NOTE 6: INCOME TAXES

The following table lists the components of the provision for income taxes:

Years ended December 31,	2016			2015		2014
(in thousands)
Current provision:
Federal	$	7,263		$	5,056	$	4,275
State		261			300		143
Deferred (benefit) provision:
Federal		(507	)		1,256		(762	)
State		(355	)		53		(43	)
Total income tax provision	$	6,662		$	6,665	$	3,613

A reconciliation between the federal statutory rate and Marine Products’ effective tax rate is as follows:

Years ended December 31,	2016			2015			2014
Federal statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		0.7			0.8			0.7
Research and experimentation credit		(1.0	)		(1.1	)		(2.1	)
Tax-exempt interest		(0.4	)		(0.4	)		(1.1	)
Tax-exempt gain on SERP assets		(1.3	)		(0.1	)		(0.5	)
Manufacturing deduction		(3.0	)		(2.5	)		(3.3	)
Change in valuation allowance		(1.4	)		—			—
Other		(0.1	)		—			0.1
Effective tax rate		28.5	%		31.7	%		28.8	%

Significant components of the Company’s deferred tax assets and liabilities are as follows:

December 31,	2016			2015
(in thousands)
Deferred tax assets:
Warranty costs	$	1,643		$	1,209
Sales incentives and discounts		725			547
Stock-based compensation		1,015			1,061
Pension		1,993			2,300
Uniform capitalization		298			96
All others		489			418
State credits and NOL’s		5,129			4,967
Valuation allowance		(4,525	)		(4,694	)
Total deferred tax assets		6,767			5,904
Deferred tax liabilities:
Depreciation and amortization expense		(1,103	)		(1,062	)
Basis differences in joint venture		(386	)		(504	)
Net deferred tax assets	$	5,278		$	4,338

Total net income tax payments were $6,546,000 in 2016, $5,797,000 in 2015, and $3,509,000 in 2014. As of December 31, 2016 the Company had net operating loss carry forwards related to state income taxes of approximately $15.5 million, and other state credits of approximately $4.5 million that will expire between 2017 and 2035. As of December 31, 2016 the Company released all valuation allowances related to net operating loss carryforwards due to implemented tax planning strategies, yet retains a valuation allowance on state tax credits of approximately $4.5 million, representing the tax affected amount of state tax credits that the Company does not expect to utilize, against the corresponding deferred tax asset. The Company’s policy is to record interest and penalties related to income tax matters as income tax expense. Accrued interest and penalties were immaterial as of December 31, 2016 and 2015.

As of December 31, 2016 and 2015, our liability for unrecognized tax benefits was $15,000 and $15,000, respectively, all of which would affect our effective rate if recognized. It is reasonably possible that the amount of the unrecognized benefits with respect to our unrecognized tax positions will increase or decrease in the next 12 months. These changes may be the result of, among other things, state tax settlements under voluntary disclosure agreements. However, quantification of an estimated range cannot be made at this time.

The Company and its subsidiaries are subject to U.S. federal and state income tax in multiple jurisdictions. In many cases our uncertain tax positions are related to tax years that remain open and subject to examination by the relevant taxing authorities. The Company’s 2013 through 2016 tax years remain open to examination. Additional years may be open to the extent attributes are being carried forward to an open year.