Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes [Abstract]

Income Taxes

17. Income Taxes

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

	Year Ended December 31,
	2020			2019		2018
Current:
Domestic	$	30,368		$	14,632	$	26,821
Foreign		4,064			3,019		3,180
Total current		34,432			17,651		30,001
Deferred:
Domestic		(7,418	)		4,677		(10,132	)
Foreign		(52	)		417		108
Total deferred		(7,470	)		5,094		(10,024	)
Total income tax provision	$	26,962		$	22,745	$	19,977

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,
	2020			2019			2018
U.S. Federal income tax rate of 21%	$	22,550		$	19,277		$	16,135
Increase (decrease) in tax rate resulting from:
State and local income taxes, net of federal income tax benefit		3,781			3,328			2,781
Income tax (tax benefits) attributable to foreign income		330			191			1,598
Other non-deductible items, net		(563	)		(409	)		(559	)
Change in valuation allowance		864			358			22
Provision for income taxes	$	26,962		$	22,745		$	19,977

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,
	2020			2019
Deferred tax assets:
Inventories	$	12,773		$	12,077
Allowance for customer returns		13,804			11,969
Postretirement benefits		42			50
Allowance for doubtful accounts		1,412			1,262
Accrued salaries and benefits		12,984			9,826
Tax credit carryforwards		1,451			609
Accrued asbestos liabilities		15,372			13,132
Other		170			148
		58,008			49,073
Valuation allowance		(1,621	)		(757	)
Total deferred tax assets		56,387			48,316
Deferred tax liabilities:
Depreciation		7,710			7,706
Other		3,907			3,338
Total deferred tax liabilities		11,617			11,044
Net deferred tax assets	$	44,770		$	37,272

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 $1.6 million as of December 31, 2020 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 $44.8 million as of December 31, 2020, which is net of the remaining valuation allowance. At December 31, 2020, we have foreign tax credit carryforwards of approximately $1.5 million that will expire in varying amounts by 2028.

As related to the taxation of our foreign subsidiaries, we aggregate our foreign earnings and profits, and utilize allowable deductions and available foreign tax credits in computing our U.S. tax.  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.

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, 2020, 2019 and 2018, 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, 2020, the Company is no longer subject to U.S. Federal tax examinations for years before 2017.  We remain subject to examination by state and local tax authorities for tax years 2016 through 2019.  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 (2016 onward), Hong Kong (2015 onward), Mexico (2016 onward) and Poland (2015 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.