Income Taxes

The components of income (loss) from continuing operations before income tax provision (benefit) and the income tax provision (benefit) for the years ended December 31 are as follows:



	2016			2015			2014
Income (loss) before income tax provision (benefit)
Domestic	$	34,885		$	26,383		$	(74,402	)
Foreign	(415		)	(1,584		)	(2,171		)
	$	34,470		$	24,799		$	(76,573	)
Income tax provision (benefit)
Current income tax provision (benefit):
Federal	$	(9,200	)	$	6,427		$	2,778
State	782			2,185			(472		)
Foreign	584			1,145			586
Total current	(7,834		)	9,757			2,892
Deferred income tax provision (benefit):
Federal	12,393			(7,472		)	(38,829		)
State	214			925			(1,817		)
Foreign	90			(395		)	(701		)
Total deferred	12,697			(6,942		)	(41,347		)
	$	4,863		$	2,815		$	(38,455	)

The Company made income tax payments of $3.2 million, $10.9 million and $10.2 million during 2016, 2015 and 2014, respectively. During the same periods, income tax refunds totaled $3.0 million, $0.2 million and $0.9 million, respectively.

A reconciliation of the federal statutory and effective income tax rate for the years ended December 31 is as follows:



	2016			2015			2014
Income (loss) before income tax provision (benefit)	$	34,470		$	24,799		$	(76,573	)
Statutory taxes (benefit) at 35.0%	$	12,064		$	8,679		$	(26,801	)
State and local income taxes	(908		)	(439		)	(7,112		)
Valuation allowances	2,602			3,525			5,742
Non-deductible expenses	966			787			632
Percentage depletion	(6,374		)	(8,406		)	(8,572		)
R&D and other federal credits	67			(1,854		)	(1,397		)
Other, net	(183		)	(332		)	322
Tax settlements	(3,371		)	855			(1,269		)
Income tax provision	$	4,863		$	2,815		$	(38,455	)
Effective income tax rate	14.1		%	11.4		%	50.2		%

As of December 31, 2016, the cumulative unremitted earnings of the Company's foreign subsidiaries are approximately $9.2 million. The Company has provided a cumulative deferred tax liability in the amount of $0.3 million with respect to the cumulative unremitted earnings of the Company as of December 31, 2016 which are expected to be repatriated. The Company has continued to conclude all remaining foreign earnings in excess of this amount will be indefinitely reinvested in its foreign operations and, therefore, the recording of deferred tax liabilities for such unremitted earnings is not required. It is impracticable to determine the amount of unrecognized deferred taxes with respect to these permanently reinvested earnings; however, foreign tax credits would be available to reduce, in part, U.S. income taxes in the event of a distribution.

A detailed summary of the total deferred tax assets and liabilities in the Company's Consolidated Balance Sheets resulting from differences in the book and tax basis of assets and liabilities follows:



	December 31
	2016		2015
Deferred tax assets
Tax carryforwards	$	24,138	$	12,812
Inventories	3,810		4,680
Accrued expenses and reserves	27,777		30,640
Other employee benefits	10,451		14,253
Partnership investment - development costs	3,818		21,766
Other	16,091		16,170
Total deferred tax assets	86,085		100,321
Less: Valuation allowance	14,495		11,723
	71,590		88,598
Deferred tax liabilities
Depreciation and depletion	41,055		42,679
Accrued pension benefits	1,813		3,610
Unremitted foreign earnings	342		296
Total deferred tax liabilities	43,210		46,585
Net deferred asset	$	28,380	$	42,013

The following table summarizes the tax carryforwards and associated carryforward periods and related valuation allowances where the Company has determined that realization is uncertain:



	December 31, 2016
	Net deferred tax asset		Valuation allowance		Carryforwards expire during:
Non-U.S. net operating loss	$	2,109	$	2,109	2021 - Indefinite
State losses	16,351		13,350		2016 - 2035
Research credit	3,301		—		2028 - 2030
Alternative minimum tax credit	8,035		—		Indefinite
Total	$	29,796	$	15,459



	December 31, 2015
	Net deferred tax asset		Valuation allowance		Carryforwards expire during:
Non-U.S. net operating loss	$	915	$	915	2020 - Indefinite
State losses	11,098		7,605		2015 - 2034
Research credit	2,807		—		2027 - 2029
Alternative minimum tax credit	1,871		—		Indefinite
Total	$	16,691	$	8,520

The Company evaluates its deferred tax assets to determine if a valuation allowance is required based on the consideration of all available evidence, both positive and negative, using a “more likely than not” standard. A valuation allowance is required where realization is determined to no longer meet the “more likely than not” standard. The establishment of a valuation allowance does not have an impact on cash, nor does such an allowance preclude the Company from using its loss carryforwards or other deferred tax assets in future periods. A significant element of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2016. The positive evidence considered by management included a strong earnings history (exclusive of the losses at Centennial, and more specifically the 2014 and 2016 impairment charges, that gave rise to the deferred tax asset) plus evidence indicating that the loss is an isolated one rather than a continuing condition and the Company’s future income-generating capacity and tax-planning strategies. Projected future taxable income and tax-planning strategies were given the appropriate weighting in the analysis and support the conclusion that such positive evidence was sufficient to overcome the weight of negative evidence related to a three-year cumulative loss. Management concluded that it is more likely than not that all of the U.S. Federal net deferred tax asset will be realized based upon projected future taxable income.

The Company has a valuation allowance for certain state and foreign deferred tax assets. Based upon the review of historical earnings and the relevant expiration of carryforwards, including utilization limitations in the various state taxing jurisdictions, the Company believes the valuation allowances are appropriate and does not expect to release valuation allowances within the next twelve months that would have a significant effect on the Company's financial position or results of operations.

The tax returns of the Company and certain of its subsidiaries are under routine examination by various taxing authorities. The Company has not been informed of any material assessment for which an accrual has not been previously provided and the Company would vigorously contest any material assessment. Management believes any potential adjustment would not materially affect the Company's financial condition or results of operations.

The following is a reconciliation of the Company's total gross unrecognized tax benefits, defined as the aggregate tax effect of differences between tax return positions and the benefits recognized in the financial statements for the years ended December 31, 2016 and 2015. Approximately $1.2 million and $3.9 million of these gross amounts as of December 31, 2016 and 2015, respectively, relate to permanent items that, if recognized, would impact the effective income tax rate. This amount differs from the gross unrecognized tax benefits presented in the table below due to the decrease in U.S. federal income taxes which would occur upon the recognition of the state tax benefits included herein.



	2016			2015			2014
Balance at January 1	$	4,870		$	3,466		$	7,848
Additions based on tax positions related to prior years	348			1,230			453
Additions based on tax positions related to the current year	377			531			921
Reductions due to settlements with taxing authorities	(2,190		)	(256		)	(4,701		)
Reductions due to lapse of the applicable statute of limitations	(1,818		)	(101		)	(1,055		)
Balance at December 31	$	1,587		$	4,870		$	3,466

The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The Company recognized net (benefit)/expense of $(0.7) million, $0.2 million and $(0.9) million in interest and penalties related to uncertain tax positions during 2016, 2015 and 2014, respectively. The total amount of interest and penalties accrued was $0.1 million and $0.7 million as of December 31, 2016 and 2015, respectively.

The Company expects the amount of unrecognized tax benefits will change within the next 12 months; however, the change in unrecognized tax benefits, which is reasonably possible within the next 12 months, is not expected to have a significant effect on the Company's financial position, results of operations or cash flows.

In general, the Company operates in taxing jurisdictions that provide a statute of limitations period ranging from three to five years for the taxing authorities to review the applicable tax filings. The examination of the 2011 and 2012 U.S. federal tax returns concluded in the second quarter of 2014. The Company does not have any additional material taxing jurisdictions in which the statute of limitations has been extended beyond the applicable time frame allowed by law.