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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of significant components of the provision or benefit for income taxes

Significant components of the provision or benefit for income taxes for the years ended December 31 were as follows:


	2019		2018⁽¹⁾		2017⁽¹⁾
	(in thousands, except percentages)
Current provision (benefit):
Federal	$	2,202	$	9,750	$	(1,969)
State		1,813		3,264		3,701
Foreign		2,060		2,238		331
		6,075		15,252		2,063

Deferred provision (benefit):
Federal		4,196		1,157		(9,312)
State		1,221		737		(867)
Foreign		(6)		(22)		(34)
		5,411		1,872		(10,213)
Total provision (benefit) for income taxes	$	11,486	$	17,124	$	(8,150)

(1)

For 2018 and 2017, the income tax provision (benefit) reflects the impact of the Tax Reform Act, as previously disclosed in this Note. Deferred income tax liabilities were reduced by $3.8 million and $24.5 million for 2018 and 2017, respectively, as a result of the decrease in the U.S. corporate statutory tax rate from 35% to 21% effective January 1, 2018. Current tax expense was reduced by $0.1 million and $1.3 million for 2018 and 2017, respectively, as a result of the tax law change and the Company’s application of a blended rate due to the use of a fiscal year other than the calendar year for U.S. income tax filing purposes.

Schedule of components of the deferred tax provision or benefit


	2019⁽¹⁾		2018⁽¹⁾⁽²⁾		2017⁽¹⁾⁽²⁾
	(in thousands)
Amortization, depreciation, and basis differences for property, plant and equipment and other long-lived assets	$	16,255	$	23,153	$	21,876
Amortization of intangibles and impairment		(6,933)		(763)		(1,030)
Changes in reserves for workers’ compensation, third-party casualty, and cargo claims		(1,880)		469		(812)
Revenue recognition		(1,437)		(2,524)		332
Allowance for doubtful accounts		541		(115)		(719)
Nonunion pension and other retirement plans		564		(2,810)		(1,977)
Multiemployer pension fund withdrawal⁽³⁾		150		(5,818)		—
Federal and state net operating loss carryforwards utilized		59		746		257
State depreciation adjustments		(1,302)		(1,761)		(1,244)
Share-based compensation		(709)		(529)		352
Valuation allowance increase (decrease)		383		(744)		401
Other accrued expenses		(699)		(4,881)		(852)
Impact of the Tax Reform Act⁽²⁾		—		(3,772)		(24,542)
Prepaid expenses⁽⁴⁾		1,782		1,313		(1,331)
Operating lease right-of-use assets/liabilities – net⁽⁵⁾		(1,049)		—		—
Other⁽⁴⁾		(314)		(92)		(924)
Deferred tax provision (benefit)	$	5,411	$	1,872	$	(10,213)

(1)	The components of the deferred tax provision above reflect the statutory U.S. income tax rate in effect for the applicable year, which is 35% for 2017, a blended rate for 2018 (as previously discussed within this Note), and 21% for 2019.

(2)	For 2018 and 2017, the effect of the change in the U.S. corporate tax rate from 35% to 21% in accordance with the Tax Reform Act is reflected as a separate component of the deferred tax provision.

(3)	ABF Freight recorded a multiemployer pension fund withdrawal liability in 2018 resulting from the transition agreement it entered into with the New England Teamsters and Trucking Industry Pension Fund (see Note I).

(4)	Prepaid expenses are presented as a separate component of the deferred tax provision (benefit). Certain reclassifications have been made to the prior period components to conform to the current year presentation.

(5)	Net change in operating lease right-of-use deferred tax assets and liabilities recorded due to the adoption of ASC Topic 842 in 2019.

Schedule of significant components of deferred tax assets and liabilities

Significant components of the deferred tax assets and liabilities at December 31 were as follows:


	2019		2018
	(in thousands)
Deferred tax assets:
Accrued expenses	$	41,757	$	39,885
Operating lease liabilities⁽¹⁾		19,726		—
Pension liabilities⁽²⁾		—		1,721
Supplemental pension liabilities⁽²⁾		1,091		1,033
Multiemployer pension fund withdrawal⁽³⁾		5,546		5,710
Postretirement liabilities other than pensions		5,359		7,660
Share-based compensation		5,605		4,893
Federal and state net operating loss carryovers		1,093		1,152
Other		1,538		1,355
Total deferred tax assets		81,715		63,409
Valuation allowance		(668)		(53)
Total deferred tax assets, net of valuation allowance		81,047		63,356

Deferred tax liabilities:
Amortization, depreciation, and basis differences for property, plant and equipment, and other long-lived assets		107,835		93,525
Operating lease right-of-use assets⁽¹⁾		18,703		—
Intangibles		7,373		14,066
Revenue recognition		669		1,513
Prepaid expenses		4,952		3,225
Total deferred tax liabilities		139,532		112,329
Net deferred tax liabilities	$	(58,485)	$	(48,973)

(1)	Operating lease right-of-use assets and liabilities were recorded in 2019 due to the adoption of ASC Topic 842.

(2)	Supplemental pension liabilities are presented as a separate component of deferred tax assets. Certain reclassifications have been made to the prior period components to conform to the current year presentation.

(3)	ABF Freight recorded a multiemployer pension fund withdrawal liability in 2018 resulting from the transition agreement it entered into with the New England Teamsters and Trucking Industry Pension Fund (see Note I).

Reconciliation between the effective income tax rate, as computed on income or loss before income taxes, and the statutory federal income tax rate

Reconciliation between the effective income tax rate, as computed on income before income taxes, and the statutory federal income tax rate for the years ended December 31 is presented in the following table:


	2019⁽¹⁾			2018⁽¹⁾			2017⁽²⁾
	(in thousands, except percentages)
Income tax provision at the statutory federal rate	$	10,809		$	17,721		$	18,052
Federal income tax effects of:
State income taxes		(637)			(840)			(992)
Nondeductible expenses⁽³⁾		1,344			1,682			1,551
Life insurance proceeds and changes in cash surrender value		(775)			7			(927)
Alternative fuel credit		(2,340)			(1,203)			—
Net increase (decrease) in valuation allowances		382			(891)			401
Net increase (decrease) in uncertain tax positions		(20)			933			(720)
Settlement of share-based compensation		388			(649)			(1,129)
Impact of the Tax Reform Act on current tax⁽²⁾		—			(52)			(1,288)
Impact of the Tax Reform Act on deferred tax⁽²⁾		—			(3,772)			(24,542)
Nonunion pension termination expense		1,040			—			—
Foreign tax credits generated⁽³⁾		(2,054)			(2,216)			(297)
Federal research and development tax credits		(1,354)			—			—
Other⁽³⁾		(385)			187			(1,390)
Federal income tax provision (benefit)		6,398			10,907			(11,281)
State income tax provision		3,034			4,001			2,834
Foreign income tax provision		2,054			2,216			297
Total provision (benefit) for income taxes	$	11,486		$	17,124		$	(8,150)
Effective tax (benefit) rate		22.3	%		20.3	%		(15.8)	%

(1) Amounts in this reconciliation reflect the statutory U.S. income tax rate in effect for the applicable year after the enactment of the Tax Reform Act, which is 21%. The effect of applying a blended rate of 32.74% for the two months ended February 28, 2018, in accordance with the Tax Reform Act, is reflected in separate components of the reconciliation.
(2) Amounts in this reconciliation reflect the statutory U.S. income tax rate in effect for the applicable year prior to the enactment of the Tax Reform Act, which is 35%. For 2017, the effect of the change in the U.S. corporate tax rate to 21% in accordance with the Tax Reform Act is reflected in separate components of the reconciliation.
(3) Foreign tax credits generated are presented as a separate component of the federal income tax provision (benefit). Certain reclassifications, including the separate presentation of foreign tax credits, have been made to the prior period components to conform to the current year presentation.