Note 7. Income Taxes

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (“the Act”), which made significant changes to U.S. federal income tax law including, among other things, lowering corporate income tax rates, permitting bonus depreciation that will allow for full expensing of qualified property and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. Beginning October 1, 2017 and continuing through September 30, 2018, the Company’s U.S. income was taxed at a 24.5% federal tax rate after which time the federal tax rate applicable to the Company was lowered to 21.0%. During fiscal 2018, deferred tax assets were revalued to the lower statutory rates of 21.0% which resulted in increased tax expense during fiscal 2018 of $16,633. An additional component of the Act, the transition tax applied on accumulated earnings and profits of controlled foreign corporations, resulted in increased tax expense of $2,170 during fiscal 2018.

On December 22, 2017, the United States Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. As of September 30, 2019, the Company has completed its accounting for the income tax effects of the Act..

The components of income (loss) before provision for income taxes and the provision for income taxes are as follows:


	Year Ended September 30,
	2017		2018		2019
Income (loss) before income taxes:
U.S.	$	(25,090)	$	(16,650)	$	790
Foreign		7,873		12,596		12,580
Total	$	(17,217)	$	(4,054)	$	13,370
Provision for (benefit from) income taxes:
Current:
U.S. Federal	$	933	$	(7,690)	$	(267)
Foreign		1,652		2,404		2,259
State		401		(137)		2
Total		2,986		(5,423)		1,994
Deferred:
U.S. Federal		(8,781)		25,141		1,423
Foreign		—		—		132
State		(1,427)		(2,496)		62
Valuation allowance		195		475		14
Total		(10,013)		23,120		1,631
Total provision for (benefit from) income taxes	$	(7,027)	$	17,697	$	3,625

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


	Year Ended September 30,
	2017			2018			2019
Statutory federal tax rate		35.00	%		24.53	%		21.00	%
Tax provision for income taxes at the statutory rate	$	(6,026)		$	(1,059)		$	2,808
Foreign tax rate differentials		(1,103)			(685)			(157)
Provision for state taxes, net of federal taxes		(371)			(45)			247
U.S. tax on distributed and undistributed earnings of foreign subsidiaries		452			240			486
Manufacturer’s deduction		—			(86)			—
Tax credits		(409)			(511)			(499)
Transition tax		—			2,170			—
Federal and state tax rate change impact on deferred tax asset		192			16,633			314
Net operating loss carryback		—			407			—
Change in valuation allowance		195			475			14
Stock compensation		—			—			655
Other, net		43			158			(243)
Provision for income taxes at effective tax rate	$	(7,027)		$	17,697		$	3,625
Effective tax rate		40.8	%		(436.5)	%		27.1	%

During fiscal 2017, the Company’s effective tax rate was higher than the federal statutory rate, primarily due to the Company incurring a pre-tax loss in the United States and pre-tax income in the United Kingdom which has a lower effective tax rate than the statutory rate. When incurring a pre-tax loss, the effective tax rate of the Company will be higher than the statutory rate if certain tax jurisdictions with lower tax rates incur pre-tax income as a partial offset to the pre-tax loss in the United States.

During fiscal 2018, the Company’s effective tax rate was negative relative to the statutory rate primarily due to the Act that resulted in significant impacts on the value of the deferred tax asset as well a one-time transition tax on income generated by foreign entities. The Act lowered the statutory rate from 35% to 21%, however, the 2018 statutory rate is calculated to be 24.53% based on the fiscal year-end date of September 30, 2018.

During fiscal 2019, the Company’s effective tax rate was higher than the federal statutory rate primarily due to state income taxes, the global intangible low-tax income tax (GILTI) and the forfeiture of stock options, restricted stock and performance share awards that occurred during the year.

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


	September 30,
	2018		2019
Deferred tax assets:
Pension and postretirement benefits	$	38,343	$	48,367
TIMET Agreement		4,775		4,163
Inventories		2,091		1,706
Accrued compensation and benefits		1,387		770
Accrued expenses and other		2,977		3,308
Tax attributes		4,178		4,441
Valuation allowance		(1,661)		(1,675)
Total deferred tax assets	$	52,090	$	61,080
Deferred tax liabilities:
Property, plant and equipment, net	$	(27,521)	$	(27,873)
Intangible and other		(1,034)		(1,091)
Total deferred tax liabilities	$	(28,555)	$	(28,964)

Net deferred tax assets (liabilities)	$	23,535	$	32,116

As of September 30, 2019, the Company had state tax net operating loss carryforwards of $14,093, tax credits of $3,719 and foreign net operating loss carryforwards of $1,786. These tax attributes begin to expire in 2026, 2024, and 2020, respectively. The Company has recorded a valuation allowance against the foreign net operating loss carryforwards of $415 and federal and state tax credits of $1,260 because management does not believe that it is more likely than not that net operating loss carryforwards will be realized.

Undistributed earnings of certain of the Company’s foreign subsidiaries amounted to approximately $71,311 at September 30, 2019. The Company considers those earnings reinvested indefinitely and, accordingly, aside from the one-time transition tax associated with the Act, no additional 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, 2019, the Company is open to examination in the U.S. for the 2016 through 2019 tax years and in various foreign jurisdictions from 2016 through 2019. The Company is also open to examination in various states in the U.S., none of which were individually material.

As of September 30, 2018 and 2019, the Company had no uncertain tax positions.