ |
|
(105 |
) |
|
|
State |
|
|
|
21 |
|
|
|
|
5 |
|
|
|
|
56 |
|
|
|
Deferred provision (benefit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
|
114 |
|
|
|
|
(3,501 |
) |
|
|
|
(11,843 |
) |
|
|
State |
|
|
|
568 |
|
|
|
|
(38 |
) |
|
|
|
(252 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit related to a change in enacted tax law |
|
|
|
(8,276 |
) |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit from income taxes |
|
$ |
|
(7,601 |
) |
|
$ |
|
(3,526 |
) |
|
$ |
|
(12,144 |
) |
|
A reconciliation of the federal statutory tax amount and our tax benefit is as follows:
|
For the years ended December 31, |
|
|
2017 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|||
|
Tax provision (benefit) at statutory tax rate |
|
$ |
|
3 |
|
|
$ |
|
(3,106 |
) |
|
$ |
|
(11,486 |
) |
|
|
State income taxes, net of federal impact |
|
|
|
3 |
|
|
|
|
(39 |
) |
|
|
|
(182 |
) |
|
|
Research and development tax credit |
|
|
|
(425 |
) |
|
|
|
(439 |
) |
|
|
|
(517 |
) |
|
|
Valuation allowance, net of federal impact |
|
|
|
475 |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
Impact of changes in enacted tax law |
|
|
|
(8,276 |
) |
|
|
|
- |
|
|
|
|
- |
|
|
|
Adjustments to deferred taxes |
|
|
|
506 |
|
|
|
|
4 |
|
|
|
|
(61 |
) |
|
|
Other, net |
|
|
|
113 |
|
|
|
|
54 |
|
|
|
|
102 |
|
|
|
Benefit from income taxes |
|
$ |
|
(7,601 |
) |
|
$ |
|
(3,526 |
) |
|
$ |
|
(12,144 |
) |
|
The Tax Cuts and Jobs Act (the “Tax Act”) was signed into law on December 22, 2017. The Tax Act changed many aspects of U.S. corporate income taxation and included reduction of the corporate income tax rate from 35% to 21%, effective for tax years beginning in 2018. We recognized the tax effects of the Tax Act in the year ended December 31, 2017 and recorded $8.3 million in tax benefits, which relates almost entirely to the remeasurement of deferred tax liabilities to the 21% tax rate. The Company expects the Tax Act changes to result in an effective tax rate of approximately 20% in 2018 and thereafter. Upon completion of our 2017 U.S. income tax return in 2018 we may identify additional remeasurement adjustments to our recorded deferred tax liabilities. We will continue to assess our provision for income taxes as future guidance is issued but do not currently anticipate significant revisions will be necessary. Any such revisions will be treated in accordance with the measurement period guidance outlined in Staff Accounting Bulletin No. 118.
In 2017, we recorded a $0.5 million valuation allowance against our Pennsylvania deferred tax assets due to a change in Pennsylvania tax law. We continue to record a full valuation allowance against our New York deferred tax assets due to the zero percent (0%) state income tax rate for qualified manufacturers. We have determined that federal and other state deferred tax assets are expected to be realized and have not recorded any additional valuation allowances.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our net deferred taxes related to continuing operations are as follows:
|
December 31, |
|
2017 |
|
|
2016 |
|
||||
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
Noncurrent deferred income taxes: |
|
|
|
|
|
|
|
|
|
|
|
Federal and state tax carryforwards |
|
$ |
|
12,894 |
|
|
$ |
|
22,533 |
|
|
Inventory |
|
|
|
549 |
|
|
|
|
649 |
|
|
Share-based compensation |
|
|
|
2,186 |
|
|
|
|
3,506 |
|
|
Receivables |
|
|
|
194 |
|
|
|
|
182 |
|
|
Accrued liabilities |
|
|
|
349 |
|
|
|
|
689 |
|
|
Other |
|
|
|
32 |
|
|
|
|
82 |
|
|
Total deferred tax assets |
|
$ |
|
16,204 |
|
|
$ |
|
27,641 |
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
$ |
|
24,970 |
|
|
$ |
|
44,498 |
|
|
Other |
|
|
|
839 |
|
|
|
|
772 |
|
|
Total deferred tax liabilities |
|
$ |
|
25,809 |
|
|
$ |
|
45,270 |
|
|
Total noncurrent deferred income taxes |
|
$ |
|
9,605 |
|
|
$ |
|
17,629 |
|
We file a U.S. federal income tax return and various state income tax returns. For federal income tax purposes, we had $45.0 million and $53.0 million of net operating loss carryforwards at December 31, 2017 and 2016, respectively. The net operating loss carryforwards begin to expire in 2031. In addition, we have credit carryforwards associated with our research and development activities of $3.1 million and $2.7 million as of December 31, 2017 and 2016, respectively. The research and development credit carryforwards being to expire in 2030.
We have state net operating loss carryforwards of $9.1 million and $9.2 million, of which $7.4 million and $0.0 million, respectively, have a valuation allowance, and state credit carryforwards of $0.2 and $0.3 million at December 31, 2017 and 2016, respectively. The valuation allowance was $2.5 million and $1.6 million at December 31, 2017 and 2016, respectively. The state net operating loss carryforwards begin to expire in 2031. The state credit carryforwards begin to expire in 2027.
We are routinely under audit by federal or state authorities. Our federal tax returns are subject to examination by the IRS for tax years after 2013. We are subject to examination by most state tax jurisdictions for tax years after 2013.