

	Fiscal Year Ended
	April 27, 2019		April 28, 2018		April 29, 2017
Income from continuing operations before taxes
United States	$	76,035	$	144,278	$	217,529
International	30,193		34,985		33,352
Total	$	106,228	$	179,263	$	250,881



	Fiscal Year Ended
	April 27, 2019			April 28, 2018			April 29, 2017
Current:
Federal	$	(19	)	$	5,876		$	72,339
Foreign	9,207			11,228			9,100
State	3,402			2,243			9,367
Total current expense	12,590			19,347			90,806
Deferred:
Federal	9,709			(45,177		)	(11,802		)
Foreign	(53		)	(743		)	(28		)
State	1,106			4,862			(1,883		)
Total deferred expense (benefit)	10,762			(41,058		)	(13,713		)
Income tax expense (benefit)	$	23,352		$	(21,711	)	$	77,093

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted into law. The Tax Act significantly revises the future ongoing U.S. federal corporate income tax by, among other things, lowering the U.S. federal corporate tax rate, implementing a territorial tax system, imposing a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on foreign sourced earnings. Effective January 1, 2018, the Tax Act reduced the U.S. federal corporate tax rate from 35.0% to 21.0%. For the fiscal year ended April 27, 2019, we utilized a 21.0% U.S. federal statutory rate. For the fiscal year ended April 28, 2018, we utilized a blended rate of approximately 30.5%.

Effective for the fiscal year ended April 27, 2019, the Tax Act subjects Patterson to tax on global intangible low-taxed income (“GILTI”). We have made an accounting policy election to treat the impacts of GILTI as a period cost in the period incurred.

For the fiscal year ended April 28, 2018, these impacts resulted in a provisional discrete net tax benefit of $76,648, which included provisional amounts of $81,871 of tax benefit on U.S. deferred tax assets and liabilities, $4,006 of tax expense for a one-time transition tax on unremitted foreign earnings and $1,217 in withholding tax paid on current year distributions. During the fiscal year ended April 27, 2019, we completed our accounting for the previously recorded provisional impacts of the Tax Act and recorded additional remeasurement benefit of $2,355 on U.S. deferred tax assets and liabilities and a reduction to the transition tax cost of $331.

While we have completed our accounting for the impacts of the Tax Act, changes in interpretation of the Tax Act, analysis of proposed and final regulations as they are issued, current and additional guidance from the Internal Revenue Service and/or state legislative actions as well as potential changes in accounting standards surrounding income taxes and the Tax Act may result in further, potentially material, changes to these completed computations.

Deferred tax assets and liabilities are included in other non-current assets and deferred income taxes on the consolidated balance sheets. Significant components of our deferred tax assets (liabilities) as of April 27, 2019 and April 28, 2018 are as follows:



	April 27, 2019			April 28, 2018
Deferred tax assets:
Capital accumulation plan	$	3,988		$	4,862
Inventory related items	4,887			4,407
Bad debt allowance	1,888			1,052
Stock based compensation expense	6,918			6,514
Interest rate swap	4,041			4,712
Foreign tax credit	7,358			8,472
Other	5,053			11,748
Gross deferred tax assets	34,133			41,767
Less: Valuation allowance	(11,237		)	(13,830		)
Total net deferred tax assets	22,896			27,937
Deferred tax liabilities
LIFO reserve	(24,098		)	(19,727		)
Amortizable intangibles	(77,126		)	(84,778		)
Goodwill	(43,903		)	(41,635		)
Property, plant, equipment	(40,793		)	(33,376		)
Total deferred tax liabilities	(185,920		)	(179,516		)
Deferred net long-term income tax liability	$	(163,024	)	$	(151,579	)

At April 27, 2019, we had a U.S. foreign tax credit asset that will expire in seven years. In addition, we have deferred tax assets which would give rise to tax capital losses if triggered in the future. These losses would have a five year carryforward period and can only be used against capital gain income. At this time, we believe that it is more likely than not that the foreign tax credit and potential capital loss carryforward attributes totaling $11,237 will not be fully utilized prior to expiration. As a result, a full valuation allowance has been established against these assets.

With regard to unremitted earnings of foreign subsidiaries generated after December 31, 2017, we do not currently provide for U.S. taxes since we intend to reinvest such undistributed earnings indefinitely outside of the United States. We continue to apply ASC 740 based on the provisions of the tax law that were in effect immediately prior to the enactment of the new law.

Income tax expense varies from the amount computed using the U.S. statutory rate. The reasons for this difference and the related tax effects are shown below:



	Fiscal Year Ended
	April 27, 2019			April 28, 2018			April 29, 2017
Tax at U.S. statutory rate	$	22,306		$	54,674		$	87,807
State tax provision, net of federal benefit	3,492			4,650			5,217
Effect of foreign taxes	2,728			(186		)	(2,602		)
ESOP	(2,465		)	(4,036		)	(4,198		)
Other permanent differences	1,074			(728		)	(2,663		)
Tax on dividends, net of foreign tax credit	—			—			(2,406		)
Tax reform	(2,686		)	(76,648		)	—
Other	(1,097		)	563			(4,062		)
Income tax expense (benefit)	$	23,352		$	(21,711	)	$	77,093

We have accounted for the uncertainty in income taxes recognized in the financial statements in accordance with ASC Topic 740, “Income Taxes”. This standard clarifies the separate identification and reporting of estimated amounts that could be assessed upon audit. The potential assessments are considered unrecognized tax benefits, because, if it is ultimately determined they are unnecessary, the reversal of these previously recorded amounts will result in a beneficial impact to our financial statements.

As of April 27, 2019 and April 28, 2018, Patterson’s gross unrecognized tax benefits were $13,035 and $14,227, respectively. If determined to be unnecessary, these amounts (net of deferred tax assets of $2,225 and $2,418, respectively, related to the tax deductibility of the gross liabilities) would decrease our effective tax rate. The gross unrecognized tax benefits are included in other non-current liabilities on the consolidated balance sheets.



	April 27, 2019			April 28, 2018
Balance at beginning of period	$	14,227		$	14,211
Additions for tax positions related to the current year	972			1,713
Additions for tax positions of prior years	50			232
Reductions for tax positions of prior years	(228		)	(475		)
Statute expirations	(1,984		)	(1,284		)
Settlements	(2		)	(170		)
Balance at end of period	$	13,035		$	14,227

We also recognize both interest and penalties with respect to unrecognized tax benefits as a component of income tax expense. As of April 27, 2019 and April 28, 2018, we had recorded $1,926 and $1,764, respectively, for interest and penalties. These amounts are also included in other non-current liabilities on the consolidated balance sheets. These amounts, net of related deferred tax assets, if determined to be unnecessary, would decrease our effective tax rate. During the year ended April 27, 2019, we recorded as part of tax expense $429 related to an increase in our estimated liability for interest and penalties.

Patterson files income tax returns, including returns for our subsidiaries, with federal, state, local and foreign jurisdictions. During fiscal 2018, the Internal Revenue Service (“IRS”) concluded an audit of fiscal years ended April 25, 2015 and April 30, 2016. The IRS has either examined or waived examination for all periods up to and including our fiscal year ended April 30, 2016, resulting in these periods being closed. In addition to the IRS, periodically, state, local and foreign income tax returns are examined by various taxing authorities. We do not believe that the outcome of these various examinations will have a material adverse impact on our financial statements.