Entity information:

• Entity registrant name: HUTTIG BUILDING PRODUCTS INC
• CIK: 0001093082
• SEC filing page: http://www.sec.gov/Archives/edgar/data/1093082/000156459018004735/0001564590-18-004735-index.htm
• XBRL Instance: http://www.sec.gov/Archives/edgar/data/1093082/000156459018004735/hbp-20171231.xml
• XBRL Cloud Viewer: https://edgardashboard.xbrlcloud.com/flex/viewer/XBRLViewer.html#instance=http://www.sec.gov/Archives/edgar/data/1093082/000156459018004735/hbp-20171231.xml
• EDGAR Dashboard: https://edgardashboard.xbrlcloud.com/edgar-dashboard/?cik=0001093082
• Generator: Donnelley Financial Solutions
• Total assets: 245,900,000
• Income tax expense (benefit): 3,200,000
• Found reconcilation from statutory to effective rates: True
• Found income tax policy: Coming soon!

---

10.    INCOME TAXES

The provision for income taxes, relating to continuing operations, is composed of the following as of December 31, 2017, 2016, and 2015 (in millions):

 

 

A reconciliation of income taxes based on the application of the statutory federal income tax rate to income taxes as set forth in the consolidated statements of operations is as follows for the years ended December 31, 2017, 2016 and 2015:

 

 

At December 31, 2017, our valuation allowance on deferred tax assets was approximately $7.1 million compared to $6.4 million at December 31, 2016. At December 31, 2017 and 2016, the valuation allowance primarily relates to individual state net operating loss carryforwards that are not more likely than not to be realized in future periods. In each reporting period, we assess the available positive and negative evidence to estimate if sufficient future taxable income would be generated to utilize the existing deferred tax assets. Our history of operating losses limits the weight we applied to other subjective evidence such as our projections for future profitability in certain states. Before we change our judgment on the need for a full valuation allowance, a sustained period of operating profitability is required.

In 2017 our net loss required us to maintain and increase the valuation allowance on certain state net operating loss carryforwards. In 2016, our net income improvement and future projections allowed us to release and benefit from $0.8 million in reduction in valuation allowance on certain state net operating loss carryforward. In 2015, our operations were in a position of three year cumulative profits. We concluded that as a result of (i) our cumulative profits, (ii) achieving full year profitability in 2013 and 2014, (iii) the issuance of the DEQ final record of decision on our formerly owned property in Montana and our subsequent completion of the final RAWP approved by the DEQ, (iv) our 2015 business results, and (v) our projections of continued profitability for 2016 and beyond, that it is more likely than not that a significant portion of our deferred tax assets will be realized.  Accordingly, in 2015, we released our valuation allowance on our net deferred tax assets, resulting in a $22.5 million benefit in our provision for income taxes.

The income tax expense from continuing operations for 2017 was $3.2 million on a loss before taxes of $3.0 million. The income tax benefit from discontinued operations for 2017 was $0.6 million on a net loss before taxes of $1.5 million. For 2016, income tax expense of $7.2 million was recorded on income of $20.5 million. In 2017, the difference between our effective tax rate and the U.S. statutory rate was primarily due to the change in statutory rates on our net deferred tax assets, as discussed below.

At December 31, 2017, the Company had gross deferred tax assets of $23.0 million and a valuation allowance of $7.1 million, netting to deferred tax assets of $15.9 million. The company had deferred tax liabilities of $6.2 million at December 31, 2017. The Company had $9.7 million and $10.3 million net deferred tax assets at December 31, 2017 and 2016, respectively.

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act tax reform legislation. This legislation makes significant change in U.S. tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from the current rate of 35% to 21%. As a result of the enacted law, the Company was required to revalue deferred tax assets and liability at the enacted rate. This revaluation resulted in $4.5 million of income tax expense in continuing operations and a corresponding reduction in the deferred tax asset.  The other provisions of the Tax Cuts and Jobs Act did not have a material impact on the 2017 financial statements. 

 

Deferred income taxes at December 31, 2017 and 2016 are comprised of the following (in millions):

 

 

The Company has both federal and state tax loss carryforwards reflected above. The Company’s federal tax loss carryforwards of approximately $41 million will begin to expire in 2030. The Company has substantially concluded all U.S. federal income tax matters for years through 2009. The state tax loss carryforwards have expiration dates from 2018 to 2036. The Company has no material uncertain tax positions at December 31, 2017.