INCOME TAXES

12 Months Ended

Dec. 31, 2019

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”). The TCJA makes broad and complex changes to the U.S. tax code, including, but not limited to: (1) reducing the U.S. federal corporate tax rate from 35% to 21% for tax years ending after December 31, 2017; (2) bonus depreciation that will allow for full expensing in the year placed in service of qualified property acquired and placed in service after September 27, 2017; (3) repealing the Domestic Production Activities Deduction for years beginning after December 31, 2017; and (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations.

The Company has accounted for in its 2019 and 2018 income tax provision the impact of Global Intangible Low-Taxed Income, base-erosion anti-abuse tax, interest expense limitations under Section 163(j), and foreign-derived intangible income deductions, although such provisions were either not applicable or resulted in a zero or immaterial impact to the consolidated financial statements.

The provision for income taxes for the years ended December 31, 2019, 2018 and 2017 consists of the following:



(thousands)	2019		2018			2017
Current:
Federal	$	17,587	$	22,578		$	27,833
State	5,019		8,725			6,036
Foreign	61		85			—
Total current	22,667		31,388			33,869
Deferred:
Federal	4,529		1,529			(6,289		)
State	1,064		(770		)	(188		)
Total deferred	5,593		759			(6,477		)
Income taxes	$	28,260	$	32,147		$	27,392

A reconciliation of the differences between the actual provision for income taxes and income taxes at the federal statutory income tax rate of 21% for the years ended December 31, 2019 and 2018 and at the federal statutory income tax rate of 35% for the year ended December 31, 2017 is as follows:



(thousands)	2019					2018					2017
Rate applied to pretax income	$	24,744		21.0	%	$	31,916		21.0	%	$	39,588		35.0	%
State taxes, net of federal tax effect	5,147			4.4	%	6,427			4.2	%	4,060			3.6	%
Remeasurement of net deferred tax liabilities	—			—	%	—			—	%	(7,699		)	(6.8	)%
Excess tax benefit on stock-based compensation	(833		)	(0.7	)%	(6,685		)	(4.4	)%	(6,009		)	(5.3	)%
Other	(798		)	(0.7	)%	489			0.4	%	(2,548		)	(2.3	)%
Income taxes	$	28,260		24.0	%	$	32,147		21.2	%	$	27,392		24.2	%

The composition of the deferred tax assets and liabilities as of December 31, 2019 and 2018 is as follows:



(thousands)	2019			2018
Long-term deferred income tax assets (liabilities):
Trade receivables allowance	$	417		$	418
Inventory capitalization	2,226			2,591
Accrued expenses	5,987			6,123
Deferred compensation	413			462
Inventory reserves	4,651			1,278
Federal NOL carryforwards	1,113			1,607
State NOL carryforwards	953			2,060
Valuation allowance - NOL	(872		)	(649		)
Share-based compensation	7,221			5,848
Operating lease right-of-use assets	(23,910		)	—
Operating lease liabilities	24,160			—
Other	2,015			1,432
Intangibles	(28,160		)	(26,419		)
Depreciation expense	(22,368		)	(16,562		)
Prepaid expenses	(1,130		)	(888		)
Net deferred tax liabilities	$	(27,284	)	$	(22,699	)

The Company paid income taxes of $36.1 million, $28.2 million and $38.6 million in 2019, 2018 and 2017, respectively.

As of December 31, 2019 and December 31, 2018, the Company had gross federal, state, and foreign net operating losses, of approximately $24.5 million and $53.9 million, respectively. These loss carryforwards generally expire between tax years ending December 31, 2020 and December 31, 2037. The components of the valuation allowance relate to certain acquired federal, state and foreign net operating loss carryforwards that the Company anticipates will not be utilized prior to their expiration, either due to income limitations or limitations under Section 382. The tax effected values of these net operating losses are $2.0 million and $3.7 million at December 31, 2019 and 2018, respectively, exclusive of valuation allowances of $0.9 million and $0.6 million at December 31, 2019 and 2018, respectively.

The Company is subject to periodic audits by domestic tax authorities. For the majority of tax jurisdictions, the U.S. federal statute of limitations remains open for the years 2015 and later. The Company is currently under audit by the Internal Revenue Service for the 2015 and 2016 tax years. Uncertain tax benefits were immaterial at December 31, 2019 and 2018 and activity related to uncertain tax benefits was immaterial for all periods presented.