INCOME TAX PROVISION

12 Months Ended

Dec. 31, 2019

(Loss) income before income taxes was comprised of the following for the years ended December 31:



(in thousands)	2019			2018		2017
U.S.	$	(161,733	)	$	198,727	$	299,424
Foreign	(23,897		)	13,904		13,403
(Loss) income before income taxes	$	(185,630	)	$	212,631	$	312,827

The components of the income tax provision were as follows for the years ended December 31:



(in thousands)	2019			2018			2017
Current tax provision:
Federal	$	36,967		$	57,117		$	104,079
State	7,400			11,319			12,996
Foreign	4,850			5,921			4,774
Total current tax provision	49,217			74,357			121,849
Deferred tax provision:
Federal	(30,095		)	(7,220		)	(37,471		)
State	(7,070		)	(1,701		)	(491		)
Foreign	2,215			(2,435		)	(1,215		)
Total deferred tax provision	(34,950		)	(11,356		)	(39,177		)
Income tax provision	$	14,267		$	63,001		$	82,672

The effective tax rate on pre-tax (loss) income reconciles to the U.S. federal statutory tax rate for the years ended December 31 as follows:



	2019		2018		2017
Income tax at federal statutory rate	21.0	%	21.0	%	35.0	%
Goodwill impairment charge	(29.3	%)	7.1	%	1.5	%
Change in valuation allowances⁽¹⁾	(4.5	%)	0.1	%	(0.3	%)
Net tax benefit of share-based compensation	(1.1	%)	(0.8	%)	(1.6	%)
State income tax expense, net of federal income tax benefit	4.9	%	3.0	%	2.7	%
Foreign tax rate differences	1.3	%	0.4	%	(0.3	%)
Impact of Tax Cuts and Jobs Act	—		(0.8	%)	(6.6	%)
Qualified production activities deduction	—		—		(3.2	%)
Other	—		(0.4	%)	(0.8	%)
Effective tax rate	(7.7	%)	29.6	%	26.4	%

⁽¹⁾ During the quarter ended September 30, 2019, we recorded asset impairment charges related to certain intangible assets located in Australia (Note 8). As a result, we placed a full valuation allowance on the intangible-related deferred tax asset of $8,432, as we do not expect that we will realize the benefit of this deferred tax asset.

In December 2017, U.S. tax reform was signed into law as the Tax Cuts and Jobs Act (the "2017 Tax Act"). This legislation included a broad range of tax reforms, including changes to corporate tax rates, business deductions and international tax provisions. This legislation resulted in a net benefit of approximately $20,500 to our 2017 income tax provision. This amount included the net tax benefit from the remeasurement of deferred income taxes to the new federal statutory tax rate of 21%, which was effective for us on January 1, 2018, and revised state income tax rates for those states we expected to follow the provisions of the 2017 Tax Act, partially offset by the establishment of a liability for repatriation toll charges related to undistributed foreign earnings and profits. During 2017, reasonable estimates were used to determine certain impacts of the 2017 Tax Act, including our 2017 deferred activity and the amount of post-1986 foreign deferred earnings subject to the repatriation toll charge. We finalized our accounting for the 2017 Tax Act during the fourth quarter of 2018. Our 2018 income tax provision was reduced

$1,700 for adjustments to our accounting for the 2017 Tax Act, primarily a reduction in the amount accrued for the repatriation toll charge.

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding accrued interest and penalties and the federal benefit of deductible state income tax, was as follows:



(in thousands)	2019			2018			2017
Balance, beginning of year	$	4,801		$	3,795		$	7,373
Additions for tax positions of current year	364			315			378
Additions for tax positions of prior years	546			1,177			659
Reductions for tax positions of prior years	(887		)	(108		)	(4,389		)
Settlements	(341		)	—			—
Lapse of statutes of limitations	(314		)	(378		)	(226		)
Balance, end of year	$	4,169		$	4,801		$	3,795

If the unrecognized tax benefits as of December 31, 2019 were recognized in the consolidated financial statements, income tax expense would decrease $4,169. Accruals for interest and penalties, excluding the tax benefits of deductible interest, were $935 as of December 31, 2019 and $1,156 as of December 31, 2018. Our income tax provision included expense for interest and penalties of $605 in 2019 and $110 in 2018 and included a reduction for interest and penalties of $284 in 2017. Within the next 12 months, it is reasonably possible that our unrecognized tax benefits will change in the range of a decrease of $2,300 to an increase of $1,900 as we attempt to resolve certain federal and state tax matters or as federal and state statutes of limitations expire. Due to the nature of the underlying liabilities and the extended time frame often needed to resolve income tax uncertainties, we cannot provide reliable estimates of the amount or timing of cash payments that may be required to settle these liabilities.

The statute of limitations for federal tax assessments for 2015 and prior years has expired. Audits of our federal income tax returns through 2015 have been completed by the Internal Revenue Service (IRS). Our 2016 through 2018 returns and our 2019 return, when filed, are subject to IRS examination. In general, income tax returns for the years 2015 through 2019 remain subject to examination by foreign, state and city tax jurisdictions. In the event that we have determined not to file income tax returns with a particular state or city, all years remain subject to examination by the tax jurisdiction.

The ultimate outcome of tax matters may differ from our estimates and assumptions. Unfavorable settlement of any particular issue would require the use of cash and could result in increased income tax expense. Favorable resolution would result in reduced income tax expense.

Tax-effected temporary differences that gave rise to deferred tax assets and liabilities as of December 31 were as follows:



	2019					2018
(in thousands)	Deferred tax assets			Deferred tax liabilities		Deferred tax assets			Deferred tax liabilities
Goodwill⁽¹⁾	$	—		$	16,424	$	—		$	47,993
Revenue recognition	—			4,752		—			3,185
Prepaid assets	—			3,830		—			3,469
Property, plant and equipment	—			3,200		—			1,739
Employee benefit plans	—			2,747		1,420			—
Installment sales treatment of notes receivable	—			1,171		—			3,054
Intangible assets⁽¹⁾	14,900			—		—			3,780
Operating leases	11,409			10,578		—			—
Net operating loss, tax credit and capital loss carryforwards	7,698			—		9,380			—
Reserves and accruals	6,154			—		8,893			—
Inventories	2,595			—		2,043			—
All other	2,756			3,452		3,237			3,858
Total deferred taxes	45,512			46,154		24,973			67,078
Valuation allowances	(10,349		)	—		(1,689		)	—
Net deferred taxes	$	35,163		$	46,154	$	23,284		$	67,078

⁽¹⁾ The change in these deferred income taxes in 2019, as compared to 2018, was primarily the result of asset impairment charges recorded during 2019. Further information can be found in Note 8.

The valuation allowances as of December 31, 2019 and December 31, 2018 related primarily to intangible-related deferred tax assets of our Australian operations, capital loss carryforwards in Canada and net operating loss carryforwards in various state jurisdictions that we do not currently expect to fully realize. Changes in our valuation allowances for the years ended December 31 were as follows:



(in thousands)	2019			2018			2017
Balance, beginning of year	$	(1,689	)	$	(1,518	)	$	(2,545	)
(Expense) benefit from change in allowances	(8,336		)	(290		)	1,015
Foreign currency translation	(324		)	119			12
Balance, end of year	$	(10,349	)	$	(1,689	)	$	(1,518	)

As of December 31, 2019, deferred income taxes have not been recognized on unremitted earnings of our foreign subsidiaries, as these amounts are intended to be reinvested indefinitely in the operations of those subsidiaries. If we were to repatriate all of our foreign cash and cash equivalents into the U.S. at one time, the tax effects would generally be limited to foreign withholding taxes on any distributions. As of December 31, 2019, the amount of cash and cash equivalents held by our foreign subsidiaries was $69,046, primarily in Canada.

As of December 31, 2019, we had the following net operating loss, capital loss and tax credit carryforwards:


•	state net operating loss carryforwards and tax credit carryforwards of $63,169 that expire at various dates up to 2048;


•	foreign capital loss carryforwards of $4,891 that do not expire;


•	foreign research tax credit carryforwards of $2,035 that expire at various dates up to 2036; and

•

federal net operating loss carryforwards of $1,451 that expire at various dates between 2025 and 2029.