Income Taxes

12 Months Ended

Dec. 31, 2019

Income Taxes [Abstract]

Income Taxes

11. INCOME TAXES

Income tax expense for the years ended December 31, 2019, 2018 and 2017 consisted of the following (in thousands):

	2019		2018		2017
Current
Federal	$	11,024	$	16,398	$	12,448
State		1,825		1,048		780
Total current		12,849		17,446		13,228
Deferred
Federal		2,323		(2,393)		(667)
State		(729)		(89)		(63)
Foreign		4		(205)		107
Total deferred		1,598		(2,687)		(623)
Provision for income taxes	$	14,447	$	14,759	$	12,605

The total provision for income taxes for the years ended December 31, 2019, 2018 and 2017 was $14.5 million, $14.8 million and $12.7 million, respectively. Those amounts have been allocated to the following financial statement items:

	2019		2018		2017
Income from operations	$	14,447	$	14,759	$	12,605
Stockholders' equity, unrealized losses on
investment securities & foreign currency		75		43		52
Total provision for income taxes	$	14,522	$	14,802	$	12,657

Significant components of the Company’s deferred tax assets (liabilities) consisted of the following (in thousands):

	December 31, 2019		December 31, 2018
Reserves on inventory and sales	$	745	$	647
Credit and loss carryforwards		1,269		681
Stock compensation		756		812
Accrued expenses and deferred costs		2,639		2,473
Inventory capitalization		307		275
Unrealized gain on investments		-		65
Total deferred tax assets		5,716		4,953
Unrealized loss on investments		(10)		-
Prepaid expenses		(1,034)		(774)
Depreciation		(3,365)		(1,199)
Total deferred tax liabilities		(4,409)		(1,973)
Net deferred tax assets	$	1,307	$	2,980

The reconciliation of the United States federal statutory tax provision to the Company’s provision for income taxes for the years ended December 31, 2019, 2018 and 2017 (in thousands, except percentages):

	2019			2018			2017
Statutory federal tax	$	19,396	21.0%	$	14,815	21.0%	$	14,114	35.0%
State income taxes, net of federal benefit		864	0.9%		769	1.1%		446	1.1%
Foreign taxes		4	0.0%		174	0.3%		(77)	-0.2%
Domestic manufacturer deduction		-	0.0%		-	0.0%		(870)	-2.2%
Share-based compensation		(6,424)	-7.0%		(1,852)	-2.6%		(1,191)	-3.0%
Other permanent differences		1,004	1.1%		615	0.8%		147	0.4%
Research and development and jobs credits		(579)	-0.6%		(85)	-0.1%		-	0.0%
Effect of Federal tax law change		-	0.0%		-	0.0%		(222)	-0.6%
Other		182	0.2%		323	0.4%		258	0.8%
Provision for income taxes	$	14,447	15.6%	$	14,759	20.9%	$	12,605	31.3%

On December 22, 2017, the President of the United States signed into law the TCJA. It amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the TCJA reduces the corporate federal tax rate from a maximum of 35% to a flat 21% rate. The rate reduction took effect on January 1, 2018. As a result of the reduction in the corporate income tax rate from 35% to 21% under the TCJA, the Company revalued its net deferred tax liability resulting in a reduction of approximately $0.4 million, which had been recorded as a reduction of income tax expense in the Company’s consolidated statements of income for the year ended December 31, 2017. The impact to the Company’s 2017 earnings per common share was an increase of approximately $0.04 per share.

In addition, the 2019, 2018 and 2017 effective tax rate was impacted by the excess tax benefit from share-based compensation activity which is reflected as a reduction of the provision for income taxes. In 2019 and 2018, the effective tax rate was also impacted by the Company’s research and development credits. However, the 2017 effective tax rate was not impacted by the Company’s research and development credits.

The Company has separate state and foreign net operating loss carry forwards totaling $18.0 million that start expiring in 2030. The company continues to utilize the net operating loss carry forward in 2020.