3. Income Taxes

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


	2019		2018		2017
Domestic	$	(2,848)	$	27,262	$	(27,722)
Mexico		194		6,704		6,598
Income (loss) before Income Taxes	$	(2,654)	$	33,966	$	(21,124)

The income tax provision (benefit) for 2019, 2018 and 2017 consists of the following (in thousands):


	2019		2018		2017

Current
Federal	$	—	$	(1,358)	$	(31)
State		(325)		911		605
Mexico		—		2,616		2,396
		(325)		2,169		2,970

Deferred
Federal		(546)		5,113		(21,190)
State		1,260		788		79
Mexico		—		(210)		954
		714		5,691		(20,157)
Income tax provision (benefit)	$	389	$	7,860	$	(17,187)

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 2019 and 2018 and 35% for 2017, respectively is as follows (in thousands):


	2019		2018		2017

Federal income tax at statutory rate	$	(558)	$	7,132	$	(7,437)
State income taxes, net of federal income tax benefit		1,633		1,319		(597)
Nondeductible per diem paid to drivers		1,173		1,182		2,476
Xpress Internacional activity		(71)		1,616		76
Tax credits		(1,341)		(1,611)		(970)
Provision to return adjustment		(138)		35		248
Valuation allowance		567		2,433		950
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		(755)		(3,278)		146
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		(459)		(651)		—
Deferred Mexican withholding tax		—		(876)		876
Other, net		338		(149)		676
Income tax provision (benefit)	$	389	$	7,860	$	(17,187)

At 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 no 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 no 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 no 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, 2019 and 2018, consists of the following (in thousands):


	2019		2018

Deferred tax assets
Allowance for doubtful accounts	$	2,075	$	1,333
Insurance and claims reserves		21,657		22,503
Compensation and employee benefits		3,394		2,973
Net operating loss and credit carryforwards		31,983		53,552
Net capital loss carryforward		4,860		—
Finance lease obligations		2,660		4,782
Investment in subsidiaries		151		6,660
Operating lease liabilities		67,860		—
Notes receivable reserve		2,639		—
Other		231		551
Valuation allowance		(6,393)		(5,826)
Total deferred tax assets	$	131,117	$	86,528
Deferred tax liabilities
Property and equipment	$	75,014	$	97,073
Intangibles		7,541		8,007
Prepaid license fees		1,011		974
Right of use assets		67,958		—
Other		285		452
Total deferred tax liabilities	$	151,809	$	106,506
Net deferred tax liability	$	20,692	$	19,978

The Company had approximately $22.0 million and $0 of federal capital loss carryforwards, $64.3 million and $177.7 million of federal operating loss carryforwards, $138.8 million and $122.3 million of state operating loss carryforwards and $0.5 million and $0.6 million of state tax credit carryforwards at December 31, 2019 and 2018, respectively. Federal operating losses created before 2018 of $24.6 million expire in 2037 while federal losses created in 2019 of $39.7 million do not expire and may be carried forward indefinitely. The federal credit carryforward of $11.0 million will begin to expire in the years 2031 through 2039. The state loss carryforwards of $138.8 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 $0.5 million expire in the years 2020 through 2028.

The Company has a valuation allowance of $6.4 million and $5.8 million at December 31, 2019 and 2018, 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 $0.6 million and $2.4 million during the years ended December 31, 2019 and December 31, 2018, respectively, due to the addition of capital loss carryforwards, 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, 2017	$	3,530	$	1,081	$	—	$	1,218	$	3,393
December 31, 2018	$	3,393	$	5,654	$	—	$	3,221	$	5,826
December 31, 2019	$	5,826	$	1,839	$	—	$	1,272	$	6,393

For the years ended December 31, 2019, 2018 and 2017, the Company had a balance of unrecognized tax benefits of $0, $0.8 million and $5.5 million respectively, which is a component of other long-term liabilities.


	2019		2018		2017
Beginning balance	$	829	$	5,506	$	5,200
Additions based on tax positions taken in prior years				829		306
Reductions due to settlements		(829)
Reductions as a result of a lapse of the applicable statute of limitations				(5,506)		—
Balance at December 31	$	—	$	829	$	5,506

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, $0.1 million and $0.1 million for 2019, 2018 and 2017, respectively.

Only tax years 2015 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, 2019, the Company has settled all uncertain tax positions with the applicable tax authorities.