14. Income Taxes

The components of the provision for income taxes were as follows:

	Year Ended December 31
	2015		2014		2013
Current
Federal	$	5,967	$	6,200	$	6,180
State and local	577		1,587		1,739
Foreign	6,597		6,138		8,632

	13,141		13,925		16,551

Deferred
Federal	5,471		7,506		5,950
State and local	563		488		(248		)
Foreign	748		1,219		(767		)

	6,782		9,213		4,935

Provision for income taxes	$	19,923	$	23,138	$	21,486

In the fourth quarter of 2015, the Company completed a U.S. research and development tax credit study for the prior years 2012 — 2014. The Company recognized a benefit of $1.1 million related to the research and development credit. During the second quarter of 2014, the Internal Revenue Service (IRS) completed its joint committee review of the Company’s 2008 amended income tax return. As a result of the conclusion of this examination, the Company received an income tax refund of $2.5 million including tax and interest which was recorded in other current assets within the Company’s consolidated balance sheet as of December 31, 2013. The Company released net uncertain tax positions including related accrued interest and penalties of $1.4 million as a result of the conclusion of this examination, all of which impacted the Company’s effective tax rate.

Income before income tax provision includes income generated by operations outside the United States of $28.1 million, $29.0 million, and $29.3 million for 2015, 2014, and 2013, respectively. No provision has been made for U.S. Federal, state, or additional foreign taxes related to approximately $84.1 million of undistributed earnings of foreign subsidiaries which have been indefinitely reinvested. Determination of the amount of any such unrecognized deferred income tax liability on this temporary difference is not practicable as such determination involves material uncertainties about the potential extent and timing of any distributions, the availability and complexity of calculating foreign tax credits, and the potential extent and timing of any such distributions, including withholding taxes.

The differences between the U.S. federal statutory tax rate and the Company’s effective income tax rate are as follows:

	Year Ended December 31
	2015		2014		2013
U.S. federal statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal income tax benefit	1.8		2.2		0.8
Tax rate differential on foreign income	(3.1	)	(2.9	)	(1.5	)
Nonrecurring adjustments related to sale of foreign subsidiary	—		—		(2.2	)
Permanent tax differences	(1.6	)	0.3		(1.4	)
Valuation allowance	0.3		—		1.5
Settlement of uncertain tax positions	—		(1.9	)	—
Tax statute expiration	(0.6	)	(0.6	)	(0.6	)
Change in uncertain tax positions	0.1		0.1		0.3
Other — net	(0.5	)	(0.3	)	0.1

Effective income tax rate	31.4	%	31.9	%	32.0	%

The Company has the following gross operating loss carryforwards and tax credit carryforwards as of December 31, 2015:

Type	Amount		Expiration Date
Foreign tax credits	$	183	2017
Capital loss carryforwards	2,014		2018
State tax credits(1)	2,232		2023 - 2027
Operating loss carryforwards — federal	549		2029
Operating loss carryforwards — state(2)	11,716		2018 - 2034
Operating loss carryforwards — foreign(3)	8,582		2023 - unlimited

(1) Of the total state tax credit carryforwards, approximately 47% begin to expire in 2023.

(2) Of the total state operating loss-carryforwards, approximately 97% expire in 2020 or later.

(3) Of the total foreign tax operating loss carryforwards, approximately 95% have no expiration.

The components of deferred taxes consist of the following:

	December 31
	2015			2014
Deferred tax assets
Net operating loss and credit carryforwards (1) (2)	$	4,875		$	5,736
Accruals	11,159			10,524
Inventories	15,403			12,856
Pensions	11,303			10,670
Valuation allowance	(2,682		)	(2,576		)

Total deferred tax assets	40,058			37,210

Deferred tax liabilities
Property, plant and equipment	$	49,272		$	39,708
Goodwill and other intangible assets	6,108			6,039
U.S. liability on Belgian and German net deferred tax assets	708			829

Total deferred tax liabilities	56,088			46,576

Net deferred tax liability(3)	$	(16,030	)	$	(9,366	)

(1)Uncertain tax liabilities of approximately $0.2 million and $0.3 million partially offset the net operating losses and credit carryforwards in 2015 and 2014, respectively.

(2)Net indirect benefits on uncertain tax liabilities of approximately $61 thousand and $74 thousand are included in the U.S. net operating loss and credit carryforwards in 2015 and 2014, respectively.

(3)A current deferred tax liability of $0.2 million is included in accounts payable and accrued liabilities within the consolidated balance sheets as of December 31, 2014.

A valuation allowance is established when it is more likely than not that a portion of the deferred tax assets will not be realized. The valuation allowance is adjusted based on the changing facts and circumstances, such as the expected expiration of an operating loss carryforward. The Company’s valuation allowance as of December 31, 2015 of $2.7 million pertained to an uncertainty related to the realization of foreign net operating loss carryforwards, U.S. foreign tax credits, domestic capital loss carryforwards, and state tax credits. The Company’s valuation allowance as of December 31, 2014 of $2.6 million pertained to an uncertainty related to the realization of foreign net operating loss carryforwards, domestic capital loss carryforwards, and state tax credits.

The Company has classified uncertain tax positions as non-current income tax liabilities unless the amount is expected to be paid within one year. The following is a reconciliation of the unrecognized income tax benefits:

	Year Ended December 31
	2015			2014			2013
Balance as of January 1	$	1,187		$	3,435		$	4,141
Gross decreases for tax positions of prior years	—			—			(438		)
Gross increases for tax positions of current year	78			75			122
Lapse of statute of limitations	(417		)	(500		)	(390		)
Settlement of uncertain tax positions	(70		)	(1,823		)	—

Balance as of December 31	$	778		$	1,187		$	3,435

As of December 31, 2015, approximately $0.6 million of the $0.8 million, and as of December 31, 2014, approximately $1.0 million of the $1.2 million, of unrecognized tax benefits would reduce the Company’s effective tax rate if recognized.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. In 2015, the Company accrued interest and penalties of approximately $33 thousand on current and prior year uncertain tax positions and reversed approximately $0.1 million of interest and penalties due to the expiration of the statute of limitations. In 2014, the Company accrued interest and penalties of approximately $0.1 million on prior year uncertain tax positions and reversed approximately $0.1 million of interest and penalties due to the expiration of the statute of limitations and approximately $0.6 million due to the settlement of uncertain tax positions. As of December 31, 2015 and 2014, the amount accrued for the payment of interest and penalties is approximately $0.3 million and $0.3 million, respectively.

Total uncertain tax positions recorded as a component of accrued pension and other liabilities within its consolidated balance sheets were approximately $0.9 million and $1.3 million for the years ended December 31, 2015 and 2014, respectively.

At this time, the Company believes that it is reasonably possible that approximately $0.1 million of the estimated unrecognized tax benefits as of December 31, 2015 will be recognized within the next twelve months based on the expiration of statutory review periods all of which will impact the effective tax rate.

As of December 31, 2015, the following tax years remain subject to examination for the major jurisdictions where the Company conducts business:

Jurisdiction		Years
United States		2012 — 2015
Kentucky		2011 — 2015
Pennsylvania		2012 — 2015
Belgium		2012 — 2015
China		2012 — 2015
Germany		2011 — 2015
United Kingdom		2012 — 2015
Japan		2010 — 2015
Singapore		2011 — 2015