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INCOME TAXES (Tables)
 12 Months Ended
Dec. 31, 2019
Components of Income Tax Expense
The components of income tax expense from our wholly owned operations and investments and our controlling interest in joint ventures with Carrier are as follows:
Years Ended December 31,
  
2019
 
  
2018
 
  
2017
 
Current:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Federal
 
$
48,359
 
   $
47,263
     $
82,333
  
State
 
 
9,362
 
    
10,031
      
12,162
  
Foreign
 
 
8,078
 
    
7,229
      
6,461
  
                         
 
    
65,799
 
    
64,523
      
100,956
  
Deferred:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Federal
 
 
2,603
 
 
 
7,082
 
 
 
(13,254
)
State
 
 
446
 
 
 
1,600
 
 
 
(1,519
)
Foreign
   
(1,771
 )
 
    
(392
 )     
4,038
  
 
  
 
1,278
 
    
8,290
      
(10,735
 )
                         
Income tax expense
 
$
67,077
 
   $
72,813
     $
90,221
  
                         
Reconciliation of Effective Income Tax Rate
Following is a reconciliation of the effective income tax rate:
Years Ended December 31,
  
2019
 
  
2018
 
  
2017
 
U.S. federal statutory rate
 
 
21.0
%
   
21.0
 %    
35.0
 %
State income taxes, net of federal benefit and other
 
 
2.8
 
    
3.6
     
2.4
 
Excess tax benefits from share-based compensation
 
 
(2.0
)
   
(2.0
 )    
(2.7
 )
Tax effects on foreign income
 
 
0.5
 
    
0.5
     
(1.0
 )
GILTI
 
 
(0.1
)
    
0.3
     
—  
  
Tax credits and other
   
(1.0
)
    
—  
      
(0.6
 )
Repatriation transition tax
 
 
—
      
(0.9
 )    
3.0
 
Deferred tax impact of enacted tax rate changes
 
 
—
 
    
0.3
     
(6.3
 )
                         
Effective income tax rate attributable to Watsco, Inc.
 
 
21.2
 
    
22.8
     
29.8
 
Taxes attributable to
non-controlling
interest
  
 
(2.7
 )
    
(3.1
 )    
(3.8
 )
                         
Effective income tax rate
 
 
18.5
%
   
19.7
 %    
26.0
 %
                         
  
Significant Components of Net Deferred Tax Liabilities
The following is a summary of the significant components of our net deferred tax liabilities:
December 31,
 
2019
 
  
2018
 
Deferred tax assets:
   
     
 
Share-based compensation
 
$
24,413
 
   $
21,517
 
Capitalized inventory costs and inventory reserves
 
 
3,627
 
    
2,151
 
Allowance for doubtful accounts
 
 
1,338
 
    
1,057
 
Self-insurance reserves
 
 
209
 
    
206
 
Other
 
 
2,212
 
    
2,486
 
Net operating loss carryforwards
 
 
2,036
 
    
484
 
                 
  
 
33,835
 
    
27,901
 
Valuation allowance
 
 
(655
 )    
—  
  
                 
Total deferred tax assets
 
 
33,180
 
    
27,901
 
                 
Deferred tax liabilities:
   
     
 
Deductible goodwill
 
 
(73,898
)
   
(69,600
 )
Depreciation
 
 
(14,241
)
   
(10,695
 )
Other
 
 
(7,188
)
   
(8,516
 )
                 
Total deferred tax liabilities
 
 
(95,327
)
   
(88,811
 )
                 
Net deferred tax liabilities (1)
 
$
(62,147
)
  $
(60,910
 )
                 
(1)
Net deferred tax liabilities have been included in the consolidated balance sheets in deferred income taxes and other liabilities.
Changes in Gross Unrecognized Tax Benefits
The changes in gross unrecognized tax benefits were as follows:
Balance at December 31, 2016
  $
3,695
 
Additions based on tax positions related to the current year
   
801
 
Reductions due to lapse of applicable statute of limitations
   
(271
 )
         
Balance at December 31, 2017
   
4,225
 
Additions based on tax positions related to the current year
   
960
 
Reductions due to lapse of applicable statute of limitations
   
(283
 )
         
Balance at December 31, 2018
   
4,902
 
Additions based on tax positions related to the current year
   
1,027
 
Reductions due to lapse of applicable statute of limitations
   
(562
 )
         
Balance at December 31, 2019
  $
5,367