Note 6. Income Taxes

The components of income before provision for income taxes are as follows:


	Year Ended September 30,
	2014		2015		2016
Income before income taxes:
U.S.	$	(360)	$	36,327	$	(4,160)
Foreign		5,480		10,849		7,911
Total	$	5,120	$	47,176	$	3,751
Provision for income taxes:
Current:
U.S. Federal	$	427	$	11,207	$	(4,427)
Foreign		1,012		1,690		1,368
State		541		686		(141)
Total		1,980		13,583		(3,200)
Deferred:
U.S. Federal		(983)		(79)		4,582
Foreign		302		690		(105)
State		70		2,368		(2,954)
Valuation allowance		—		128		408
Total		(611)		3,107		1,931
Total provision for income taxes	$	1,369	$	16,690	$	(1,269)

The provision for income taxes applicable to results of operations differed from the U.S. federal statutory rate as follows:


	Year Ended September 30,
	2014			2015			2016
Statutory federal tax rate		35	%		35	%		35	%
Tax provision for income taxes at the statutory rate	$	1,792		$	16,512		$	1,313
Foreign tax rate differentials		(605)			(1,417)			(1,505)
Provision for state taxes, net of federal taxes		230			818			778
U.S. tax on distributed and undistributed earnings of foreign subsidiaries		173			419			523
Manufacturer’s deduction		—			(1,213)			(98)
Tax credits		(91)			(240)			(1,198)
State tax rate change impact on deferred tax asset		157			1,565			(1,819)
Change in Valuation Allowance		—			128			408
Other, net		(287)			118			329
Provision for income taxes at effective tax rate	$	1,369		$	16,690		$	(1,269)
Effective tax rate		26.7	%		35.4	%		(33.8)	%

During fiscal 2014, the Company’s effective tax rate was lower than the statutory rate, primarily due to a higher proportion of income in lower tax jurisdictions. The Company generated a taxable loss in the United States, which was carried back to earlier years.

During fiscal 2015, the Company’s effective tax rate was higher than the statutory rate, primarily due to a change in the Indiana tax law that was enacted in May, 2015, which decreased the deferred tax asset and increased tax expense.

During fiscal 2016, the Company’s effective tax rate was negative relative to the statutory rate, primarily due to an increase in the value of the Company’s deferred tax assets driven by a higher state tax rate and research credits. Additionally, the Company earned a greater proportion of profitability in foreign jurisdictions.

Deferred tax assets (liabilities) are comprised of the following:


	September 30,
	2015		2016
Deferred tax assets:
Pension and postretirement benefits	$	77,076	$	93,238
TIMET Agreement		10,024		9,361
Inventories		3,771		3,405
Accrued compensation and benefits		2,027		2,264
Accrued expenses and other		2,085		3,132
Tax attributes		778		1,642
Valuation allowance		(128)		(532)
Total deferred tax assets	$	95,633	$	112,510
Deferred tax liabilities:
Property, plant and equipment, net	$	(34,109)	$	(41,645)
Intangible and other		(1,271)		(1,433)
Total deferred tax liabilities	$	(35,380)	$	(43,078)

Net deferred tax assets (liabilities)	$	60,253	$	69,432
Net current deferred tax assets	$	6,295	$	—
Net long-term deferred tax assets (liabilities)	$	53,958	$	69,432

As of September 30, 2016, the Company had state tax net operating loss carryforwards of approximately $3,453, tax credits of $1,198 and foreign net operating loss carryforwards of $349. As of September 30, 2015, the Company had state tax net operating loss of approximately $24, tax credits of $778 and foreign net operating loss carryforwards of $483. The Company has recorded a valuation allowance against the foreign net operating loss carryforwards of $349 because management does not believe that it is more likely than not that net operating loss carryforwards will be realized prior to their expiration.

Undistributed earnings of certain of the Company’s foreign subsidiaries amounted to approximately $54,172 at September 30, 2016. The Company considers those earnings reinvested indefinitely and, accordingly, no provision for U.S. income taxes has been provided. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with its hypothetical calculation.

As of September 30, 2016, the Company was open to examination in the U.S. federal income tax jurisdiction for the 2014 through 2016 tax years and in various foreign jurisdictions from 2011 through 2016. The Company is also open to examination in various states in the U.S., none of which were individually material.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The objective of this update is to simplify the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent on the Consolidated Balance Sheet. As permitted, the Company early adopted this standard prospectively for the fiscal year beginning October 1, 2015. Prior periods were not retrospectively adjusted.