Income Taxes

The components of income (loss) before income taxes for the years ended December 31, 2019 and 2018 are as follows (in thousands):



	Year Ended December 31, 2019		Year Ended December 31, 2018
United States	$	53,966	$	(47,873	)
Foreign	989		5,826
Income (loss) before taxes	$	54,955	$	(42,047	)

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



	Year Ended December 31, 2019			Year Ended December 31, 2018
Current:
Federal	$	9,389		$	(374	)
State	2,252			494
Foreign	2,511			1,787
	14,152			1,907

Deferred:
Federal	449			(5,189		)
State	75			(2,328		)
Foreign	(1,549		)	(18		)
	(1,025		)	(7,535		)
Income tax expense (benefit)	$	13,127		$	(5,628	)

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



	Year Ended December 31, 2019			Year Ended December 31, 2018
Tax computed at federal statutory rate	$	11,542		$	(8,830	)
State income tax, net of federal benefit	2,851			(451		)
Permanent items	576			510
Transaction costs	78			21
Global intangible low taxed income	348			538
Foreign derived intangible income	(490		)	—
Foreign rate differential	56			350
Gain on tax receivable agreement	(51		)	(250		)
Rate change	70			47
Valuation allowance	(35		)	(471		)
Other	(1,818		)	2,908
Income tax expense (benefit)	$	13,127		$	(5,628	)

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):



	December 31, 2019			December 31, 2018
Deferred tax assets:
Right-of-use lease liabilities	$	32,840		$	—
Definite-lived intangible assets	9,670			851
Inventories and related reserves	4,445			3,891
Interest expense carryforward	3,577			6,315
Capital lease obligation	—			2,354
Unrealized derivative loss	1,972			—
Accrued compensation	278			259
Allowance for doubtful accounts	940			935
Net operating loss carryforwards	1,108			1,579
Other, net	1,972			920
Total deferred tax assets	56,802			17,104

Deferred tax liabilities:
Right-of-use assets	(32,250		)	—
Indefinite-lived intangible assets	(22,311		)	(15,900		)
Property, plant and equipment	(20,854		)	(21,490		)
Total deferred tax liabilities	(75,415		)	(37,390		)

Valuation allowance	(359		)	(392		)
Total deferred tax liabilities, net	$	(18,972	)	$	(20,678	)

As of December 31, 2019, the Company had state income tax net operating loss carryforwards of $18.8 million. These carryforwards will expire on various dates in the next 20 years as follows (in thousands):



	December 31, 2019
2021-2026	$	2,664
2027-2032	6,577
2033-2038	9,593
	$	18,834

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, 2019, 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 for the years ended December 31, 2019 and 2018.

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, 2019 and 2018. The Company does not anticipate a significant change in its unrecognized tax benefits over the next 12 months.

The Tax Act 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 had 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 2016 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 2015 taxable year by United States state and local tax authorities.

Tax Receivable Agreement

In connection with the IPO, the Company entered into a TRA with Parent 2 that provides for the payment by the Company to Parent 2 of 90% of the amount of cash savings, if any, in U.S. federal, state, local and non-U.S. income tax that the Company realizes (or in some circumstances is deemed to realize) as a result of the utilization of the Company and the Company’s subsidiaries’ (a) depreciation and amortization deductions, and any offset to taxable income and gain or increase to taxable loss, resulting from the tax basis the Company has in its assets at the consummation of the IPO, (b) net operating losses, (c) tax credits and (d) certain other tax attributes. During 2017, the Company recorded a liability of $203.8 million, with a corresponding offset to additional paid-in capital for the TRA. At the end of each reporting period, any changes in the Company's estimate of the liability will be recorded in the consolidated statement of operations as a component of other income (expense). The timing and amount of future tax benefits associated with the TRA are subject to change, and future payments may be required which could be materially different from the current estimated liability. The TRA will remain in effect until all tax benefits have been used or expired, unless the agreement is terminated early.

As of December 31, 2019 and December 31, 2018, the TRA liability balance was $117.4 million and $134.6 million, respectively. The first payment related to the TRA was made in January 2019 for $16.7 million and was reflected as a current liability as of December 31, 2018. The next TRA payment was made in January 2020 for $27.9 million and was reflected as a current liability as of December 31, 2019.