Income Taxes

The provision for income tax

(benefit) expense consists of (in thousands):

	201 7			201 6
Current:
Federal	$	(10	)	$	525
State		(25	)		193
Total current		(35	)		718
Deferred:
Federal		-			-
State		-			-
Total deferred		-			-
Income tax (benefit) expense	$	(35	)	$	718

A reconciliation of the difference between the federal statutory income tax rate and the effective income tax rate follows:

	201 7			201 6
Federal statutory rate		35.0	%		35.0	%
State tax, net of federal benefit		(12.3	)		(6.1	)
State tax credits and adjustments		(1.7	)		1.8
Change in federal tax rate		(54.6	)		-
Change in cash surrender value of life insurance policies		-			(185.1	)
Valuation allowance increase		38.8			143.2
Other, net		(4.7	)		(4.6	)
Effective income tax rate		0.5	%		(15.8	)%

December 22, 2017,

the Tax Cuts and Jobs Act (the “Act”) was enacted into law.

We have remeasured the below deferred tax assets at the lower corporate tax rate of

21%

based on when we expect those balances to reverse, however, this was offset by a corresponding adjustment to the Company’s full valuation allowance.

We have substantially completed our provisional analysis of the income tax effects of the Tax Act and recorded a reasonable estimate of such effects. However, the SEC staff issued guidance regarding application of Financial Accounting Standards Board income tax guidance in the reporting period that includes

December 22, 2017

– the date on which the Tax Act was signed into law – to address situations when a company does

not

have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. We have estimated the tax impacts related to the impact to deferred tax assets and liabilities and included these amounts in our consolidated financial statements for the year ended

December 31, 2017,

on a provisional basis. In this regard, the Tax Act repeals the corporate alternative minimum tax, or AMT, regime, including claiming a refund and full realization of remaining AMT credits. We have

not

been able to make a reasonable estimate with respect to the realization of existing AMT credit carryforwards, and accordingly, continue to apply the income tax-related accounting guidance that was in effect immediately prior to the enactment of the Tax Act. In order for us to complete the income tax effects of the Tax Act on the existing AMT deferred tax asset, we need to further analyze the nature, validity, and recoverability of the AMT-related deferred tax credit carryforwards prior to recording the underlying appropriate tax benefit. Accordingly, the ultimate impact related to the Tax Act

may

differ, possibly materially, due to, among other things, completing our analysis of the realization of available AMT credit refunds, further refinement of our calculations, changes in interpretations and assumptions that we made, additional guidance that

may

be issued by the U.S. Government, and actions and related accounting policy decisions that we

may

take as a result of the Tax Act. We expect this analysis to be complete when our

2017

U.S. corporate income tax return is filed in

2018.

The income tax effects of temporary differences that comprise deferred tax assets and liabilities at

December 31

follow (in thousands):

	20 1 7			201 6
Noncurrent deferred tax assets (liabilities) :
Accounts receivable	$	46		$	99
Other accrued expenses		339			587
Property, plant and equipment		(659	)		(1,190	)
Employee benefits		1,970			3,979
Contribution carryforward		-			181
AMT credit		1,192			1,205
Net operating loss		6,733			7,727
Gross non-current deferred tax assets		9,621			12,588
Less valuation allowance		(9,621	)		(12,588	)
Net noncurrent deferred tax assets	$	-		$	-

We have U.S. federal net operating loss carryforwards of approximately $

29.2

million which are available to reduce future taxable income. The federal net operating loss will begin expiring in

2033.

We have combined state net operating loss carryforwards of

$22.3

million that will expire at various times beginning in

2027.

During

201

we recorded a non-cash credit to our valuation allowance of

$3.0

million against our

December 31, 2017

deferred tax assets. The primary assets which are covered by this valuation allowance are employee benefits and net operating losses in excess of the amounts which can be carried back to prior periods. The valuation allowance was calculated in accordance with the provisions of ASC

740,

Income Taxes

, which requires an assessment of both positive and negative evidence when measuring the need for a valuation

allowance. Our results over the most recent

four

-year period were heavily affected by our business restructuring activities. Our cumulative loss represented sufficient negative evidence to require a valuation allowance. We intend to maintain a valuation allowance until sufficient positive evidence exists to support its reversal, resulting in

deferred tax asset balance being recognized. Should we determine that we will

not

be able to realize all or part of our deferred tax asset in the future, an adjustment to the deferred tax asset will be charged to income in the period such determination is made.

The unrecognized tax benefits activity for the year ended

December 31

s (in thousands):

	201 7			201 6
Unrecognized tax benefits balance at January 1	$	471		$	307
Gross (decrease) increases in tax positions of prior years		(17	)		164
Unrecognized tax benefits balance at December 31	$	454		$	471

As of

December 31,

201

and

2016,

we had approximately

$80,000

and

$97,000

of accrued interest related to uncertain tax positions, respectively.

Total amount of unrecognized tax benefits that would affect our effective tax rate if recognized is

$358,000

December 31, 2017

and

$307,000

December 31, 2016.

The

2010

through

2016

tax years remain open to examination by major taxing jurisdictions.