TAXES ON INCOME (TAX BENEFITS)

Income (loss) from continuing operations before taxes on income (tax benefits) was as follows (in thousands):



	Years Ended December 31,
	2016		2015			2014
Domestic	$	23,205	$	(15,944	)	$	(75,112	)
Foreign	12,064		17,159			39,137
Total	$	35,269	$	1,215		$	(35,975	)

Provisions (benefits) for taxes on income (loss) from continuing operations consisted of the following components (in thousands):



	Years Ended December 31,
	2016			2015			2014
Current:
Federal	$	(636	)	$	2,150		$	(2,112	)
Foreign	3,585			5,600			10,586
State	175			528			2,635
Subtotal	3,124			8,278			11,109
Deferred:
Federal	2,158			218			(18,629		)
Foreign	475			1,382			3,034
State	352			(673		)	646
Subtotal	2,985			927			(14,949		)
Total tax provision (benefit)	$	6,109		$	9,205		$	(3,840	)

Income tax (benefit) expense differed from the amounts computed by applying the U.S. federal income tax rate of 35% to income (loss) before income taxes, equity in income (loss) of joint ventures and minority interests as a result of the following (in thousands):



	Years Ended December 31,
	2016			2015			2014
Income taxes (benefit) at U.S. federal statutory tax rate	$	12,344		$	425		$	(12,591	)
Increase (decrease) in taxes resulting from:
Change in the balance of the valuation allowance for deferred tax assets allocated to foreign income tax expense	1,364			(756		)	7,785
Change in the balance of the valuation allowance for deferred tax assets allocated to domestic income tax expense	(4,202		)	4,834			5,206
State income taxes, net of federal income tax benefit	342			(94		)	(3,073		)
Divestitures	271			2,269			—
Meals and entertainment	736			761			863
Changes in taxes previously accrued	23			(489		)	(1,932		)
Foreign tax rate differences	(2,559		)	(1,468		)	(9,215		)
Goodwill impairment	—			3,485			9,690
Recognition of uncertain tax positions	85			24			(96		)
Settlement of escrow arrangement	—			(1,115		)	—
Domestic Production Activities deduction	(1,017		)	(528		)	(81		)
Incremental U.S. taxes on undistributed foreign earnings	—			2,102			—
Other matters	(1,278		)	(245		)	(396		)
Total tax provision (benefit)	$	6,109		$	9,205		$	(3,840	)
Effective tax rate	17.3		%	757.6		%	10.7		%

Net deferred taxes consisted of the following (in thousands):



	December 31,
	2016			2015
Deferred income tax assets:
Foreign tax credit carryforwards	$	3,426		$	358
Net operating loss carryforwards	26,212			14,688
Accrued expenses	17,366			24,449
Other	8,701			8,285
Total gross deferred income tax assets	55,705			47,780
Less valuation allowance	(15,428		)	(18,897		)
Net deferred income tax assets	40,277			28,883
Deferred income tax liabilities:
Property, plant and equipment	(12,627		)	(11,438		)
Intangible assets	(28,346		)	(14,525		)
Undistributed foreign earnings	(7,051		)	(9,153		)
Other	(9,237		)	(8,248		)
Total deferred income tax liabilities	(57,261		)	(43,364		)
Net deferred income tax liabilities	$	(16,984	)	$	(14,481	)

The Company’s tax assets and liabilities, netted by taxing location, are in the following captions in the balance sheets (in thousands):



	December 31,
	2016			2015
Current deferred income tax assets, net	$	7,824		$	7,804
Current deferred income tax liabilities, net ⁽¹⁾	(3,317		)	(5,029		)
Noncurrent deferred income tax assets, net	1,848			2,130
Noncurrent deferred income tax liabilities, net	(23,339		)	(19,386		)
Net deferred income tax liabilities	$	(16,984	)	$	(14,481	)

__________________________


⁽¹⁾	The December 31, 2015 balance includes $1.5 million of deferred income tax liabilities related to BPPC, which are classified as held for sale. See Note 5.

The Company’s deferred tax assets at December 31, 2016 included $26.2 million in federal, state and foreign net operating loss (“NOL”) carryforwards. These NOLs include $20.8 million, which if not used will expire between the years 2017 and 2036, and $5.4 million that have no expiration dates. The Company also has deferred tax amounts related to foreign tax credit carryforwards of $3.4 million, of which, $3.2 million will expire in 2026 if not used and $0.2 million have no expiration date.

For financial reporting purposes, a valuation allowance of $15.4 million has been recognized to reduce the deferred tax assets related to certain federal, state and foreign net operating loss carryforwards and other assets, for which it is more likely than not that the related tax benefits will not be realized, due to uncertainties as to the timing and amounts of future taxable income. The valuation allowance at December 31, 2015 was $18.9 million. The decrease during 2016 was primarily related to a $4.2 million reduction of previously recorded valuation allowances in the U.S., due to changes in the realization of future tax benefits and deferred tax composition changes, partially offset by a $1.4 million increase in the valuation allowance on certain net operating losses and deferred tax assets in foreign jurisdictions, primarily Europe.

Activity in the valuation allowance is summarized as follows (in thousands):



	Years Ended December 31,
	2016			2015			2014
Balance, at beginning of year	$	18,897		$	19,353		$	7,797
Additions	3,095			7,783			14,442
Reversals	(4,984		)	(5,294		)	(2,090		)
Other adjustments	(1,580		)	(2,945		)	(796		)
Balance, at end of year	$	15,428		$	18,897		$	19,353

The Company has recorded income tax expense at U.S. tax rates on all profits, except for undistributed profits of non-U.S. subsidiaries of approximately $208.4 million, which are considered indefinitely reinvested. Determination of the amount of unrecognized deferred tax liability related to the indefinitely reinvested profits is not feasible. A deferred tax asset is recognized only if the Company has definite plans to generate a U.S. tax benefit by repatriating earnings in the foreseeable future. As part of the February 2016 acquisition of Underground Solutions, the Company repatriated approximately $29.7 million from foreign subsidiaries to assist in funding the transaction, incurring approximately $3.2 million in additional taxes, an estimate for which was accrued as of December 31, 2015. This was viewed as a one-time, special-use transaction. With few exceptions, U.S. income taxes, net of applicable foreign tax credits, have not been provided on undistributed earnings of international subsidiaries. It is the Company’s intention to permanently reinvest these earnings.

FASB ASC 740, Income Taxes (“FASB ASC 740”), prescribes a more-likely-than-not threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASC ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods and disclosure of uncertain tax positions in financial statements.

A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in thousands):



	Years Ended December 31,
	2016			2015			2014
Balance at January 1,	$	2,410		$	2,672		$	2,936
Additions for tax positions of prior years related to acquisitions	148			—			—
Additions for tax positions of prior years	10			10			36
Lapse in statute of limitations	(83		)	(218		)	(252		)
Foreign currency translation	(20		)	(54		)	(48		)
Balance at December 31, total tax provision	$	2,465		$	2,410		$	2,672

The total amount of unrecognized tax benefits, if recognized, that would affect the effective tax rate was $0.5 million at December 31, 2016.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. During the years ended December 31, 2016, 2015 and 2014, approximately $0.3 million was expensed for interest and penalties in each period.

The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits will change in 2017. The Company has certain tax return years subject to statutes of limitation that will expire within twelve months. Unless challenged by tax authorities, the expiration of those statutes of limitation is expected to result in the recognition of uncertain tax positions in the amount of approximately $0.3 million.

The Company is subject to taxation in the United States, various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state, local or foreign examinations by tax authorities for years before 2012.