11. Income Taxes

Income tax (benefit) expense from continuing operations and effective income tax rates consist of the following:


	December 31,
	2019			2018
Current taxes:
Domestic	$	2,490		$	2,558
Foreign		15			—
		2,505			2,558
Deferred taxes:
Domestic		1,147			(6,897)
Foreign		—			—
		1,147			(6,897)
Income tax expense (benefit)	$	3,652		$	(4,339)
Loss before income taxes
Domestic income (loss)	$	801		$	(18,383)
Foreign		(1,479)			(755)
Total	$	(678)		$	(19,138)
Effective income tax rate		(538.6)	%		22.7	%

The effective income tax rate differs from the U.S. federal statutory income tax rate as follows:


	December 31,
	2019		2018
Tax at federal statutory rate	21.0	%	21.0	%
State income taxes	(114.8)		4.0
Foreign taxes	(51.9)		(0.1)
Tax benefit for U.K. sale	345.2		17.5
Valuation allowance	(474.7)		(13.5)
Unrecognized tax benefits	(34.5)		(4.8)
Tax credits	(108.4)		2.5
Deferred tax impact of enacted tax rate and law changes	—		(0.7)
Permanent items	(120.6)		(1.8)
Other	0.1		(1.4)
Effective income tax rate	(538.6)	%	22.7	%

The components of the deferred tax assets and liabilities are as follows:


	December 31,
	2019		2018
Deferred tax assets:
Accrued expense	$	2,426	$	2,553
Net operating loss carryforward		1,216		5,589
Deferred financing costs		400		553
Stock compensation		892		861
Tax credit carryforward		17		1,118
Interest limitation		8,773		4,412
Lease liability		1,728		—
Other		669		927
Total gross deferred tax assets		16,121		16,013
Valuation allowance		(5,638)		(6,823)
Net deferred tax assets		10,483		9,190
Deferred tax liabilities:
Plant, equipment and leasehold improvements		(5,505)		(3,851)
Intangible assets		(8,877)		(9,311)
Right-of-use assets		(1,486)		—
Prepaid expenses and other		(1,511)		(1,777)
Total gross deferred tax liabilities		(17,379)		(14,939)
Net deferred tax liabilities	$	(6,896)	$	(5,749)

The net change in the valuation allowance during the year ended December 31, 2019 was a decrease of $1,185. The overall decrease is comprised primarily of a decrease related to the sale of certain foreign subsidiaries and changes in facts and circumstances related to state research and development credits carried forward, partially offset by an increase due to the interest deduction limitation related to section 163(j) that is not expected to be fully realized.

For 2019, the effective tax rate differs from the federal U.S. statutory rate primarily due to the impact of tax expense recorded related to a partial valuation allowance on certain U.S. deferred tax assets. The partial valuation allowance is due to the limitation on the deductibility of interest expense which is a provision of U.S. government tax reform legislation enacted in December 2017. In addition, the Company recorded tax benefits relating to certain elections in connection with the U.K. segment disposition. Other items impacting the effective tax rate in 2019 include other permanent non-deductible items, and state and foreign income taxes.

The Company no longer has any substantial potential tax benefits associated with gross foreign operating loss carryforwards due to the sale of its Canadian subsidiary. The Company has potential tax benefits associated with $3,668 of gross domestic operating loss carryforwards as of December 31, 2019, which do not expire. The Company also has various state and local operating loss carryforwards which will expire at various dates from 2033 to 2038. The Company does expect to be able to utilize these losses prior to expiration. The Company’s income tax receivable on the consolidated balance sheet as of December 31, 2019, and December 31, 2018, is primarily comprised of a U.S. federal income tax receivable relating to a prior tax year.

The Company has potential tax benefits associated with state research and development tax credit carryforwards as of December 31, 2019 of $108, which will expire in 2032. The Company expects to be able to recognize these credit carryforwards, and accordingly has not provided a valuation allowance for the tax benefit. Additionally, the Company does not have any potential tax benefits associated with federal research and development tax credit carryforwards as of December 31, 2019.

At December 31, 2019, no provision has been made for U.S. federal and state taxes on cumulative foreign earnings as there are no current or cumulative earnings of foreign operations. The Company recorded no current tax benefit in 2019 related to the sale of the Canadian operations.

Unrecognized Tax Benefits

Unrecognized tax benefits represent the aggregate tax effect of differences between the tax return positions and the amounts otherwise recognized in the Company’s consolidated financial statements, and are reflected in “Other long term liabilities” and “Deferred income taxes” in the Company’s consolidated balance sheets. The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax provision only when based upon the technical merits, it is “more-likely-than-not” that the tax position will be sustained upon examination.



Balance as of December 31, 2018	$	2,044
Increase related to current year tax position		349
Decrease related to prior year tax position		(97)
Decrease related to settlements with tax authorities, net of federal benefit		(124)
Balance as of December 31, 2019	$	2,172

The Company recognizes interest and penalties with respect to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest and penalties related to unrecognized tax benefits for the year ended December 31, 2019 was $238, and was $221 for the year ended December 31, 2018.

The Company is generally subject to potential federal and state examinations for the tax years on and after December 31, 2014 for federal purposes and December 31, 2015 for state purposes. The Company is subject to examinations for its U.K. subsidiaries for tax years ended on and after December 31, 2018. The Company's Canadian subsidiary which was sold April 1, 2019, is subject to examination for tax years ended on and after December 31, 2016.