INCOME TAXES
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Table 14.1: Components of Income Tax Expense |
| For the Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
| (in thousands) |
Current income tax expense | $ | 19,980 |
| | $ | 16,323 |
| | $ | 5,929 |
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Deferred tax (benefit)/expense | (3,414 | ) | | 6,504 |
| | 3,407 |
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Income tax expense | $ | 16,566 |
| | $ | 22,827 |
| | $ | 9,336 |
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Table 14.2: Components of Income before Provision for Income Taxes by Country |
| For the Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
| (in thousands) |
United States | $ | 75,940 |
| | $ | 67,128 |
| | $ | 27,090 |
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Canada | 474 |
| | (277 | ) | | (1,018 | ) |
Income before provision for income taxes | $ | 76,414 |
| | $ | 66,851 |
| | $ | 26,072 |
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Table 14.3: Reconciliation of Tax Expense at Statutory Tax Rate to Actual Tax Expense |
| For the Year Ended December 31, |
| 2017 | | 2016 | | 2015 |
| (in thousands) |
Tax expense at statutory rate | $ | 26,745 |
| | $ | 23,398 |
| | $ | 9,124 |
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Increase/(decrease) due to: | | | | | |
U.S./Canadian tax rate differential | (94 | ) | | 21 |
| | (18 | ) |
U.S. state taxes net of federal benefit | 1,339 |
| | 1,045 |
| | 401 |
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Non-deductible (benefit)/expense | (104 | ) | | 144 |
| | 166 |
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Domestic production activities deduction | (1,870 | ) | | (1,719 | ) | | (356 | ) |
Tax credits | — |
| | (12 | ) | | (147 | ) |
Change in valuation allowance | (60 | ) | | 27 |
| | 272 |
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Tax Cuts and Jobs Act of 2017 | (9,168 | ) | | — |
| | — |
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Other | (222 | ) | | (77 | ) | | (106 | ) |
Income tax expense | $ | 16,566 |
| | $ | 22,827 |
| | $ | 9,336 |
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Statutory tax rate | 35.00 | % | | 35.00 | % | | 35.00 | % |
Effective tax rate | 21.68 | % | | 34.15 | % | | 35.81 | % |
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Table 14.4: Components of Deferred Tax Assets and Liabilities |
| As of December 31, |
| 2017 | | 2016 |
| (in thousands) |
Deferred tax assets: | | | |
Reserves and other liabilities | $ | 916 |
| | $ | 3,220 |
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Tax loss carryforwards | 313 |
| | 661 |
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Acquisition costs and intangibles | 531 |
| | 498 |
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Equity investment | 883 |
| | 1,503 |
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Deferred compensation | 760 |
| | 877 |
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Inventory | 536 |
| | 1,432 |
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State depreciation | 201 |
| | 95 |
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Other | 141 |
| | 83 |
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Valuation allowance | (507 | ) | | (693 | ) |
Total deferred tax assets | $ | 3,774 |
| | $ | 7,676 |
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Deferred tax liabilities: | | | |
Prepaids | $ | 402 |
| | $ | 543 |
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Acquisition costs and intangibles | 2,214 |
| | 1,074 |
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Depreciation, amortization and other | 15,909 |
| | 24,012 |
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Unrealized gains on hedges | 355 |
| | 788 |
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Total deferred tax liabilities | 18,880 |
| | 26,417 |
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Net deferred tax liability | $ | 15,106 |
| | $ | 18,741 |
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On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "Act") was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred and the creation of new taxes on certain foreign sourced earnings. Due to the timing of the enactment and the complexity involved in applying the provisions or the Act, the Company has calculated its best estimate of the impact of the Act in its year end income tax provision in accordance with its understanding of the Act and guidance available as of the date of this filing and as a result has recorded $9.2 million reduction in income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted. The provisional amount relates to the remeasurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is approximately 22.7%. The provisional amount related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings was zero, based on our estimate of foreign earnings. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additionally regulatory guidance may be issued, and actions the Company may take as a result of the Act. The accounting is expected to be complete when the 2017 U.S. Federal and state corporate income tax returns are filed in late 2018.
The Company is subject to audit examinations at federal, state and local levels by tax authorities in those jurisdictions. In addition, the Canadian operations are subject to audit examinations at federal and provincial levels by tax authorities in those jurisdictions. The tax matters challenged by the tax authorities are typically complex; therefore, the ultimate outcome of any challenges would be subject to uncertainty. The Company has not identified any issues that did not meet the recognition threshold or would be impacted by the measurement provisions of the uncertain tax position guidance.
As of December 31, 2017 and 2016 the Company did not have any unrecognized tax benefits. The Company does not expect the amount of any unrecognized tax benefits to significantly increase in the next twelve months. The Company recognizes interest related to income tax matters as interest expense and penalties related to income tax matters as other non-interest expense. As of December 31, 2017 and 2016, the Company does not have any amounts accrued for interest or penalties.