Taxes on Income

12 Months Ended

Dec. 31, 2019

(9) Taxes on Income

Earnings before taxes on income and details of the provision for taxes on income for the years ended December 31, 2019, 2018 and 2017 were as follows (in thousands):

	2019			2018			2017
Earnings (loss) before taxes on income:
United States	$	190,839		$	117,800		$	74,267
Foreign		(1,019	)		(3,641	)		(1,253	)
	$	189,820		$	114,159		$	73,014

Provision (benefit) for taxes on income:
U.S. Federal:
Current	$	(312	)	$	—		$	11,143
Deferred		45,133			27,102			(258,703	)
	$	44,821		$	27,102		$	(247,560	)
U.S. State:
Current	$	76		$	(243	)	$	3,861
Deferred		1,706			7,619			2,280
	$	1,782		$	7,376		$	6,141
Foreign:
Current	$	198		$	443		$	370
Deferred		—			160			160
	$	198		$	603		$	530
Consolidated:
Current	$	(38	)	$	200		$	15,374
Deferred		46,839			34,881			(256,263	)
	$	46,801		$	35,081		$	(240,889	)

The Company’s provision for taxes on income varied from the statutory federal income tax rate for the years ended December 31, 2019, 2018 and 2017 due to the following:

	2019			2018			2017
United States income tax statutory rate		21.0	%		21.0	%		35.0	%
State and local taxes, net of federal benefit		0.7			6.5			0.9
Change due to U.S. tax reform		—			—			(369.0	)
Other – net		3.0			3.2			3.2
		24.7	%		30.7	%		(329.9	)%

The tax effects of temporary differences that give rise to significant portions of the non-current deferred tax assets and liabilities at December 31, 2019 and 2018 were as follows (in thousands):

	2019			2018
Non-current deferred tax assets and liabilities:
Deferred tax assets:
Allowance for doubtful accounts	$	1,758		$	2,105
Inventory		13,401			5,017
Insurance accruals		4,397			4,119
Deferred compensation		1,109			1,291
Unrealized loss on defined benefit plans		10,253			9,891
Operating loss carryforwards		143,181			81,867
Pension benefits		6,825			6,559
Other		7,392			22,421
		188,316			133,270
Valuation allowances		(20,525	)		(25,568	)
		167,791			107,702
Deferred tax liabilities:
Property		(620,891	)		(526,873	)
Deferred state taxes		(63,640	)		(74,638	)
Goodwill and other intangibles		(54,844	)		(34,235	)
Other		(16,620	)		(14,741	)
		(755,995	)		(650,487	)
	$	(588,204	)	$	(542,785	)

During 2019, the Company generated a net operating loss mainly caused by taking the full cost deduction of purchased fixed assets. The deferred tax assets of $117,134,000 has been recorded at December 31, 2019 and can be utilized by future taxable income indefinitely.

The Company had state operating loss deferred tax assets of $17,282,000 in 2019 and $19,039,000 in 2018. The valuation allowance for state deferred tax assets as of December 31, 2019 and 2018 was $11,760,000 and $17,027,000, respectively, related to the Company’s state net operating loss carryforwards based on the Company’s determination that it is more likely than not that the deferred tax assets will not be realized. Expiration of these state net operating loss carryforwards vary by state through 2037 and none will expire in fiscal 2020.

As of December 31, 2019, the Company had a Canadian net operating loss carryforward of $8,765,000 which expires in 2038. A full valuation allowance has been provided for this asset.

The Company or one of its subsidiaries files income tax returns in the United States federal jurisdiction and various state jurisdictions. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the 2016 through 2018 tax years. With few exceptions, the Company and its subsidiaries’ state income tax returns are open to audit under the statute of limitations for the 2013 through 2018 tax years.

As of December 31, 2019, the Company has provided a liability of $1,172,000 for unrecognized tax benefits related to various income tax issues which includes interest and penalties. The amount that would impact the Company’s effective tax rate, if recognized, is $960,000, with the difference between the total amount of unrecognized tax benefits and the amount that would impact the effective tax rate being primarily related to the federal tax benefit of state income tax items. It is not reasonably possible to determine if the liability for unrecognized tax benefits will significantly change prior to December 31, 2020 due to the uncertainty of possible examination results.

A reconciliation of the beginning and ending amount of the liability for unrecognized tax benefits for the years ended December 31, 2019, 2018 and 2017, is as follows (in thousands):

	2019			2018			2017
Balance at beginning of year	$	1,443		$	1,787		$	2,019
Additions based on tax positions related to the current year		51			254			403
Additions for tax positions of prior years		58			70			273
Reductions for tax positions of prior years		(669	)		(668	)		(908	)
Balance at end of year	$	883		$	1,443		$	1,787

The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes. The Company recognized net benefit of $71,000 and $209,000 in interest and penalties for the year ended December 31, 2019 and 2018, respectively, and net expense of $120,000 in interest and penalties for the years ended December 31, 2017. The Company had $289,000, $466,000 and $675,000 of accrued liabilities for the payment of interest and penalties at December 31, 2019, 2018 and 2017, respectively.