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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income Statement Components The jurisdictional components of income before taxes consist of the following:
|  | December 31, |  |  |  |
(in thousands) |  | 2019 |  | 2018 |  | 2017
Income before income taxes: |  |  |  |  |  |
Domestic |  | $ | 54,566 |  |  | $ | 66,858 |  |  | $ | 61,329 |
Foreign |  | 29,769 |  |  | 27,673 |  |  | 21,038 |
|  | $ | 84,335 |  |  | $ | 94,531 |  |  | $ | 82,367 |
The components of income tax expense (benefit) consist of the following:
|  | December 31, |  |  |  |
(in thousands) |  | 2019 |  | 2018 |  | 2017
Current: |  |  |  |  |  |
Domestic |  | $ | 6,403 |  |  | $ | 6,771 |  |  | $ | 26,713 |
Foreign |  | 8,419 |  |  | 7,391 |  |  | 6,222 |
State |  | 3,291 |  |  | 4,831 |  |  | 3,789 |
|  | 18,113 |  |  | 18,993 |  |  | 36,724 |
Deferred: |  |  |  |  |  |
Domestic |  | 3,800 |  |  | 2,542 |  |  | 1,711 |
Foreign |  | (280) |  |  | (390) |  |  | (155) |
State |  | (204) |  |  | (100) |  |  | (228) |
|  | 3,316 |  |  | 2,052 |  |  | 1,328 |
Total income taxes |  | $ | 21,429 |  |  | $ | 21,045 |  |  | $ | 38,052 |
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 21% in 2019 and 2018 and 35% in 2017 to income before income taxes consists of the following:
|  | December 31, |  |  |  |
(in thousands) |  | 2019 |  | 2018 |  | 2017
Income tax expense at statutory rates |  | $ | 17,710 |  |  | $ | 19,851 |  |  | $ | 28,828 |
Increase (reduction) from: |  |  |  |  |  |
Jurisdictional rate differences |  | 988 |  |  | 719 |  |  | (1,863) |
Valuation allowance |  | 460 |  |  | (267) |  |  | 308 |
Stock based compensation |  | (358) |  |  | (205) |  |  | (778) |
U.S. state taxes |  | 3,125 |  |  | 3,917 |  |  | 2,463 |
Domestic production deduction |  | — |  |  | — |  |  | (1,039) |
R&D credit |  | (699) |  |  | (531) |  |  | (500) |
GILTI |  | 872 |  |  | 673 |  |  | — |
Previously unrecognized tax benefit |  | (1,504) |  |  | — |  |  | — |
Other, net |  | 835 |  |  | 219 |  |  | 397 |
Provision for income taxes before tax reform |  | $ | 21,429 |  |  | $ | 24,376 |  |  | $ | 27,816 |
Effective tax rate before effects of tax reform |  | 25 | % |  | 26 | % |  | 34 | %
Tax Reform: |  |  |  |  |  |
Rate change of deferreds |  | — |  |  | 1,200 |  |  | (3,334) |
Transition tax on deemed repatriation |  | — |  |  | (4,531) |  |  | 13,104 |
Other |  | — |  |  | — |  |  | 466 |
Impact of tax reform |  | $ | — |  |  | $ | (3,331) |  |  | $ | 10,236 |
Provision for income tax |  | $ | 21,429 |  |  | $ | 21,045 |  |  | $ | 38,052 |
Effective tax rate |  | 25 | % |  | 22 | % |  | 46 | %
Deferred Income Tax Assets and Liabilities 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) |  | 2019 |  | 2018
Deferred income tax assets: |  |  |  |
Inventory basis difference |  | $ | 4,351 |  |  | $ | 1,825 |
Accounts receivable reserve |  | 384 |  |  | 251 |
Rental equipment and Property, plant and equipment |  | 73 |  |  | 56 |
Stock based compensation |  | 391 |  |  | 672 |
Pension liability |  | 2,874 |  |  | 3,204 |
Employee benefit accrual |  | 1,669 |  |  | 1,911 |
Product liability and warranty reserves |  | 2,526 |  |  | 1,294 |
Foreign net operating loss |  | 4,485 |  |  | 4,164 |
Lease liability |  | 3,046 |  |  | — |
State net operating loss |  | 148 |  |  | 148 |
Other |  | 190 |  |  | (156) |
Total deferred income tax assets |  | $ | 20,137 |  |  | $ | 13,369 |
Less: Valuation allowance |  | (4,156) |  |  | (3,696) |
Net deferred income tax assets |  | $ | 15,981 |  |  | $ | 9,673 |
Deferred income tax liabilities: |  |  |  |
Inventory basis differences |  | $ | (122) |  |  | $ | — |
Rental equipment and Property, plant and equipment |  | (17,327) |  |  | (9,928) |
Lease asset |  | (3,022) |  |  | — |
Intangible assets |  | (18,897) |  |  | (8,944) |
Expenses not currently deductible for book purposes |  | (1,996) |  |  | (749) |
Total deferred income tax liabilities |  | $ | (41,364) |  |  | $ | (19,621) |
Net deferred income taxes |  | $ | (25,383) |  |  | $ | (9,948) |
As of December 31, 2019, 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 approximately $10,519,000 with an unlimited carry-forward period, and $5,363,000 with a carry-forward expiring in 2036. The Company also has U.S. state net operating loss carry-forwards in the amount of $4,602,000 which will expire between 2020 and 2030. We have recorded a valuation allowance as of December 31, 2019 and 2018 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. During 2019, the valuation allowance increased $460,000 related to operating losses generated by foreign affiliates. Unrecognized Tax Benefits Unrecognized tax benefits in the amount of $262,000 and $236,000 for 2019 and 2018, 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.
Unrecognized Tax Benefits |  |  |  |
|  | December 31, |  |
|  | 2019 |  | 2018
Balance as of beginning of year |  | $ | 236,000 |  |  | $ | 234,000 |
Increases for tax positions related to the current year |  | 88,000 |  |  | 63,000 |
Increases in tax positions taken related to liabilities assumed in acquisitions |  | 2,219,000 |  |  | — |
Decreases in tax positions taken related to liabilities assumed in acquisitions |  | (1,504,000) |  |  | — |
Decreases as a result of settlements with taxing authorities related to liabilities assumed in acquisitions |  | (715,000) |  |  | — |
Decreases due to lapse of statute of limitations |  | (62,000) |  |  | (61,000) |
Balance as of end of year |  | $ | 262,000 |  |  | $ | 236,000 |
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, 2019, 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 2015 through 2019. The Company’s open tax years for its foreign income tax returns are for the tax years ended 2013 through 2019. 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 $3,965,000 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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