H. INCOME TAXES:

The following table summarizes the provision for income taxes from continuing operations:



	For Years Ended December 31 (in thousands)
	2019		2018		2017
Current:
Federal	$	11,453	$	10,996	$	24,200
State		537		1,575		1,772
		11,990		12,571		25,972
Deferred:
Federal		(179)		(280)		(4,008)
State		(45)		159		7
		(224)		(121)		(4,001)
Total tax provision	$	11,766	$	12,450	$	21,971

The effective rate of the provision for income taxes on earnings from continuing operations before income taxes as shown in the Consolidated Statements of Comprehensive Income differs from the applicable statutory federal income tax rate for the following reasons:



	Percent of Pre-tax Income
	2019	2018	2017
Statutory rate	21.0%	21.0%	35.0%
State tax, net of federal benefit	0.7%	2.6%	1.8%
Tax exempt interest and dividends	(0.1%)	(0.6%)	(0.7%)
Other	0.9%	0.8%	(2.4%)
Effective rate	22.5%	23.8%	33.7%

Deferred tax assets and liabilities are recorded based on the differences between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes. The tax effects of the cumulative temporary differences resulting in deferred tax assets and liabilities are as follows at December 31:



	(In thousands)
	2019		2018
Deferred tax assets
Insurance (primarily product liability)	$	947	$	900
Vacation		662		527
Inventory		642		339
Deferred compensation		162		303
Environmental		227		237
Doubtful accounts		97		158
Other		103		37
Total deferred tax assets		2,840		2,501

Deferred tax liabilities
Goodwill and other intangibles		1,391		1,200
Depreciation		131		213
Deferred revenue		37		-
Total deferred tax liabilities		1,559		1,413

Net deferred tax assets	$	1,281	$	1,088

In December 2017, the United States enacted changes to its tax laws, which included a reduction of the corporate income tax rate from 35% to 21%, beginning in 2018. The reduction in the tax rate resulted in a revaluation of the Company’s deferred tax assets and liabilities held at December 31, 2017, causing an increase in its 2017 income tax provision of $534,000. The Company believes its accounting assessment for the impact of the enacted changes to the United States tax laws is complete.

The Company establishes tax reserves in accordance with FASB ASC 740, Income Taxes. As of December 31, 2019, the carrying amount of the Company’s gross unrecognized tax benefits was $2,237,000 which, if recognized, would affect the Company’s effective income tax rate.

The following is a reconciliation of the Company’s unrecognized tax benefits for the years ended December 31, 2019 and 2018:



	(In thousands)
	2019		2018
Balance at January 1	$	320	$	459
Increases for tax positions taken related to the current year		453		73
Increases for tax positions taken related to prior years		1,519		-
Decreases for tax positions taken related to prior years		-		(54)
Lapse of statute of limitations		(55)		(56)
Settlements		-		(102)
Balance at December 31	$	2,237	$	320

It is the Company’s practice to include tax related interest expense, interest income, and penalties in tax expense. During the years ended December 31, 2019, 2018 and 2017, the Company accrued approximately $298,000, $14,000 and $17,000 in interest expense, respectively.

The Company is subject to U.S. federal income tax as well as income taxes of multiple states. During 2018, the state of Wisconsin completed its audits of the tax years 2013 through 2016. During June of 2016, the Internal Revenue Service completed its audits of the tax years 2012 and 2013. As a result of the audits, the tax amortization period of certain intangible assets was shortened. For all states in which it does business, the Company is subject to state audit statutes.