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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“TCJA”) that institutes fundamental changes to the U.S. Internal Revenue Code of 1986, as amended ("the Code"). TCJA includes changes to the taxation of foreign earnings by implementing a dividend exemption system, an expansion of the current anti-deferral rules, a minimum tax on low-taxed foreign earnings and new measures to deter base erosion. TCJA also includes a permanent reduction in the U.S. corporate tax rate to 21%, repeal of the corporate alternative minimum tax, certain expensing of capital investment, and a limitation of the deductions for interest expense and executive compensation. Furthermore, as part of the transition to the new tax system, a one-time transition tax is imposed on a U.S. shareholder’s historical undistributed earnings of foreign subsidiaries. Although TCJA is generally effective January 1, 2018, GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date, which was December 22, 2017. Due to the significant and complete changes to the Code from the TCJA, the SEC issued staff Accounting Bulletin No. 118, "Income Tax Accounting Implications of the Tax Cuts and Jobs Act," (SAB 118). SAB 118 provides measurement period for up to one year for adjustments to be made to account for the effects of the TCJA. The Company reflected the income tax effects of those aspects of TCJA for which the accounting is complete. To the extent that the Company’s accounting for certain income tax effects of TCJA is incomplete but the Company is able to determine a reasonable estimate, the Company recorded a provisional estimate in the financial statements. For those items where a reasonable estimate could not be made, a provisional amount was not recorded and the Company continued to apply the provisions of the tax laws that were in effect immediately before the enactment of TCJA. The primary impacts of TCJA relate to the re-measurement of deferred tax assets and liabilities resulting from the change in the U.S. corporate tax rate and the one-time mandatory transition tax. For the year ended December 31, 2017, we recorded a tax benefit of approximately $3,334,000 due to the decrease in the U.S. corporate tax rate from 35% to 21% and a tax charge of $13,104,000 for the one-time transition tax on the deemed repatriation of previously undistributed accumulated earnings and profits of our international subsidiaries. In accordance with TCJA, we will elect to pay the tax liability over a period of eight years, with the first installment of $1,048,000 due in 2018; the remainder of the balance is recorded in Long-term tax liabilities. The transition tax is a provisional amount because certain information related to the computation of earnings and profits is not readily available and there is limited information from federal and state taxing authorities regarding the application and interpretation of the recently enacted legislation. We will disclose the impact to the provisional amount in the reporting period in which the accounting is completed, which will not exceed one year from the date of enactment of TCJA. In addition to the changes described above, TCJA imposes a U.S. tax on Global Intangible Low Taxed Income (“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder. The computation of GILTI is still subject to interpretation and additional clarifying guidance is expected, but is generally intended to impose tax on the earnings of a foreign corporation that are deemed to exceed a certain threshold return relative to the underlying business investment. In accordance with guidance issued by Financial Accounting Standards Board ("FASB"), we are still evaluating whether to make a policy election to treat the GILTI tax as a period expense or to provide U.S. deferred taxes on temporary differences that are expected to generate GILTI income when they reverse in future years. The jurisdictional components of income before taxes consist of the following:
|  | December 31,
(in thousands) |  | 2017 |  | 2016 |  | 2015
Income before income taxes: |  |  |  |  |  |
Domestic |  | $ | 61,329 |  |  | $ | 44,446 |  |  | $ | 52,313 |
Foreign |  | 21,038 |  |  | 17,743 |  |  | 14,554 |
|  | $ | 82,367 |  |  | $ | 62,189 |  |  | $ | 66,867 |
The components of income tax expense (benefit) consist of the following:
|  | December 31,
(in thousands) |  | 2017 |  | 2016 |  | 2015
Current: |  |  |  |  |  |
Domestic |  | $ | 26,713 |  |  | $ | 11,958 |  |  | $ | 13,293 |
Foreign |  | 6,222 |  |  | 5,491 |  |  | 4,614 |
State |  | 3,789 |  |  | 2,075 |  |  | 2,947 |
|  | 36,724 |  |  | 19,524 |  |  | 20,854 |
Deferred: |  |  |  |  |  |  |  |  |
Domestic |  | 1,711 |  |  | 1,580 |  |  | 3,481 |
Foreign |  | (155 | ) |  | 934 |  |  | (718 | )
State |  | (228 | ) |  | 106 |  |  | 41 |
|  | 1,328 |  |  | 2,620 |  |  | 2,804 |
Total income taxes |  | $ | 38,052 |  |  | $ | 22,144 |  |  | $ | 23,658 |
The difference between income tax expense (benefit) for financial statement purposes and the amount of income tax expense computed by applying the domestic statutory income tax rate of 35% to income before income taxes consists of the following:
|  | December 31,
(in thousands) |  | 2017 |  | 2016 |  | 2015
Domestic statutory rate at 35% |  | $ | 28,828 |  |  | $ | 21,766 |  |  | $ | 23,403 |
Increase (reduction) from: |  |  |  |  |  |  |  |  |
Jurisdictional rate differences |  | (1,863 | ) |  | (1,936 | ) |  | (2,192 | )
Valuation allowance |  | 308 |  |  | 1,731 |  |  | 797 |
Stock based compensation |  | (778 | ) |  | 275 |  |  | 257 |
U.S. state taxes |  | 2,463 |  |  | 1,295 |  |  | 1,942 |
Domestic production deduction |  | (1,039 | ) |  | (618 | ) |  | (518 | )
R&D credit |  | (500 | ) |  | (329 | ) |  | (475 | )
Other, net |  | 397 |  |  | (40 | ) |  | 444 |
Provision for income taxes before tax reform |  | $ | 27,816 |  |  | $ | 22,144 |  |  | $ | 23,658 |
Effective tax rate |  | 34 | % |  | 36 | % |  | 35 | %
Tax Reform: |  |  |  |  |  |
Rate change of deferreds |  | (3,334 | ) |  | — |  |  | — |
Mandatory deemed repatriation expense |  | 13,104 |  |  | — |  |  | — |
Other |  | 466 |  |  | — |  |  | — |
Impact of tax reform |  | $ | 10,236 |  |  | $ | — |  |  | $ | — |
Provision for income tax |  | $ | 38,052 |  |  | $ | 22,144 |  |  | $ | 23,658 |
Effective tax rate |  | 46 | % |  | 36 | % |  | 35 | %
Deferred income taxes arise from temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. The components of the Company’s deferred income tax assets and liabilities consist of the following:
|  | December 31,
(in thousands) |  | 2017 |  | 2016
Deferred income tax assets: |  |  |  |
Inventory basis difference |  | $ | 571 |  |  | $ | 1,568 |
Accounts receivable reserve |  | 310 |  |  | 231 |
Rental equipment and Property, plant and equipment |  | 4 |  |  | — |
Stock based compensation |  | 549 |  |  | 937 |
Pension liability |  | 2,859 |  |  | 3,947 |
Employee benefit accrual |  | 2,193 |  |  | 1,481 |
Product liability and warranty reserves |  | 1,211 |  |  | 1,600 |
Expenses not currently deductible for tax purposes |  | — |  |  | 28 |
Foreign net operating loss |  | 4,266 |  |  | 3,513 |
State net operating loss |  | 286 |  |  | 102 |
Foreign tax credit |  | 4,106 |  |  | — |
Other |  | 216 |  |  | 94 |
Total deferred income tax assets |  | $ | 16,571 |  |  | $ | 13,501 |
Less: Valuation allowance |  | (8,519 | ) |  | (3,382 | )
Net deferred income tax assets |  | $ | 8,052 |  |  | $ | 10,119 |
Deferred income tax liabilities: |  |  |  |  |  |
Inventory basis differences |  | $ | — |  |  | $ | (16 | )
Rental equipment and Property, plant and equipment |  | (7,477 | ) |  | (5,289 | )
Intangible assets |  | (7,064 | ) |  | (10,046 | )
Expenses not currently deductible for tax purposes |  | (887 | ) |  | (593 | )
Total deferred income tax liabilities |  | $ | (15,428 | ) |  | $ | (15,944 | )
Net deferred income taxes |  | $ | (7,376 | ) |  | $ | (5,825 | )
As of December 31, 2017, the Company had foreign deferred tax assets consisting of foreign net operating losses and other tax benefits available to reduce future taxable income in a foreign jurisdiction. These foreign jurisdictions’ net operating loss carry-forwards are in the approximate amount of $10,680,000 with an unlimited carry-forward period, and $3,759,000 with a carry-forward expiring in 2035. The Company also has U.S. state net operating loss carry-forwards in the amount of $4,602,000 which will expire between 2018 and 2029. We have recorded a valuation allowance as of December 31, 2017 and 2016 due to uncertainties related to our ability to utilize some of the deferred income tax assets, primarily consisting of international operating losses and foreign tax credits generated by the transition tax, before they expire. The valuation allowance is based on estimates of taxable income in the various jurisdictions in which we operate and the period over which deferred income tax assets will be recoverable. The realization of net deferred income tax assets recorded as of December 31, 2017 is primarily dependent upon the ability to generate future taxable income in certain U.S. states and international jurisdictions. The Company released a valuation allowance of $147,000 in Canada related to restructuring. Unrecognized tax benefits in the amount of $234,000 and $235,000 for 2017 and 2016, respectively, are included in other non-current liabilities on the balance sheet. The unrecognized tax benefits, if recognized, would favorably impact our effective tax rate in a future period. We do not expect our unrecognized tax benefits disclosed above to change significantly over the next 12 months.
|  | December 31,
|  | 2017 |  | 2016
Balance as of beginning of year |  | $ | 235,000 |  |  | $ | 301,000 |
Additions for tax positions related to the current year |  | 62,000 |  |  | 51,000 |
Additions for tax positions related to prior years |  | — |  |  | — |
Reduction due to lapse of statute of limitations |  | (63,000 | ) |  | (117,000 | )
Balance as of end of year |  | $ | 234,000 |  |  | $ | 235,000 |
The Company adopted the policy to include interest and penalty expense related to income taxes as interest and other expense, respectively. As of December 31, 2017, no interest or penalties has been accrued. The Company’s open tax years for its federal and state income tax returns are for the tax years ended 2013 through 2017. The Company’s open tax years for its foreign income tax returns are for the tax years ended 2011 through 2017. The Company is currently under audit for tax years 2014 and 2015 for the State of New York and for tax year 2011 and 2016 for certain subsidiaries in Canada. The Company previously considered substantially all of the earnings in our foreign subsidiaries to be permanently reinvested and, accordingly, recorded no deferred income taxes on such earnings. As a result of the fundamental changes to the taxation of multinational corporations created by TCJA, we no longer intend to permanently reinvest all of the historical undistributed earnings of our foreign affiliates. We will distribute earnings from our European subsidiaries, while maintaining our permanent reinvestment for our other foreign subsidiaries. There will generally be no U.S. corporate taxes imposed on such future distributions of foreign earnings or foreign withholding and other local taxes. For the amounts we continue to assert permanent reinvestment, if the amounts were distributed, the company would be subject to approximately $2,540,000 in withholding taxes.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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