On December 22, 2017, the President of the United States signed into law the Tax Reform Act. The legislation significantly changed U.S. tax law by lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries, among others. The Tax Reform Act also added many new provisions including changes to bonus depreciation and the deductions for executive compensation and interest expense. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018.

The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act, the Company revalued its ending net deferred tax liabilities at December 31, 2017 and recognized a provisional $11.1 million tax benefit in the Company’s consolidated statements of operations for the year ended December 31, 2017.

The Tax Reform Act provided for a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits through the year ended December 31, 2017. The Company had an estimated $54.5 million of undistributed foreign earnings and profits subject to the deemed mandatory repatriation and recognized a provisional $5.3 million of income tax expense in the Company’s consolidated statements of operations for the year ended December 31, 2017. After the utilization of existing net operating loss carryforwards, the Company did not incur any U.S. federal cash taxes resulting from the deemed mandatory repatriation.

While the Tax Reform Act provides for a territorial tax system, beginning in 2018, it includes the global intangible low-taxed income (“GILTI”) provisions that require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. GAAP allows companies to make an accounting election to either treat taxes due on future GILTI inclusions in U.S. taxable income as current period expense when incurred (“period cost method”) or factor such amounts into the measurement of its deferred taxes (“deferred method”). The Company has elected to use the period cost method.

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of 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. The Company recognized the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred tax assets and liabilities and included those estimated amounts in its consolidated financial statements for the year ended December 31, 2017. During the year ended December 31, 2018, the Company finalized the accounting for these items and recorded an adjustment to reduce the amount of income tax expense attributable to the deemed mandatory repatriation of foreign subsidiary earnings and profits by $0.5 million. The final adjustment required to revalue net deferred tax liabilities was immaterial.


	Year Ended December 31, 2019		Year Ended December 31, 2018		Year Ended December 31, 2017

Domestic	$	(40,169)	$	(28,793)	$	(31,880)
Foreign	754		9,094		864
Loss from continuing operations before income taxes	$	(39,415)	$	(19,699)	$	(31,016)


	Year Ended December 31, 2019		Year Ended December 31, 2018		Year Ended December 31, 2017

Current
Federal	$	106	$	53	$	208
State	75		53		(125)
Foreign	2,008		2,527		3,405
Total current income tax provision	2,189		2,633		3,488

Deferred
Federal	581		(6,112)		(16,916)
State	2,428		(597)		(1,142)
Foreign	(1,182)		(970)		(1,044)
Total deferred income tax provision (benefit)	1,827		(7,679)		(19,102)
Total income tax provision (benefit)	$	4,016	$	(5,046)	$	(15,614)

The tax provision (benefit) from continuing operations included within the consolidated statements of operations differs from the amounts computed by applying the Federal income tax rate to loss before income taxes. A reconciliation of income taxes at the Federal statutory rate to the effective tax rate is summarized as follows:


	Year Ended December 31, 2019		Year Ended December 31, 2018		Year Ended December 31, 2017

Tax at Federal statutory rate	21.0	%	21.0	%	35.0	%
State taxes - net of Federal benefit	1.8		6.5		3.3
Research and development incentives	1.2		2.1		0.6
Foreign rate differential	0.8		(1.7)		0.6

Valuation allowances⁽¹⁾	(33.7)		(1.8)		1.5
Change in foreign tax rates	—		—		(0.6)
Increase in tax reserves	(0.8)		(1.3)		(0.2)
Stock compensation expense	0.2		(1.7)		(1.7)
U.S. taxation of foreign earnings⁽²⁾	0.4		(2.4)		(4.4)
Non-deductible meals and entertainment	(0.2)		(0.1)		(0.1)

Change in U.S. tax rate⁽³⁾	—		—		34.8
Transition tax on unremitted foreign earnings⁽⁴⁾	—		2.6		(17.1)
Other	(0.9)		2.4		(1.4)
Effective tax rate	(10.2)	%	25.6	%	50.3	%

(1)During the year ended December 31, 2019, the Company recorded a valuation allowance of $13.3 million for federal and state deferred tax assets primarily related to the U.S. interest deduction limitation carryforward.

(2)During the year ended December 31, 2018, the U.S. taxation of foreign earnings includes the recognition of GILTI and the U.S. taxation of other foreign income. During the year ended December 31, 2017, the amount includes the recording of a deferred tax liability for foreign earnings of the Company’s wholly-owned U.S. subsidiaries that are no longer considered indefinitely reinvested.

(4) During the years ended December 31, 2018 and 2017, the transition tax on unremitted foreign earnings represents the impact of the deemed mandatory repatriation provisions under the Tax Reform Act.


	December 31, 2019		December 31, 2018
Deferred tax assets
Accrued expenses and reserves	$	1,475	$	2,035
Postretirement and postemployment benefits	800		924
Employee benefits	2,691		2,838
Operating lease liabilities	5,269		—
Inventories	1,410		1,261
Other assets	1,128		1,285
Interest disallowance	11,686		6,157
Operating loss and credit carryforwards	12,806		14,782
Gross deferred tax assets	37,265		29,282
Less valuation allowance	(16,553)		(3,828)
Deferred tax assets	20,712		25,454

Deferred tax liabilities
Property, plant and equipment	(6,530)		(14,941)
Right-of-use operating lease assets	(4,619)		—
Intangible assets and other liabilities	(14,790)		(25,801)
Foreign investments	(1,026)		(1,261)
Deferred tax liabilities	(26,965)		(42,003)
Net deferred tax liability	$	(6,253)	$	(16,549)

Amounts recognized in the statement of financial position consist of:
Other assets - net	$	1,281	$	1,064
Deferred income taxes	(7,534)		(17,613)
Net amount recognized	$	(6,253)	$	(16,549)

At December 31, 2019, the Company has U.S. federal and state net operating loss carryforwards, which expire at various dates through 2039, approximating $12.8 million and $110.3 million, respectively. In addition, the Company has U.S. federal research and development credit carryforwards of $2.4 million which expire between 2034 and 2039 and state tax credit carryforwards and other tax attributes of $1.1 million which expire between 2019 and 2034. The Company’s foreign net operating loss carryforwards total approximately $15.0 million (at December 31, 2019 exchange rates). The majority of these foreign net operating loss carryforwards are available for an indefinite period.

Valuation allowances totaling $16.6 million and $3.8 million as of December 31, 2019 and 2018, respectively, have been established for deferred income tax assets primarily related to U.S. interest expense carryforwards, state net operating loss and credit carryforwards and certain foreign subsidiary net operating loss carryforwards that may not be realized. Realization of the net deferred income tax assets is dependent on generating sufficient taxable income prior to their expiration. Although realization is not assured, management believes it is more-likely-than-not that the net deferred income tax assets will be realized. The amount of the net deferred income tax assets considered realizable, however, could change in the near term if future taxable income during the carryforward period fluctuates.


	Year Ended December 31, 2019		Year Ended December 31, 2018		Year Ended December 31, 2017

Balance at beginning of period	$	2,084	$	1,916	$	1,881
Additions (reductions) based on tax positions related to current year	209		168		267



Reductions related to lapses of statute of limitations	—		—		(232)
Balance at end of period	$	2,293	$	2,084	$	1,916

Of the $2.3 million, $2.1 million, and $1.9 million of unrecognized tax benefits as of December 31, 2019, 2018 and 2017, respectively, approximately $2.3 million, $2.1 million, and $1.9 million, respectively, would impact the effective income tax rate if recognized. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as part of its

income tax provision. During the years ended December 31, 2019, 2018 and 2017, the Company had an immaterial amount of interest and penalties that were recognized as a component of the income tax provision.

At December 31, 2019 and 2018, the Company has an immaterial amount of accrued interest and penalties related to taxes included within the consolidated balance sheet. During the next twelve months, as a result of the completion of tax audits that are currently in process and anticipated changes in the status of certain foreign subsidiaries, the Company believes it is reasonably possible the total amount of unrecognized tax benefits will change.

The Company, along with its subsidiaries, files returns in the U.S. Federal and various state and foreign jurisdictions. With certain exceptions, the Company is subject to examination by U.S. Federal and state taxing authorities for the taxable years in the following table. The Company does not expect the results of these examinations to have a material impact on the Company.


Tax Jurisdiction						Open Tax Years

France						2017 - 2019
Germany						2012 - 2019
Mexico						2015 - 2019
Portugal						2016 - 2019
Spain						2016 - 2019
Sweden						2014 - 2019
United Kingdom						2017 - 2019
United States (federal)						2014 - 2019
United States (state and local)						2014 - 2019

During the fourth quarter of 2017, the Company changed its assertion regarding the indefinite reinvestment of earnings of its wholly-owned non U.S. subsidiaries. This change in assertion was triggered by the anticipated future impact of changes arising from the enactment of the Tax Reform Act, including the interest expense deduction limitation and significant reduction in the U.S. taxation of earnings repatriated from the Company’s foreign subsidiaries. As a result, during the year ended December 31, 2017, the Company recognized a deferred tax liability of $1.7 million on the undistributed earnings of its wholly-owned foreign subsidiaries. As of the years ended December 31, 2019 and 2018, the Company has recognized deferred tax liabilities on the undistributed earnings of its wholly-owned foreign subsidiaries of $1.0 million and $1.3 million, respectively.