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INCOME TAXES | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The Company’s effective tax rate for 2020, 2019 and 2018 was 20.5%, 17.4%, and 20.7%, respectively. The increase from 2019 to 2020 is primarily due to a reduction in certain tax credits. On March 27, 2020 Congress passed the Coronavirus Aid, Relief, and Economic Security Act, and on December 31, 2020 Congress passed an additional round of COVID relief legislation as part of the Bipartisan-Bicameral Omnibus COVID Relief Deal. The Company has reviewed the change in law and determined that it does not have a significant impact on the Company’s tax provision or financial statements. In addition, Balchem will continue to evaluate and analyze the impact of the U.S. Tax Cuts and Jobs Act that was enacted on December 22, 2017 and the additional guidance that has been issued, and may be issued, by the U.S. Department of Treasury, the SEC, and/or the Financial Accounting Standards Board ("FASB") regarding this act. The Company considers the undistributed earnings of certain non-U.S. subsidiaries to be indefinitely reinvested outside of the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and the Company's specific plans for reinvestment of those subsidiary earnings. The Company projects that its foreign earnings will be utilized offshore for working capital and future foreign growth. The determination of the unrecognized deferred tax liability on those undistributed earnings is not practicable due to its legal entity structure and the complexity of U.S. and local country tax laws. If the Company decides to repatriate the undistributed foreign earnings, it will need to recognize the income tax effects in the period it changes its assertion on indefinite reinvestment. Income tax expense consists of the following:
|  | 2020 |  | 2019 |  | 2018
Current: |  |  |  |  |  |
Federal |  | $ | 19,249 |  |  | $ | 17,757 |  |  | $ | 18,296 |
Foreign |  | 3,399 |  |  | 1,609 |  |  | 4,060 |
State |  | 3,590 |  |  | 818 |  |  | 3,880 |
Deemed Repatriation |  | — |  |  | — |  |  | (970) |
Deferred: |  |  |  |  |  |
Federal |  | (3,017) |  |  | (3,707) |  |  | (3,788) |
Foreign |  | 167 |  |  | 67 |  |  | (69) |
State |  | (1,594) |  |  | 263 |  |  | (952) |
Total income tax provision |  | $ | 21,794 |  |  | $ | 16,807 |  |  | $ | 20,457 |
The provision for income taxes differs from the amount computed by applying the Federal statutory rate of 21% for 2020, 2019, and 2018 to earnings before income tax expense due to the following:
|  | 2020 |  | 2019 |  | 2018
Income tax at Federal statutory rate |  | $ | 22,348 |  |  | $ | 20,260 |  |  | $ | 20,796 |
State income taxes, net of Federal income taxes |  | 2,288 |  |  | (244) |  |  | 2,742 |
Stock Options |  | (1,529) |  |  | (222) |  |  | (1,293) |
GILTI |  | — |  |  | 2,507 |  |  | 1,027 |
FDII |  | (1,400) |  |  | (1,922) |  |  | — |
Deemed Repatriation |  | — |  |  | — |  |  | (970) |
Patent Box Decree (related to prior years) |  | — |  |  | (1,948) |  |  | — |
Foreign Tax Credits |  | — |  |  | (1,125) |  |  | (1,136) |
Other |  | 87 |  |  | (499) |  |  | (709) |
Total income tax provision |  | $ | 21,794 |  |  | $ | 16,807 |  |  | $ | 20,457 |
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2020 and 2019 were as follows:
|  | 2020 |  | 2019
Deferred tax assets: |  |  |  |
Inventories |  | $ | 1,470 |  |  | $ | 1,844 |
Restricted stock and stock options |  | 3,862 |  |  | 4,097 |
Lease liabilities |  | 1,641 |  |  | 1,456 |
Currency and interest rate swap |  | 2,831 |  |  | 442 |
Other |  | 3,308 |  |  | 3,935 |
Total deferred tax assets |  | 13,112 |  |  | 11,774 |
Deferred tax liabilities: |  |  |  |
Amortization |  | $ | 32,872 |  |  | $ | 28,589 |
Depreciation |  | 27,897 |  |  | 37,075 |
Prepaid expenses |  | 915 |  |  | 465 |
Right of use assets |  | 1,926 |  |  | 1,461 |
Other |  | 731 |  |  | 584 |
Total deferred tax liabilities |  | 64,341 |  |  | 68,174 |
Valuation allowance |  | 130 |  |  | 31 |
Net deferred tax liability |  | $ | 51,359 |  |  | $ | 56,431 |
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will not realize the benefits of these deductible differences. The amount of deferred tax asset realizable, however, could change if management’s estimate of future taxable income should change. As of December 31, 2020, the Company has federal and state income tax net operating loss (NOL) carryforwards of $2,367 and $1,026, respectively, The federal NOL will not expire. The state NOL carryforwards will expire between 2025 and 2034. The Company believes that the benefit from the state NOL carryforwards will be realized, therefore a valuation allowance is not required to be established on these assets. However, the Company also acquired an insignificant amount of NOL carryforwards with the acquisition of Chemogas. These NOLs are not expected to be realized and therefore a valuation allowance on these items was established. The Company considers the undistributed earnings of certain non-U.S. subsidiaries to be indefinitely reinvested outside of the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and specific plans for reinvestment of those subsidiary earnings. The Company projects that foreign earnings will be utilized offshore for working capital and future foreign growth. The determination of the unrecognized deferred tax liability on those undistributed earnings is not practicable due to the Company's legal entity structure and the complexity of U.S. and local country tax laws. If Balchem decides to repatriate the undistributed foreign earnings, the income tax effects will need to be recognized in the period the Company changes its assertion on indefinite reinvestment. Provisions of ASC 740-10 clarify whether or not to recognize assets or liabilities for tax positions taken that may be challenged by a tax authority. A reconciliation of the beginning and ending amount of unrecognized tax benefits, which is included in other long-term obligations on the Company’s consolidated balance sheets, is as follows:
|  | 2020 |  | 2019 |  | 2018
Balance at beginning of period |  | $ | 4,762 |  |  | $ | 5,709 |  |  | $ | 4,781 |
Increases for tax positions of prior years |  | 267 |  |  | 431 |  |  | 1,366 |
Decreases for tax positions of prior years |  | (391) |  |  | (1,978) |  |  | (1,185) |
Increases for tax positions related to current year |  | 697 |  |  | 600 |  |  | 747 |
Balance at end of period |  | $ | 5,335 |  |  | $ | 4,762 |  |  | $ | 5,709 |
All of Balchem's unrecognized tax benefits, if recognized in future periods, would impact the Company's effective tax rate in such future periods. The Company recognizes both interest and penalties as part of the income tax provision. During the years ended December 31, 2020, 2019 and 2018, these amounted to approximately $232, $132 and $207, respectively. As of December 31, 2020 and 2019, accrued interest and penalties were $1,845 and $1,612, respectively. Balchem files income tax returns in the U.S. and in various states and foreign countries. In the major jurisdictions where the Company operates, it is generally no longer subject to income tax examinations by tax authorities for years before 2016 and management does not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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