4.	Income Taxes

The components of earnings (loss) before income taxes are as follows (in thousands):

	2018		2017			2016

Domestic	$	27,262	$	(27,722	)	$	(32,218	)
Mexico		6,704		6,598			7,796
Income (loss) before Income Taxes	$	33,966	$	(21,124	)	$	(24,422	)

The income tax provision (benefit) for

2018,

2017

and

2016

consists of the following (in thousands):

	2018			2017			2016

Current
Federal	$	(1,358	)	$	(31	)	$	847
State		911			605			314
Mexico		2,616			2,396			2,636
		2,169			2,970			3,797
Deferred
Federal		5,113			(21,190	)		(11,248	)
State		788			79			(1,139	)
Mexico		(210	)		954			142
		5,691			(20,157	)		(12,245	)
Income tax provision (benefit)	$	7,860		$	(17,187	)	$	(8,448	)

A reconciliation of the income tax provision (benefit) as reported in the consolidated statements of comprehensive income to the amounts computed by applying federal statutory rate of

21%

for

2018

and

35%

for

2017

and

2016,

respectively is as follows (in thousands):

	2018			2017			2016

Federal income tax at statutory rate	$	7,132		$	(7,437	)	$	(8,714	)
State income taxes, net of federal income tax benefit		1,319			(597	)		(727	)
Nondeductible per diem paid to drivers		1,182			2,476			2,556
Xpress Internacional activity		1,616			76			466
Tax credits		(1,611	)		(970	)		(1,005	)
Provision to return adjustment		35			248			(1,659	)
Valuation allowance		2,433			950			(22	)
Foreign transition tax on deemed distribution		(30	)		2,315			-
Global intangible low-taxed income (GILTI)		1,217			-			-
Tax Act impact of federal rate change		-			(14,723	)		-
Basis difference on assets held for sale		(2,524	)		-			-
Change in reserve for uncertain tax positions and settlements		(3,278	)		146			100
Affirmative issue - imputed interest expense		1,223			(1,223	)		-
Non-taxable life insurance death benefit		(1,004	)		-			-
Expiration of federal capital loss carryforward		1,826			-			-
Excess tax benefits on share-based compensation		(651	)		-			-
Deferred Mexican withholding tax		(876	)		876			-
Other, net		(149	)		676			557
Income tax provision (benefit)	$	7,860		$	(17,187	)	$	(8,448	)

December 31, 2018,

our analysis is complete for amounts recorded related to the Act. The final amount of the

one

-time transition tax imposed by the Act was favorably adjusted by

$0.2

million from the original provision provided in the

December 31, 2017

financial statements. There were

other material adjustments related to the impact of the Act.

Prior to the enactment of the Tax Act, the Company was indefinitely reinvested with respect to undistributed earnings of foreign subsidiaries. At

December 31, 2017,

the Company changed its assertion and established a deferred tax liability of

$0.9

million related to foreign withholding taxes that it would incur should it repatriate these historic earnings. As of

December 31, 2018,

the Company had an executed letter of intent to sell the stock of the foreign subsidiaries for which it had previously reflected the

$0.9

million deferred tax liability. Since the Company

longer expects to repatriate these earnings in the future and, instead, sold the stock of these foreign subsidiaries on

January 17, 2019,

it has fully reversed the related deferred tax liability. As a result of the Company’s disposal of its interests in all foreign subsidiaries on

January 17, 2019,

there are

longer any undistributed earnings from foreign subsidiaries that can be indefinitely reinvested,

The tax effect of temporary differences that give rise to significant portions of deferred tax assets and liabilities at

December

31,

2018

and

2017,

consists of the following (in thousands):

	2018			2017

Deferred tax assets
Allowance for doubtful accounts	$	1,333		$	1,099
Insurance and claims reserves		22,503			24,261
Compensation and employee benefits		2,973			2,355
Net operating loss and credit carryforwards		53,552			15,225
Net federal capital loss carryforward		-			1,826
Capital lease obligations		4,782			6,512
Investment in subsidiaries		6,660			1,540
Other		551			3,487
Valuation allowance		(5,826	)		(3,393	)
Total deferred tax assets	$	86,528		$	52,912
Deferred tax liabilities
Property and equipment	$	97,073		$	56,570
Intangibles		8,007			8,392
Prepaid license fees		974			1,014
Other		452			2,566
Total deferred tax liabilities	$	106,506		$	68,542
Net deferred tax liability	$	19,978		$	15,630

The Company had approximately

and

$8.7

million of federal capital loss carryforwards,

$177.7

million and

$13.5

million of federal operating loss carryforwards,

$122.3

million and

$82.9

million of state operating loss carryforwards and

$0.6

million and

$0.5

million of state tax credit carryforwards at

December

31,

2018

and

2017,

respectively. The federal capital loss expired in

2018.

Federal operating losses created before

2018

$27.0

million expire in years

2036

through

2037

while federal losses created in

2018

$150.7

million do

not

expire and

may

be carried forward indefinitely. The federal credit carryforward of

$9.1

million will begin to expire in the years

2034

through

2038.

The state loss carryforwards of

$122.3

million begin to expire in the years

2020

and forward, depending on the state and

may

be used to offset otherwise taxable income. State tax credit carryforwards of

$0.6

million expire in the years

2019

through

2028.

The Company has a valuation allowance of

$5.8

million and

$3.4

million at

December

31,

2018

and

2017,

respectively, to offset the tax benefit of certain state operating loss carryforwards, state credit carryforwards, and federal capital loss carryforwards. The valuation allowance increased by

$2.4

million and decreased

$0.1

million during the years ended

December

31,

2018

and

December 31, 2017,

respectively, due to the expiration of a federal capital loss, the addition of capital deferred tax assets, and the change in certain separate company state operating loss carryforwards and certain state tax credit carryforwards which the Company does

not

currently believe it will be able to utilize before the applicable expiration date of each item.

Deferred tax valuation allowances	Balance at
	beginning of		Charges to costs		Charges to other					Balance at end
	period		and expenses		accounts			Deductions		of period
Fiscal year ended
December 31, 2016	$	3,583	$	-	$	(31	)	$	22	$	3,530
December 31, 2017	$	3,530	$	1,081	$	-		$	1,218	$	3,393
December 31, 2018	$	3,393	$	5,654	$	-		$	3,221	$	5,826

For the years ended

December

31,

2018,

2017

and

2016,

the Company had a balance of unrecognized tax benefits of

$0.8

million,

$5.5

million and

$5.2

million respectively, which is a component of other long-term liabilities.

	2018			2017		2016
Beginning balance	$	5,506		$	5,200	$	5,200
Additions based on tax positions taken in prior years		829			306		-
Reductions as a result of a lapse of the applicable statute of limitations		(5,506	)		-		-
Balance at December 31	$	829		$	5,506	$	5,200

Interest and penalties related to uncertain tax positions are classified as income tax expense in the consolidated statement of comprehensive income. This amounted to

$0.1

million,

$0.1

million and

$0.1

million for

2018,

2017

and

2016,

respectively.

Only tax years

2014

and forward remain subject to examination by federal and state tax jurisdictions, other than the current IRS audit. This audit is focused on amended federal income tax returns filed for

2009

2012

and relates only to reported changes in fuel tax credits and agricultural chemicals security credits. Due to events related to this IRS exam that occurred in

2018,

the Company has released the reserve related to these items.

As of

December 31, 2018,

we estimate that it is reasonably possible that unrecognized tax benefits

may

decrease up to

$0.8

million in the next

months due to the resolution of these tax matters. The resolution of these unrecognized tax benefits would impact the Company's tax expense between

and

$0.7

million, exclusive of interest.