Income Taxes

Earnings before income taxes consisted of the following:



(In thousands)	2019			2018			2017
United States	$	60,042		$	111,980		$	123,229
International	(1,380		)	(2,100		)	(424		)
Earnings before income taxes	$	58,662		$	109,880		$	122,805

The components of income tax expense (benefit) for each of the last three fiscal years was:



(In thousands)	2019			2018			2017
Current
Federal	$	22,746		$	22,074		$	35,610
State and local	(4,437		)	3,106			2,929
International	(459		)	1,578			(147		)
Total current	17,850			26,758			38,392
Deferred
Federal	(12,409		)	4,049			(945		)
State and local	6,275			351			(78		)
International	628			(1,205		)	(42		)
Total deferred	(5,506		)	3,195			(1,065		)
Total non-current tax expense (benefit)	624			439			(312		)
Total income tax expense	$	12,968		$	30,392		$	37,015

Income tax payments, net of refunds, were $16.5 million, $25.7 million and $47.8 million in fiscal 2019, 2018 and 2017, respectively.

The following table provides a reconciliation of the statutory federal income tax rate to our consolidated effective tax rates:



	2019		2018		2017
Statutory federal income tax rate	21.0	%	32.7	%	35.0	%
Tax rate change revaluation	—		(3.7	)	—
Manufacturing deduction	—		(2.2	)	(3.3	)
State and local income taxes, net of federal tax benefit	2.7		1.8		1.6
Foreign tax rate differential	0.8		(0.7	)	(1.6	)
Tax credits - research & development	(2.7	)	(0.9	)	(0.7	)
Other, net	0.3		0.7		(0.9	)
Consolidated effective income tax rate	22.1	%	27.7	%	30.1	%

The estimated effective tax rate for fiscal 2019 declined 5.6 percentage points from fiscal 2018 primarily due to the reduced Federal rate under the U.S. Tax Cuts and Jobs Act ("the Act"), which was enacted in December 2017. Another factor was the impact of the favorable permanent items in relation to lower earnings before income taxes in fiscal 2019. The estimated effective tax rate for fiscal 2018 declined 2.4 percentage points from fiscal 2017 primarily due to the federal tax rate reduction under the Act, as well as the revalution of deferred taxes required by the tax rate reduction. Also in fiscal 2017, we recorded a net tax benefit of $1.9 million on a distribution from our Brazilian operation.

In fiscal 2019, we completed our analysis of the Act and made an accounting policy election to recognize the tax expense on future U.S. inclusions of foreign sourced earnings under the Global Intangible Low-Taxed Income (“GILTI”) provision, if any, as a current period expense when incurred. Upon finalizing our analysis, no significant adjustments were recorded.

Deferred tax assets and deferred tax liabilities at March 2, 2019 and March 3, 2018 were:



(In thousands)	2019			2018
Other accruals	$	13,530		$	3,428
Deferred compensation	9,007			8,926
Goodwill and other intangibles	(5,151		)	(4,655		)
Depreciation	(24,289		)	(19,523		)
Liability for unrecognized tax benefits	2,547			2,850
Net operating losses and tax credits	9,913			6,272
Valuation allowance on net operating losses	(8,546		)	(4,296		)
Unearned income	4,557			2,628
Other	1,550			1,067
Deferred tax assets (liabilities)	$	3,118		$	(3,303	)

The Company has U.S. federal tax credits as well as state net operating loss carryforwards with a tax effect of $9.9 million. A valuation allowance of $8.5 million has been established for these net operating loss carryforwards due to the uncertainty of the use of the tax benefits in future periods.

The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions, Canada, Brazil and other international jurisdictions. The Company is no longer subject to U.S. federal tax examinations for years prior to fiscal 2016, or state and local income tax examinations for years prior to fiscal 2013. The Company is not currently under U.S. federal examination for years subsequent to fiscal year 2015, and there is very limited audit activity of the Company’s income tax returns in U.S. state jurisdictions or international jurisdictions.

The Company considers the earnings of its non-U.S. subsidiaries to be indefinitely invested outside of the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and specific plans for reinvestment of those subsidiary earnings. Should the Company decide to repatriate the foreign earnings, it would need to adjust the income tax provision in the period it was determined that the earnings will no longer be indefinitely invested outside the U.S.

If we were to prevail on all unrecognized tax benefits recorded, $3.1 million, $2.4 million and $2.1 million for fiscal 2019, 2018 and 2017, respectively, would benefit the effective tax rate. Also included in the balance of unrecognized tax benefits for fiscal 2019, 2018 and 2017, are $2.0 million, $2.3 million and $2.0 million, respectively, of tax benefits that, if recognized, would result in adjustments to deferred taxes.

Penalties and interest related to unrecognized tax benefits are recorded in income tax expense. For fiscal 2019, we accrued penalties and interest related to unrecognized tax benefits of $0.3 million. For fiscal 2018 and 2017, the accrual was $0.4 million and $0.4 million, respectively.

The following table provides a reconciliation of the total amounts of gross unrecognized tax benefits:



(In thousands)	2019			2018			2017
Gross unrecognized tax benefits at beginning of year	$	4,705		$	4,075		$	4,512
Gross increases in tax positions for prior years	500			614			54
Gross decreases in tax positions for prior years	(377		)	(122		)	(233		)
Gross increases based on tax positions related to the current year	1,067			639			508
Settlements	(303		)	—			(23		)
Statute of limitations expiration	(481		)	(519		)	(743		)
Revaluation impact	—			18			—
Gross unrecognized tax benefits at end of year	$	5,111		$	4,705		$	4,075

The total liability for unrecognized tax benefits is expected to decrease by approximately $0.5 million during fiscal 2020 due to lapsing of statutes.