Income Taxes

The components of income before income taxes and income tax expense for the years ended December 31, 2019, 2018 and 2017 are as follows (in thousands):



	Years ended December 31,
	2019			2018			2017
Income before income taxes:
Domestic	$	12,814		$	5,577		$	2,901
Foreign	9,555			9,186			16,788
Total income before income taxes	$	22,369		$	14,763		$	19,689

Income tax expense (benefit):
Current:
Federal	$	2,634		$	388		$	3,210
State and local	586			378			256
Foreign	5,046			3,285			3,645
Total current	8,266			4,051			7,111
Deferred:
Federal	(338		)	813			(241		)
State and local	(99		)	258			(176		)
Foreign	(649		)	(195		)	104
Total deferred	(1,086		)	876			(313		)
Total income tax expense	$	7,180		$	4,927		$	6,798

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. The sources and tax effects of the differences are as follows:



	December 31,
	2019		2018		2017
Federal income tax rate	21.0	%	21.0	%	35.0	%
State and local taxes net of federal benefit	3.0		1.9		0.2
Domestic production deduction	—		—		(1.1	)
Valuation allowance	6.3		0.4		0.9
Foreign tax credits	(5.0	)	—		—
Foreign tax rate differential	4.1		1.8		(8.8	)
Permanent differences	3.5		2.7		(6.2	)
Other	(1.0	)	2.2		(1.8	)
Global Intangible Low-taxed Income	0.2		1.5		—
Tax Cuts and Jobs Act of 2017	—		1.9		16.3
Effective tax rate	32.1	%	33.4	%	34.5	%

The Tax Cuts and Jobs Act of 2017 created a requirement that Global Intangible Low-Taxed Income (“GILTI”) earned by a controlled foreign corporation (“CFC”) must be included in the gross income of the U.S. shareholder. The FASB Staff Q&A Topic 740, No. 5, “Accounting for Global Intangible Low-Taxed Income” states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis difference expected to reverse as GILTI in future years, or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI as a current period expense when incurred.

Income tax expense was $7.2 million for the year ended December 31, 2019 compared to $4.9 million for the year ended December 31, 2018. Our effective income tax rate was 32.1% and 33.4% for the years ended December 31, 2019 and 2018, respectively. The decrease in the effective income tax rate compared to 2018 is primarily due to a change in the mix of income from higher to lower taxing jurisdiction.

Uncertain Tax Positions

As of December 31, 2019 and 2018, we had no uncertain tax positions reflected on our consolidated balance sheet. The Company files income tax returns in U.S. federal, state and local jurisdictions, and various non-U.S. jurisdictions, and is subject to audit by tax authorities in those jurisdictions. Tax years 2016 through 2019 remain open to examination by these tax jurisdictions, and earlier years remain open to examination in certain of these jurisdictions which have longer statutes of limitations.

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Significant components of our deferred tax assets and liabilities are as follows (in thousands):



	December 31,
	2019			2018
Deferred tax assets:
Allowance for doubtful accounts	$	291		$	531
Accrued liabilities and other	2,066			2,564
Stock-based compensation expense	297			296
Net federal, state and foreign operating loss carryforwards	2,825			1,953
Foreign tax credit carryforwards	1,379			266
Deferred tax assets	6,858			5,610
Valuation allowance on deferred tax assets	(4,025		)	(1,385		)
Deferred tax liabilities:
Other	182			1,181
Intangible assets, property and equipment, principally due to difference in depreciation and amortization	8,969			10,784
Net deferred tax liabilities	$	(6,318	)	$	(7,740	)

As of December 31, 2019, we had foreign and U.S. state net operating loss carryforwards of $11.5 million for tax purposes, which will be available to offset future taxable income. If not used, these carryforwards will expire beginning in 2020.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets may not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon these factors, management placed a valuation allowance of $4.0 million and $1.4 million as of the years ended December 31, 2019 and 2018, respectively, against certain deferred tax assets, including net operating loss carryforwards, due to the uncertainty of future profitability in foreign jurisdictions. Management believes it is more likely than not that the Company will realize the benefits of the remaining deferred tax assets.

Foreign Income

The 2017 Tax Act includes a mandatory one-time tax on accumulated earnings of foreign subsidiaries, and as a result, all previously unremitted earnings for which no U.S. deferred tax liability had been accrued have now been subject to U.S. tax. Notwithstanding the U.S. taxation of these amounts, we intend to continue to invest these earnings, as well as the capital invested in these subsidiaries, indefinitely outside of the U.S. and do not expect to incur any significant, additional taxes related to such amounts. The Company has not provided for any additional outside basis difference inherent in its foreign subsidiaries, as these amounts continue to be indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to any additional outside basis difference in these entities is not practicable.