As a REIT, we generally are not subject to federal and state corporate income taxes on income from investments in real estate that we distribute to our shareholders. We conduct certain activities through our PotlatchDeltic TRS which are subject to corporate level federal and state income taxes. These activities are principally comprised of our wood products manufacturing operations and certain real estate investments. Therefore, income tax expense or benefit is primarily due to income or loss of the PotlatchDelticTRS, as well as permanent book versus tax differences.

Deltic’s REIT qualifying activities were also not subject to federal and state corporate income taxes commencing on the date of the merger. We are, however, subject to corporate taxes on built-in gains (the excess of fair market value over tax basis on the merger date) on sales of former Deltic real property held by the REIT during the five years following the Deltic merger. The sale of standing timber is not subject to built-in gains tax.

On December 22, 2017, H.R. 1, Tax Cuts and Jobs Act (the Act) was enacted. The Act contained significant changes to corporate taxation, including the reduction of the corporate tax rate from 35% to 21% effective January 1, 2018. The tax rate reduction required a remeasurement of our deferred tax assets and liabilities as of the date of enactment. Accordingly, net deferred tax assets, including the related valuation allowance, were reduced by $10.7 million and the change was recorded as an increase to the 2017 tax provision. In addition, during 2018 we recorded a net tax benefit of $5.0 million primarily related to deducting contributions to our qualified pension plans on our 2017 federal tax returns at the higher 2017 income tax rate.

(Dollars in thousands)	2018		2017		2016
Current	$	7,038	$	16,657	$	(6,178	)
Deferred		11,370		14,325		2,143
Net operating loss carryforwards		791		1,039		(290	)
Income tax provision (benefit)	$	19,199	$	32,021	$	(4,325	)

Income tax expense differs from the amount computed by applying the statutory federal income tax rate of 21% for 2018 and 35% for 2017 and 2016 to income before income taxes due to the following for the years ended December 31:

(Dollars in thousands)	2018			2017			2016
U.S. federal statutory income tax	$	29,837		$	41,466		$	2,314
REIT income not subject to federal income tax		(8,773	)		(20,651	)		(7,199	)
U.S. tax rate change on deferred tax assets and liabilities		—			10,528			—
Pension contribution deducted at higher tax rate		(5,665	)		—			—
Intercompany profit-in-inventory elimination adjustment		—			—			1,465
Change in valuation allowance		—			140			162
State income taxes, net of federal income tax		3,712			2,608			(740	)
Domestic production activities deduction		—			(1,511	)		(2	)
Permanent book-tax differences		(771	)		(252	)		(218	)
Research and development credits		—			(294	)		(689	)
All other items		859			(13	)		582
Income tax provision (benefit)	$	19,199		$	32,021		$	(4,325	)
Effective tax rate		13.5	%		27.0	%		(65.4	%)

The tax effects of significant temporary differences creating deferred tax assets and liabilities at December 31 were:

(Dollars in thousands)	2018			2017
Deferred tax assets:
Pension and other postretirement employee benefits	$	30,523		$	27,330
Inventories		601			353
Tax credits		2,688			2,443
Nondeductible accruals		1,039			2,566
Incentive compensation		1,000			1,131
Employee benefits		1,452			1,037
Other		320			142
Total deferred tax assets		37,623			35,002
Valuation allowance		(790	)		(790	)
Deferred tax assets, net of valuation allowance		36,833			34,212
Deferred tax liabilities:
Timber and timberlands, net		(1,025	)		(1,432	)
Property, plant and equipment, net		(58,909	)		(12,683	)
Intangible assets, net		(4,134	)		—
Real estate development		(2,035	)		—
Other		(2,739	)		(301	)
Total deferred tax liabilities		(68,842	)		(14,416	)
Deferred tax (liabilities) assets, net	$	(32,009	)	$	19,796

As of December 31, 2018, we had no federal net operating loss carryforwards. State net operating loss and capital loss carryforwards were $1.0 million that expire from 2021 through 2022 and Idaho Investment Tax Credits were $3.2 million that expire from 2019 through 2032. We use the flow-through method of accounting for investment tax credits.

With the exception of the $0.8 million valuation allowance related to certain Idaho Investment Tax Credit carryforwards we expect will expire prior to realization, we believe it is more likely than not that we will have sufficient future taxable income to realize our deferred tax assets.

The following table summarizes the tax years subject to examination by major taxing jurisdictions:

As of December 31, 2018, we had $0.6 million of unrecognized tax benefits which, if recognized, would impact the effective tax rate. There was $0.6 million unrecognized tax benefits at December 31, 2017 and $0.9 million unrecognized tax benefits at December 31, 2016. We currently believe there is a reasonable possibility that the amounts of unrecognized tax benefits will decrease in the next 12 months based on the closing of certain ongoing state tax examinations.

A reconciliation of the beginning and ending unrecognized tax benefits is as follows:

(Dollars in thousands)	2018		2017
Balance at January 1	$	564	$	850
Additions for tax positions of prior years		—		8
Reduction for tax positions of prior years		—		(294	)
Balance at December 31	$	564	$	564

We reflect accrued interest related to tax obligations, as well as penalties, in our provision for income taxes. For the years ended December 31, 2018, 2017 and 2016, we recognized insignificant amounts related to interest and penalties in our tax provision. At December 31, 2018, 2017 and 2016, we had insignificant amounts of accrued interest related to tax obligations and no accrued interest receivable with respect to open tax refunds.