Income Taxes

The components of income before income taxes are as follows:



	2018		2017		2016
Domestic	$	121,674	$	124,472	$	110,526
Foreign	55,666		47,855		60,474
	$	177,340	$	172,327	$	171,000

The components of provision for income taxes for all periods presented were as follows:



	2018			2017			2016
Current:
Federal	$	32,880		$	56,836		$	47,655
State and local	5,012			5,746			6,063
Foreign	11,771			10,773			3,270
	49,663			73,355			56,988
Deferred:
Federal	(2,489		)	(22,061		)	(7,050		)
State and local	(200		)	800			153
Foreign	(133		)	1,095			(365		)
	(2,822		)	(20,166		)	(7,262		)
	$	46,841		$	53,189		$	49,726

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law, which made significant changes to the Internal Revenue Code of 1986, as amended. Changes include, but are not limited to, a reduction in the U.S. corporate statutory tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, the transition from a worldwide tax system to a territorial regime and a one-time transition tax on the deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Tax Act also includes a provision to tax global intangible low-taxed income of foreign subsidiaries, a special tax deduction for foreign-derived intangible income (“GILTI”), and a base erosion anti-abuse tax measure that may tax certain payments between a U.S. corporation and its subsidiaries. These additional provisions of the Tax Act are effective for the Company beginning after December 31, 2017. The Company has elected to account for GILTI as a period cost in the year the tax is incurred.

At December 31, 2017, the Company recorded provisional amounts which netted to a benefit of approximately $7,599 for certain items pertaining to the Tax Act in accordance with the guidance of Staff Accounting Bulletin No. 118 (“SAB 118”) because it had not yet completed accounting for these effects. These items included the one-time transition tax liability related to undistributed earnings of certain foreign subsidiaries that were not previously taxed, the revaluation of deferred tax assets and liabilities, and other deferred tax impacts. During the fourth quarter of 2018, the Company has now completed its accounting for all of the enactment-date income tax effects of the Tax Act and has recognized an incremental expense of $3,474 to the provisional amounts.

A reconciliation between taxes computed at the Federal statutory rate and the effective tax rate is as follows:



	December 31,
	2018		2017		2016
Income taxes at federal statutory rate	21.0	%	35.0	%	35.0	%
Effects of foreign operations	(0.7	)	(4.5	)	(5.3	)
Stock-based compensation	(2.1	)	(2.2	)	(3.0	)
State and local income taxes - net of federal income tax benefit	2.4		2.0		2.0
Nondeductible items	0.1		0.5		0.2
Impact of tax reform	2.0		(4.4	)	—
Receivable adjustment	—		2.7		—
Prepaid tax adjustment related to prior years	3.8		—		—
Other	(0.1	)	1.8		0.2
Effective rate	26.4	%	30.9	%	29.1	%

The components of deferred tax assets and liabilities are as follows:



	December 31,
	2018			2017
Deferred taxes assets
Receivable allowances	$	8,702		$	7,315
Inventory	2,274			901
Unrealized loss	282			321
Accrued expenses	1,113			1,796
Deferred compensation	10,217			11,071
Deferred rent	4,257			3,737
Net carryforwards	647			300
Other	1,557			3,842
Gross deferred tax assets before valuation allowance	29,049			29,283

Less: valuation allowance	(649		)	—
Gross deferred tax assets after valuation allowance	28,400			29,283

Deferred tax liabilities
Depreciation and amortization	(13,009		)	(16,210		)
Unremitted earnings of foreign subsidiaries	(2,597		)	(2,422		)
Amortization of goodwill	(7,514		)	(7,883		)
Gross deferred tax liabilities	(23,120		)	(26,515		)

Net deferred tax assets	$	5,280		$	2,768

The Company applies the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.

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 (including the impact of available carryback and carryforward periods), projected future taxable income and tax‑planning strategies in making this assessment.

The Company maintained a valuation allowance in the amount of $649 for the year ended December 31, 2018. This valuation allowance relates to a deferred tax asset on an outside basis difference which the Company does not expect to realize.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



	December 31,
	2018		2017			2016
Beginning Balance	$	361	$	1,407		$	1,407
Additions related to current period tax positions	1,150		—			—
Reductions for tax positions of prior years	—		(1,046		)	—
Ending Balance	$	1,511	$	361		$	1,407

For the years ended December 31, 2018, 2017 and 2016 the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $1,511, $361 and $1,407, in the aggregate, respectively. The Company recognizes interest and penalties, if any, related to uncertain income tax positions in income tax expense. Accrued interest and penalties on unrecognized tax benefits and interest and penalty expense was immaterial to the consolidated financial statements for all periods presented. The unrecognized tax benefits are not expected to materially change in the next twelve months.

The Company files income tax returns in the U.S. for federal, state and local purposes, and in certain foreign jurisdictions. The Company's tax years 2015 through 2018 remain open to examination by most taxing authorities. During 2017, the U.S. Internal Revenue Service ("IRS") completed its audit of the Company's 2014 U.S. income tax return.

The Company’s consolidated financial statements provide for any related tax liability on amounts that may be repatriated from foreign operations, aside from undistributed earnings of certain of the Company’s foreign subsidiaries that are intended to be indefinitely reinvested in operations outside the U.S. The deferred tax liability of $2,597 at December 31, 2018 reflects the withholding tax on amounts that may be repatriated from foreign operations.