Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Provision

Income before income taxes includes the following components:



	Year Ended December 31
	2019		2018		2017
	(thousands)
Domestic	$	105,341	$	21,704	$	115,083
Foreign	2,890		398		2,505
Income before income taxes	$	108,231	$	22,102	$	117,588

The income tax provision shown in the Consolidated Statements of Operations includes the following:



	Year Ended December 31
	2019		2018			2017
	(thousands)
Current income tax provision (benefit)
Federal	$	13,700	$	6,459		$	22,541
State	4,574		3,126			3,973
Foreign	7		5			—
Total current	18,281		9,590			26,514

Deferred income tax provision (benefit)
Federal	7,430		(5,987		)	6,747
State	925		(2,127		)	991
Foreign	670		149			379
Total deferred	9,025		(7,965		)	8,117
Income tax provision	$	27,306	$	1,625		$	34,631

The effective tax rate varies from the U.S. Federal statutory income tax rate principally due to the following:



	Year Ended December 31
	2019			2018			2017
	(thousands, except percentages)
Income before income taxes	$	108,231		$	22,102		$	117,588
Statutory U.S. income tax rate (a)	21.0		%	21.0		%	35.0		%

Statutory tax provision	$	22,728		$	4,642		$	41,156
State taxes	4,390			741			3,719
Domestic production activities deduction	—			—			(963		)
Unrecognized tax benefits	(178		)	(181		)	(86		)
Benefit from enactment of the Tax Act (b)	—			(3,806		)	(8,129		)
Tax credits	(725		)	(272		)	(912		)
Foreign rate differential	71			432			(366		)
Share-based compensation	(532		)	(1,718		)	(413		)
Nondeductible executive compensation	852			366			—
Meals and entertainment	738			886			663
Other	(38		)	535			(38		)
Total	$	27,306		$	1,625		$	34,631

Effective income tax rate	25.2		%	7.4		%	29.5		%

______________________________________


(a)	On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”), was enacted by the U.S. government. The most significant impact to our financial statements was the reduction of the corporate federal income tax rate from 35% to 21%.

(b)

As of December 31, 2018, we completed our assessment of the effects of the Tax Act on our financial statements. In connection with our analysis of the Tax Act, we recorded discrete tax benefits of $3.8 million and $8.1 million, respectively, during the years ended December 31, 2018 and 2017. The $3.8 million reduction in income tax expense resulted from the remeasurement of deferred income taxes to the new federal statutory rate of 21%, which mostly relates to a $20.0 million discretionary pension contribution made during 2018, for which we received a tax deduction at the 2017 federal income tax rate. The $8.1 million reduction in income tax expense resulted from the remeasurement of deferred income taxes to the new federal statutory rate of 21%.

During the year ended December 31, 2019, refunds received, net of cash taxes paid was $1.4 million. During the years ended December 31, 2018 and 2017, cash paid for taxes, net of refunds received, was $14.5 million and $36.1 million, respectively.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. The components of our net deferred tax assets and liabilities at December 31, 2019 and 2018, are summarized as follows:



	December 31, 2019			December 31, 2018
	(thousands)
Deferred tax assets
Employee benefits	$	26,914		$	27,149
Lease liabilities	23,241			—
Capital leases	—			5,742
Inventories	3,358			2,649
Foreign net operating loss carryforward	1,514			3,108
Other	6,256			6,461
Net deferred tax assets	$	61,283		$	45,109

Deferred tax liabilities
Property and equipment	$	(50,751	)	$	(48,302	)
Right-of-use assets	(21,753		)	—
Intangible assets and other	(5,924		)	(5,369		)
Other	(1,597		)	(2,445		)
Deferred tax liabilities	$	(80,025	)	$	(56,116	)

Total deferred tax liabilities, net	$	(18,742	)	$	(11,007	)

As of December 31, 2019, we have foreign net operating loss carryforwards of $10.4 million, which if unused, will expire in years 2031 through 2036. We have state income tax credits totaling $1.3 million as of December 31, 2019, which if unused will expire in years 2020 through 2032. The foreign net operating loss and state credit carryforwards in the income tax returns filed included unrecognized tax benefits. The deferred tax assets recognized for those net operating loss and state credit carryforwards are presented net of these unrecognized tax benefits.

Income Tax Uncertainties

The following table summarizes the changes related to our gross unrecognized tax benefits excluding interest and penalties:



	2019			2018			2017
	(thousands)
Balance as of January 1	$	1,850		$	2,083		$	2,224
Increases related to prior years' tax positions	—			13			1
Increases related to current year tax positions	53			—			51
Decreases related to prior years' tax positions	—			(43		)	(12		)
Lapse of statute of limitations	(218		)	(203		)	(181		)
Balance as of December 31	$	1,685		$	1,850		$	2,083

As of December 31, 2019, 2018, and 2017, we had $1.7 million, $1.9 million, and $2.1 million, respectively, of unrecognized tax benefits recorded on our Consolidated Balance Sheets, excluding interest and penalties. Of the total unrecognized tax benefits recorded, $1.7 million, $1.8 million, and $2.0 million (net of the federal benefit for state taxes), respectively, would impact the effective tax rate if recognized.

We recognize interest and penalties related to uncertain tax positions as income tax expense in our Consolidated Statements of Operations. For the years ended December 31, 2019, 2018, and 2017, we recognized an insignificant amount of interest and penalties related to taxes. We recognize tax liabilities and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available or as new uncertainties occur. We do not expect the unrecognized tax benefits to change significantly over the next twelve months.

We file income tax returns in the U.S. and various state and foreign jurisdictions. Tax years 2016 to present remain open to examination in the U.S. and tax years 2015 to present remain open to examination in Canada and various states. We recorded net operating losses in Canada beginning in 2006 that are subject to examinations and adjustments up to four years following the year in which they are utilized.