19.	Income Taxes

In December 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”), which included a broad range of tax reform affecting businesses, including the reduction of the federal corporate tax rate from 35% to 21%, changes in the deductibility of certain business expenses, and the manner in which international operations are taxed in the U.S. Although the majority of the changes resulting from the Act are effective beginning in 2018, U.S. GAAP requires that certain impacts of the Act be recognized in the income tax provision in the period of enactment. In connection with the enactment of the Act, our income tax provision for the fourth quarter of 2017 included an increase of $17.5 million, reflecting an increase of $16.1 million for the remeasurement of our net deferred tax assets and an increase in tax of $1.4 million due to the deemed repatriation of earnings of our foreign subsidiaries.

As related to the deemed repatriation of earnings of foreign subsidiaries, the Act includes a mandatory one-time tax on accumulated earnings of foreign subsidiaries. As a result, all previously unremitted earnings for which no U.S. deferred tax liability had been accrued are now subject to U.S. tax. In accordance with the guidelines provided in the Act, as of December 31, 2017 we have aggregated our estimated foreign earnings and profits, and utilized participating deductions and available foreign tax credits. The gross repatriation tax was $2.3 million, which was offset by $0.9 million of foreign tax credits for a net repatriation tax charge of $1.4 million. The net repatriation tax of $1.4 million was recorded in the fourth quarter of 2017. During 2018, we refined and updated our calculation of the gross repatriation tax to $2.7 million, which was paid to the U.S. Treasury. The difference in the refined and updated repatriation tax and what was previously recorded in the fourth quarter of 2017 was reflected in the 2018 tax provision. Notwithstanding the U.S. taxation of these amounts, we intend to continue to invest most or all of these earnings indefinitely outside of the U.S., and do not expect to incur any significant additional taxes related to such amounts.

The income tax provision (benefit) consists of the following (in thousands):

	Year Ended December 31,
	2018			2017		2016
Current:
Domestic	$	26,821		$	30,742	$	33,156
Foreign		3,180			3,139		3,628
Total current		30,001			33,881		36,784

Deferred:
Domestic		(10,132	)		18,833		(387	)
Foreign		108			98		(239	)
Total deferred		(10,024	)		18,931		(626	)
Total income tax provision	$	19,977		$	52,812	$	36,158

Reconciliations between taxes at the U.S. Federal income tax rate and taxes at our effective income tax rate on earnings from continuing operations before income taxes are as follows (in thousands):

	Year Ended December 31,
	2018			2017			2016

U.S. Federal income tax rate of 21% in 2018, 35% in 2017 and 35% in 2016	$	16,135		$	33,755		$	34,500
Increase (decrease) in tax rate resulting from:
State and local income taxes, net of federal income tax benefit		2,781			3,138			2,944
Income tax (tax benefits) attributable to foreign income		1,598			(149	)		(887	)
Other non-deductible items, net		(559	)		(1,319	)		(464	)
Impact of Tax Cuts and Jobs Act		—			17,515			—
Change in valuation allowance		22			(128	)		65
Provision for income taxes	$	19,977		$	52,812		$	36,158

The following is a summary of the components of the net deferred tax assets and liabilities recognized in the accompanying consolidated balance sheets (in thousands):

	December 31,
	2018			2017
Deferred tax assets:
Inventories	$	12,798		$	11,498
Allowance for customer returns		16,836			8,678
Postretirement benefits		58			170
Allowance for doubtful accounts		1,371			1,181
Accrued salaries and benefits		9,147			8,500
Capital loss		—			154
Tax credit carryforwards		272			272
Deferred gain on building sale		—			55
Accrued asbestos liabilities		11,872			8,886
Other		127			—
		52,481			39,394
Valuation allowance		(399	)		(377	)
Total deferred tax assets		52,082			39,017
Deferred tax liabilities:
Depreciation		7,755			5,495
Other		1,993			1,102
Total deferred tax liabilities		9,748			6,597

Net deferred tax assets	$	42,334		$	32,420

In assessing the realizability of the deferred tax assets, we consider whether it is more likely than not that some portion or the entire deferred tax asset will be realized. Ultimately, the realization of the deferred tax asset is dependent upon the generation of sufficient taxable income in those periods in which temporary differences become deductible and/or net operating loss carryforwards can be utilized. We consider the level of historical taxable income, scheduled reversal of temporary differences, carryback and carryforward periods, tax planning strategies and projected future taxable income in determining whether a valuation allowance is warranted. We also consider cumulative losses in recent years as well as the impact of one-time events in assessing our pre-tax earnings. Assumptions regarding future taxable income require significant judgment. Our assumptions are consistent with estimates and plans used to manage our business.

The valuation allowance of $0.4 million as of December 31, 2018 is intended to provide for uncertainty regarding the ultimate realization of our U.S. foreign tax credit carryovers and foreign net operating loss carryovers. Based on these considerations, we believe it is more likely than not that we would realize the benefit of the net deferred tax asset of $42.3 million as of December 31, 2018, which is net of the remaining valuation allowance.

At December 31, 2018, we have foreign tax credit carryforwards of approximately $0.3 million that will expire in varying amounts by 2021.

In accordance with generally accepted accounting practices, we recognize in our financial statements only those tax positions that meet the more-likely-than-not recognition threshold. We establish tax reserves for uncertain tax positions that do not meet this threshold. During the years ended December 31, 2018, 2017 and 2016, we did not establish a liability for uncertain tax positions.

We are subject to taxation in the U.S. and various state, local and foreign jurisdictions. As of December 31, 2018, the Company is no longer subject to U.S. Federal tax examinations for years before 2015. We remain subject to examination by state and local tax authorities for tax years 2014 through 2017. Foreign jurisdictions have statutes of limitations generally ranging from 2 to 6 years. Years still open to examination by foreign tax authorities in major jurisdictions include Canada (2014 onward), Hong Kong (2013 onward), Mexico (2014 onward) and Poland (2013 onward). We do not presently anticipate that our unrecognized tax benefits will significantly increase or decrease over the next 12 months; however, actual developments in this area could differ from those currently expected.