Note 7, Income Taxes:

On December 22, 2017, the President signed into Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act contains significant changes to corporate taxes, including a permanent reduction of the corporate tax rate from 35% to 21% effective January 1, 2018. The Tax Act’s other major changes applicable to Havertys include the elimination of certain deductions and an enhanced and extended option to claim accelerated depreciation deductions on qualified property.

In December 2017, the Securities and Exchange Commission (SEC) staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allowed us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date.

We remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 25%. At December 31, 2017, we made a reasonable estimate of the effects on our existing deferred tax balances. The total amount recorded related to the remeasurement of our deferred tax balance was an additional expense of $5,868,000. We completed our analysis of the Tax Act during 2018 and no adjustments were made to expense for this remeasurement of our deferred tax balances.

Income tax expense (benefit) consists of the following:

(In thousands)	2018			2017			2016
Current
Federal	$	8,422		$	14,239		$	16,259
State		2,118			2,350			2,326
		10,540			16,589			18,585
Deferred
Federal		(232	)		5,829			(690	)
State		(207	)		(270	)		(430	)
		(439	)		5,559			(1,120	)
	$	10,101		$	22,148		$	17,465

The differences between income tax expense in the accompanying Consolidated Financial Statements and the amount computed by applying the statutory Federal income tax rate are as follows:

(In thousands)	2018			2017			2016
Statutory rates applied to income before income taxes	$	8,486		$	15,129		$	16,037
State income taxes, net of Federal tax benefit		1,616			1,306			1,494
Net permanent differences		220			95			99
Other		(221	)		(250	)		(165	)
Tax Act, net impact		—			5,868			—

	$	10,101		$	22,148		$	17,465

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The amounts in the following table are grouped based on broad categories of items that generate the deferred tax assets and liabilities.

(In thousands)	2018		2017
Deferred tax assets:
Accounts receivable	$	530	$	433
Property and equipment		7,584		6,434
Leases		4,135		4,356
Accrued liabilities		8,172		8,171
Retirement benefits		266		492
Other		56		62
Total deferred tax assets		20,743		19,948

Deferred tax liabilities:
Inventory		7,649		7,034
Other		550		539
Total deferred tax liabilities		8,199		7,573
Net deferred tax assets	$	12,544	$	12,375

We review our deferred tax assets to determine the need for a valuation allowance. Based on evidence we conclude that it is more-likely-than-not that our deferred tax assets will be realized and therefore a valuation allowance is not required.

We file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. With respect to U.S. federal, state and local jurisdictions, with limited exceptions, we are no longer subject to income tax audits for years before 2015.

Uncertain Tax Positions

No uncertain tax positions were identified for the years currently open under statute of limitations. Interest and penalties associated with uncertain tax positions, if any, are recognized as components of income tax expense.