5. Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

The items comprising income tax expense are as follows (in thousands):

		Year ended December 31,
		2016			2015			2014
Current	— Federal	$	10,706		$	11,848		$	12,626
	— State		1,226			1,528			1,585
			11,932			13,376			14,211
Deferred	— Federal		(92	)		(1,364	)		31
	— State		(155	)		(67	)		(29	)
			(247	)		(1,431	)		2
Provision for Income Taxes		$	11,685		$	11,945		$	14,213

Temporary differences and carryforwards which have given rise to deferred income tax assets and liabilities as of December 31, 2016 and 2015 are as follows (in thousands):

	2016		2015
Deferred tax assets:
Benefit plans	$	1,819	$	1,958
Inventories		519		473
Other		1,292		733
Total deferred tax assets	$	3,630	$	3,164
Deferred tax liabilities:
Property, plant and equipment	$	9,550	$	9,585
Patents and goodwill		2,833		2,897
Other		--		91
Total deferred tax liabilities	$	12,383	$	12,573
Net deferred tax liability	$	8,753	$	9,409
Balance Sheet classification:
Non-current deferred income tax liability	$	9,404	$	9,989
Current deferred income tax asset		651		580
Net deferred tax liability	$	8,753	$	9,409

Total income tax expense differs from the amount that would be provided by applying the statutory federal income tax rate to pretax earnings as illustrated below (in thousands):

	Year ended December 31,
	2016			2015			2014
Income tax expense at the statutory federal income tax rate	$	13,743		$	14,304		$	14,707
Increase (decrease) resulting from:
State income taxes		730			882			934
Section 199 manufacturing deduction		(1,165	)		(1,383	)		(1,290	)
R&D tax credits		(1,070	)		(2,254	)		(393	)
Excess tax benefit from stock compensation		(687	)		--			--
Other, net		134			396			255
Provision for Income Taxes	$	11,685		$	11,945		$	14,213

An excess tax benefit is the realized tax benefit related to the amount of deductible compensation cost reported on an employer’s tax return for equity instruments in excess of the compensation cost for those instruments recognized for financial reporting purposes. The Company adopted ASU-2016-09 (see Note 1) effective January 1, 2016 eliminating the requirement for excess tax benefits to be recorded as additional paid-in capital when realized. Excess tax benefits in the amount of $156,000 and $168,000 were recognized as additional paid-in capital during 2015 and 2014, respectively, resulting from the vesting of restricted stock and restricted stock units. With the adoption of ASU 2016-09, excess tax benefits of $687,000 were recognized as a component of income tax expense in 2016 for these types of transactions.

We recorded tax credits for our R&D expenditures totaling $2.3 million in 2015. This amount included an adjustment for recalculation of our R&D tax credits from prior years resulting from a new regulation issued by the Treasury Department which favorably impacted the benefits provided to the Company under these rules.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits as required by ASC 740 is as follows (in thousands):

Gross unrecognized tax benefits at January 1, 2014	$	346
Increase in tax positions for prior years		6
Increase in tax positions for current year		0
Lapse in statutes of limitation		(223	)
Gross unrecognized tax benefits at December 31, 2014	$	129
Increase in tax positions for prior years		122
Increase in tax positions for current year		0
Lapse in statutes of limitation		(131	)
Gross unrecognized tax benefits at December 31, 2015	$	120
Decrease in tax positions for prior years		(120	)
Increase in tax positions for current year		0
Lapse in statutes of limitation		0
Gross unrecognized tax benefits at December 31, 2016	$	0

We are subject to United States federal income tax as well as to income tax of multiple state jurisdictions.  We have concluded all United States federal income tax matters for years through 2011. The audit of our federal income tax returns for 2011, 2012 and 2013 was completed in 2016 with no changes. All material state and local income tax matters have been concluded for years through 2012. 

We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense. Tax expense for the year ended December 31, 2016, 2015 and 2014 included a net interest benefit of $0, $9,000 and $12,000, respectively.