INCOME TAXES

The Company's pre-tax income (loss) from continuing operations for domestic and foreign sources is as follows (in thousands):



	Year Ended December 31,
	2016			2015		2014
Domestic	$	(359	)	$	1,675	$	(7,230	)
Foreign	3,426			2,763		6,105
Total	$	3,067		$	4,438	$	(1,125	)

Significant components of income tax expense attributable to continuing operations are as follows (in thousands):



	Year Ended December 31,
	2016			2015			2014
Current:
State	$	(16	)	$	9		$	47
Foreign	1,678			1,851			740
Total current	1,662			1,860			787
Deferred:
Federal	158			155			(386		)
Foreign	23			(187		)	832
Total deferred	181			(32		)	446
Total income tax expense	$	1,843		$	1,828		$	1,233

The following is a reconciliation of income tax expense computed at the United States statutory rate to amounts shown in the Consolidated Statements of Operations:



	2016		2015		2014
Federal income taxes at statutory rate	35.0	%	35.0	%	35.0	%
Taxes on foreign income which differ from the U.S. statutory rate	(22.1	)	(1.8	)	13.9
Effect of change in the enacted rate	(1.3	)	(2.6	)	—
Change in valuation allowance	(3.9	)	(2.3	)	158.4
U.S. taxation of international operations	32.3		6.2		(170.1	)
Change in estimated liabilities	9.5		1.8		26.8
Non-deductible items	10.8		4.8		(170.9	)
State and local income taxes	(0.1	)	0.1		(2.7	)
	60.2	%	41.2	%	(109.6	)%

Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):



	December 31,
	2016			2015
Deferred tax assets:
Federal, state, and foreign net operating losses	$	20,372		$	18,713
Postretirement benefits	631			608
Deferred employee benefits	1,688			1,924
Accrued pension	16,410			15,738
Inventory valuation	2,766			3,067
Foreign tax credit carryforwards	7,693			7,847
Other	2,030			2,804
	$	51,590		$	50,701
Less valuation allowance	(45,012		)	(43,663		)
Total deferred tax assets	$	6,578		$	7,038

Deferred tax liabilities:
Tax over book depreciation	$	(3,509	)	$	(3,662	)
Inventory valuation	(1,995		)	(2,006		)
Intangible assets	(1,600		)	(1,637		)
Other	(303		)	(391		)
Total deferred tax liabilities	(7,407		)	(7,696		)
Net deferred tax liabilities	$	(829	)	$	(658	)

In November 2015, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update with new guidance on simplifying the presentation of deferred income taxes that requires deferred tax assets and liabilities, along with any related valuation allowance, to be classified as non-current on the balance sheet. We adopted the standards update effective December 31, 2016, electing to apply it retrospectively to all periods presented. The below table summarizes the adjustments made to conform prior period classification with the new guidance (in thousands):



	December 31, 2015
	As Filed			Reclass			As Adjusted
Deferred tax assets
Current deferred income tax assets	$	2,102		(2,102		)	—
Non-current deferred income tax assets	525			1,905			2,430
Total deferred income tax assets	$	2,627		$	(197	)	$	2,430
Deferred tax liabilities
Current deferred income tax liabilities	(2,164		)	2,164			—
Non-current deferred income tax liabilities	(1,121		)	(1,967		)	(3,088		)
Total deferred income tax liabilities	$	(3,285	)	$	197		$	(3,088	)

Net deferred tax assets and liabilities	$	(658	)	$	—		$	(658	)

Non-current deferred tax assets of $3.0 million and $2.4 million for 2016 and 2015, respectively, are reported in "Other non-current assets" in the Consolidated Balance Sheets.

In 2016, the valuation allowance increased by $1.3 million, of which $0.4 million was due to operational results and $0.9 million of valuation allowance was recorded in other comprehensive income (loss).

In 2015, the valuation allowance decreased by $1.1 million, of which $1.0 million was due to operational results and $0.1 million of valuation allowance was recorded in other comprehensive income (loss).

At December 31, 2016, there were U.S. federal and state net operating loss carryforwards of $23.9 million and $21.6 million, respectively, which expire from 2028 through 2031. If certain substantial changes in the Company's ownership occur, there would be an annual limitation on the amount of the carryforwards that can be utilized. The U.S. net operating loss includes approximately $2.2 million of the net operating loss carryforwards for which a benefit will be recorded in "Additional paid-in capital" in the Consolidated Balance Sheets when realized. There are Foreign Tax Credit Carryforwards of $7.7 million which expire between 2020 and 2025. There also are foreign net operating loss carryforwards of $47.8 million, of which $11.1 million will expire between 2020 through 2036, and of which $36.7 million have no expiration date.

At the end of 2016, the undistributed earnings of the Company's foreign subsidiaries, which amounted to approximately $52.4 million, are considered to be indefinitely reinvested and, accordingly, no provision for taxes has been provided thereon. Given the complexities of the foreign tax credit calculations, it is not practicable to compute the tax liability that would be due upon distribution of those earnings in the form of dividends or liquidation or sale of the foreign subsidiaries.

A reconciliation of the beginning and ending amount of uncertain tax positions is as follows (in thousands):



	December 31,
	2016			2015			2014
Balance at beginning of year	$	2,305		$	2,342		$	2,743
Additions for tax positions related to the current year	302			282			182
Additions for tax positions of prior years	72			263			430
Reductions for tax positions of prior years	(832		)	—			(393		)
Reductions due to lapse of applicable statutes of limitation	—			(582		)	(620		)
Balance at end of year	$	1,847		$	2,305		$	2,342

If recognized, essentially all of the uncertain tax positions and related interest at December 31, 2016 would be recorded as a benefit to income tax expense on the Consolidated Statements of Operations. It is reasonably possible that certain of the uncertain tax positions pertaining to the foreign operations may change within the next 12 months due to audit settlements and statute of limitations expirations. The estimated change in uncertain tax positions for these items is estimated to be up to $1.0 million.

Interest and penalties related to uncertain tax positions are recorded as income tax expense in the Consolidated Statements of Operations. Accrued interest related to the uncertain tax positions was $0.1 million at December 31, 2016 and 2015. There were no accrued penalties related to uncertain tax positions in 2016 and 2015. The accrued interest is reported in other liabilities on the Consolidated Balance Sheets.

The tax years 2013, 2014, 2015 and 2016 remain open to examination by the U.S. federal taxing authorities. The tax years 2011 through 2016 remain open to examination by the U.S. state taxing authorities. For other major jurisdictions (Switzerland, U.K., Taiwan, India, Germany, Netherlands and China); the tax years between 2008 and 2016 generally remain open to routine examination by foreign taxing authorities, depending on the jurisdiction.

Net taxes paid in 2016, 2015 and 2014 totaled $1.7 million, $1.5 million and $1.9 million, respectively.