11. Income Taxes

The provision for income tax expense (benefit) consists of the following:



	Year ended December 31
	2018		2017		2016
Current:
Federal	$	3,953	$	11,897	$	16,664
State		1,736		988		1,866
		5,689		12,885		18,530
Deferred:
Federal		5,001		(17,264)		4,930
State		1,164		1,970		1,227
		6,165		(15,294)		6,157
	$	11,854	$	(2,409)	$	24,687

A reconciliation of income tax expense computed at the federal statutory rate to the provision for income taxes for the years ended December 31, 2018, 2017 and 2016 is as follows:



	2018		2017		2016
Federal income tax expense at statutory rate	$	11,709	$	18,520	$	22,294
State taxes, net of federal benefit		2,349		1,539		2,547
Change in uncertain tax positions, net		(1,292)		1,043		50
Research and development credit		(226)		(160)		(274)
State rate change		287		240		64
Manufacturing tax benefits		-		(933)		(1,248)
Prior period adjustments		-		-		1,096
Federal deferred rate change		(836)		(22,452)		-
Other		(137)		(206)		158
	$	11,854	$	(2,409)	$	24,687

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



	December 31,
	2018		2017
Deferred tax assets:
Allowance for doubtful accounts	$	212	$	259
Inventory reserves		1,353		967
Warranty liability		1,559		1,421
Deferred compensation		1,264		781
Earnout liabilities		516		694
Pension and retiree health benefit obligations		1,219		3,242
Accrued vacation		702		656
Medical claims reserve		78		189
State net operating losses		4,416		3,386
Other accrued liabilities		2,176		2,092
Valuation allowance		(1,473)		(777)
Total deferred tax assets		12,022		12,910
Deferred tax liabilities:
Tax deductible goodwill and other intangibles		(53,565)		(47,163)
Accelerated depreciation		(6,547)		(5,084)
Other		(108)		68
Total deferred tax liabilities		(60,220)		(52,179)
Net deferred tax liabilities	$	(48,198)	$	(39,269)

Deferred income tax balances reflect the effects of temporary differences between the carrying amount of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

State operating loss carry forwards for tax purposes will result in future tax benefits of approximately $3,721. These loss carry-forwards will begin to expire in 2021. The Company evaluated the need to maintain a valuation allowance against certain deferred tax assets. Based on this evaluation, which included a review of recent profitability, future projections of profitability, and future deferred tax liabilities, the Company concluded that a valuation allowance of approximately $1,473 is necessary at December 31, 2018 for the state net operating loss carry-forwards which are likely to expire prior to the Company's ability to use the tax benefit.

A reconciliation of the beginning and ending liability for uncertain tax positions is as follows:



	2018		2017		2016
Balance at beginning of year	$	3,531	$	2,361	$	490
Increases for tax positions taken in the current year		21		97		73
Increases for tax positions taken in the prior years		146		1,602		1,809
Decreases due to settlements with taxing authorities		(693)		(8)		(11)
Decreases due to lapses in the statute of limitations		(1,210)		(521)		-
Balance at the end of year	$	1,795	$	3,531	$	2,361

The amount of the unrecognized tax benefits that would affect the effective tax rate, if recognized, was approximately $1,174 at December 31, 2018. The Company recognizes interest and penalties related to the unrecognized tax benefits in income tax expense. Approximately $502 and $804 of accrued interest and penalties is reported as an income tax liability at December 31, 2018 and 2017, respectively. The liability for unrecognized tax benefits is reported in Other Long‑term Liabilities on the consolidated balance sheets at December 31, 2018 and 2017.

The Company files income tax returns in the United States (federal) and various states. Tax years open to examination by tax authorities under the statute of limitations include 2015, 2016 and 2017 for Federal and 2014 through 2017 for most states. The Federal 2015 audit have been closed; however, the statute of limitations is still open for this tax year. Tax returns for the 2018 tax year have not yet been filed.

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (“The Act”). Over the long term, the Company generally expects to benefit from the lower statutory rates provided by The Act. The Company operates solely in the United States; therefore, the international provisions of The Act do not apply. The only material item that impacted the Company in 2017 is the reduction in the deferred tax rate. As a result of the reduction in the U.S. corporate income tax rate from 35.0 percent to 21.0 percent under The Act, the Company recorded a reduction to its net deferred tax liability of $22,452, and a corresponding decrease to income tax expense in the Company’s Consolidated Statement of Operations for the year ended December 31, 2017.

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of The Tax Reform Act. As of the financial reporting date, we have recorded all known enactment-date income tax effects of the Act. These adjustments have been recorded as a component of income tax expense and include the revaluation of deferred tax assets and liabilities. In the year ended December 31, 2018, the Company did not have any material tax accounting adjustments to the provisional estimate recorded in the financial statements for the year ended December 31, 2017, the first measurement period under SAB 118 and amounts are now complete.