Income Taxes

The components of (loss) income before income taxes for the years ended December 31, 2018 and 2017 are as follows (in thousands):



	Year Ended December 31, 2018			Year Ended December 31, 2017
United States	$	(47,873	)	$	62,753
Foreign	5,826			9,188
(Loss) income before taxes	$	(42,047	)	$	71,941

The following table shows the (benefit) expense for income taxes (in thousands):



	Year Ended December 31, 2018			Year Ended December 31, 2017
Current:
Federal	$	(374	)	$	(1,614	)
State	494			795
Foreign	1,787			2,041
	1,907			1,222

Deferred:
Federal	(5,189		)	(8,624		)
State	(2,328		)	1,028
Foreign	(18		)	409
	(7,535		)	(7,187		)
Income tax benefit	$	(5,628	)	$	(5,965	)

The differences between income taxes expected at the U.S. federal statutory rate of 21.0% and the reported income tax benefit are summarized as follows (in thousands):



	Year Ended December 31, 2018			Year Ended December 31, 2017
Tax computed at federal statutory rate	$	(8,830	)	$	25,168
State income tax, net of federal benefit	(451		)	1,940
Permanent items	510			624
Transaction costs	21			517
Global intangible low taxed income	538			—
Foreign rate differential	350			(773		)
Gain on tax receivable agreement	(250		)	(23,812		)
Rate change	47			(9,100		)
Valuation allowance	(471		)	864
Other	2,908			(1,393		)
Income tax benefit	$	(5,628	)	$	(5,965	)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table shows significant components of the Company’s deferred tax assets and liabilities (in thousands):



	Year Ended December 31, 2018			Year Ended December 31, 2017
Deferred tax assets (liabilities):
Definite-lived intangible assets	$	851		$	(16,806	)
Indefinite-lived intangible assets	(15,900		)	(11,074		)
Property, plant and equipment	(21,490		)	(13,862		)
Inventories and related reserves	3,891			4,625
Accrued compensation	259			547
Allowance for doubtful accounts	935			1,458
Capital lease obligations	2,354			2,964
Derivative on foreign currency	—			(1,585		)
Net operating loss carryforwards	1,579			14,801
Interest expense carryforward	6,315			—
Other, net	920			1,884
Total deferred tax liabilities	(20,286		)	(17,048		)
Valuation allowance	(392		)	(864		)
Total deferred tax liabilities, net	$	(20,678	)	$	(17,912	)

The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative federal tax loss incurred over the three-year period ended December 31, 2018 of $66.6 million. Such objective evidence limits the ability to consider other subjective evidence, such as the Company's projections for future growth.

The Company has sufficient taxable temporary differences, excluding those associated with indefinite lived assets and goodwill, to enable the use of the tax benefits of most operating loss carryforwards and deductible temporary differences, irrespective of future taxable income. More specifically, the Company is in a net deferred tax liability position (after excluding those associated with indefinite-lived assets and goodwill) in the United States and Canada because of substantial deferred tax liabilities for depreciable property and equipment that will offset the reversal of the deferred tax assets in the future before the expiration of most deferred tax assets. Consolidated deferred tax liabilities associated with indefinite lived assets and goodwill were $15.9 million and $11.1 million at December 31, 2018 and 2017, respectively.

As of December 31, 2018, the Company had state income tax net operating loss carryforwards of $27.9 million. These carryforwards will expire on various dates in the next 20 years as follows (in millions):



	State
2020-2025	$	2.8
2026-2031	6.7
2032-2037	18.4
	$	27.9

At December 31, 2018, the Company had federal tax credit carryforwards of $0.2 million. These carryforwards become refundable and will be refunded by 2022.

Based on the positive and negative evidence reviewed, the Company believes that it is more likely than not that the benefit from certain state net operating loss ("NOL") carryforwards related to single filing states of a liquidated subsidiary will not be realized. In recognition of this risk, the Company has provided a valuation allowance of $0.4 million on the deferred tax assets related to these state NOL carryforwards. If or when recognized, the tax benefits related to any reversal of the valuation allowance on deferred tax assets as of December 31, 2018, will be accounted for as a reduction of income tax expense.

The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. The Company had no material uncertain tax positions for which it recognized a benefit at December 31, 2018 and December 31, 2017.

The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense in the accompanying consolidated statements of operations. There were no accrued interest and penalties associated with uncertain tax positions as of December 31, 2018 and December 31, 2017. The Company does not anticipate a significant change in its unrecognized tax benefits over the next 12 months.

On December 22, 2017, the United States government enacted the Tax Act resulting in significant modifications to existing law. The Company follows the guidance in Staff Accounting Bulletin 118, which provides additional clarification regarding the application of ASC Topic 740 in situations where the Company does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act for the reporting period in which the Tax Act was enacted. SAB 118 provides for a measurement period beginning in the reporting period that includes the Tax Act’s enactment date and ending when the Company has obtained, prepared, and analyzed the information needed in order to complete the accounting requirements but in no circumstances should the measurement period extend beyond one year from the enactment date.

The Company had completed the accounting for the effects of the Tax Act during the year ended December 31, 2017, except for the repricing of ending deferred taxes due to the reduction in the corporate tax rate and the impact of the one-time deemed repatriation transition tax on unrepatriated foreign earnings. As a result, the Company's financial statements for the year ended December 31, 2017 reflect these effects of the Tax Act as provisional based on a reasonable estimate of the income tax effects. The Company included a provisional reduction in deferred tax liability and corresponding provisional reduction in tax provision expense of $9.1 million in relation to the repricing of its ending deferred tax balance. The Company concluded its analysis in the fourth quarter of 2018 and no adjustment to the provisional amount is required.

The Company had also included a provisional income tax payable in the amount of $0.5 million related to the one-time deemed repatriation transition tax on unrepatriated foreign earnings. The provisional amount was based on information available at the time, including estimated tax earnings and profits and tax pools from foreign investments. During the first quarter of 2018, the Company recorded a provisional adjustment in the amount of $0.3 million. The Company completed its computation of the transition tax during the fourth quarter of 2018, which resulted in no further adjustments to income tax payable.

The Tax Act also subjects United States stockholders to current tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries. The FASB staff Q&A, Topic 740 No. 5, Accounting for GILTI, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. We have elected to recognize the tax on GILTI as a period expense in the period the tax is incurred.

The Company considers the earnings of non-U.S. subsidiaries to be indefinitely invested outside the United States based on estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and the Company's specific plans for reinvestment of those subsidiary earnings. As required by the Tax Act, the Company has recorded a tax liability related to the U.S. federal income taxes on approximately $12.1 million of undistributed earnings of foreign subsidiaries indefinitely invested outside the United States. However, the Company has not recorded a deferred tax liability for state and foreign withholding taxes associated with the repatriation of those foreign earnings. If the Company decides to repatriate the foreign earnings, it would need to adjust its income tax provision in the period it determined that the earnings will no longer be indefinitely invested outside the United States.

We are subject to taxation in the United States and Canada. The tax years 2015 and thereafter remain open to examination for the Company and predecessor entities by the United States federal and Canadian tax authorities. With few exceptions, predecessor entities are also subject to examination for the 2014 taxable year by United States state and local tax authorities.