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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes |
18. | Income Taxes
On December 22, 2017, the Tax Act was signed into law. The Tax Act made broad and complex changes to the U.S. tax code which included a lowering of the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018, accelerated expensing of qualified capital investments for a specific period, limitations of the deductibility of interest expense and executive compensation, and a transition from a worldwide to a territorial tax system, which required companies to pay a one-time transition tax on certain unrepatriated earnings from foreign subsidiaries. ASC 740, Income Taxes, requires a company to record the effects of a tax law change in the period of enactment. ASU 2018-05 allowed a company to record a provisional amount when it did not have the necessary information available, prepared or analyzed in reasonable detail to complete its accounting for the change in the tax law. The measurement period ends when the company has obtained, prepared and analyzed the information necessary to finalize its accounting, but could not extend beyond one year. In the fourth quarter of 2017, we included a provisional amount for the one-time transition tax on certain unrepatriated earnings. The accounting for the income tax effect of the one-time transition tax on certain unrepatriated earnings was finalized in the third quarter of 2018, impacting the year-to-date overall effective tax rate by (1.3)%. In the fourth quarter of 2017, we remeasured our deferred taxes at the reduced corporate tax rate of 21% and recognized the change as a discrete income tax expense. The accounting for the remeasurement of the deferred taxes and transition tax was finalized in the third quarter of 2018. Adjustments to the provisional amounts were not material to the consolidated financial statements. The accounting for the income tax effects of the Tax Act is complete as of December 31, 2018. Income from continuing operations for the three years ended December 31 was as follows:
| 2018 |  | 2017 |  | 2016
U.S. operations | $ | 23,913 |  |  | $ | 7,465 |  |  | $ | 54,018 |
Foreign operations | 11,929 |  |  | (8,757 | ) |  | 12,473 |
Total | $ | 35,842 |  |  | $ | (1,292 | ) |  | $ | 66,491 |
Income tax expense (benefit) for the three years ended December 31 was as follows:
| 2018 |  | 2017 |  | 2016
Current: |  |  |  |  |
Federal | $ | 3,731 |  |  | $ | 2,590 |  |  | $ | 15,962 |
Foreign | 7,030 |  |  | 8,701 |  |  | 3,035 |
State | 1,033 |  |  | 812 |  |  | 1,859 |
| $ | 11,794 |  |  | $ | 12,103 |  |  | $ | 20,856 |
Deferred: |  |  |  |  |  |  |  |
Federal | $ | (3,135 | ) |  | $ | 1,640 |  |  | $ | (472 | )
Foreign | (6,012 | ) |  | (8,699 | ) |  | (434 | )
State | (343 | ) |  | (131 | ) |  | (73 | )
| $ | (9,490 | ) |  | $ | (7,190 | ) |  | $ | (979 | )
Total: |  |  |  |  |  |  |  |
Federal | $ | 596 |  |  | $ | 4,230 |  |  | $ | 15,490 |
Foreign | 1,018 |  |  | 2 |  |  | 2,601 |
State | 690 |  |  | 681 |  |  | 1,786 |
Total Income Tax Expense | $ | 2,304 |  |  | $ | 4,913 |  |  | $ | 19,877 |
In general, it is our practice and intention to permanently reinvest the earnings of our foreign subsidiaries and repatriate earnings only when the tax impact is zero or immaterial and that position has not changed following incurring the transition tax under the Tax Act. Accordingly, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of our approximately $1,572 of undistributed earnings from foreign subsidiaries to the United States as those earnings continue to be permanently reinvested. Our effective income tax rate varied from the U.S. federal statutory tax rate for the three years ended December 31 as follows:
| 2018 |  | 2017 |  | 2016
Tax at statutory rate | 21.0 | % |  | 35.0 | % |  | 35.0 | %
(Decreases) increases in the tax rate from: |  |  |  |  |  |  |
State and local taxes, net of federal benefit | 1.4 |  |  | (21.1 | ) |  | 1.7 |
Effect of foreign operations | (4.3 | ) |  | (70.8 | ) |  | (5.5 | )
Transaction costs | (4.2 | ) |  | (226.3 | ) |  | — |
Effect of 2017 deferred rate change | (1.0 | ) |  | (154.3 | ) |  | — |
Transition Tax | (1.0 | ) |  | (28.0 | ) |  | — |
Effect of changes in valuation allowances | 6.6 |  |  | (126.5 | ) |  | 1.9 |
Domestic production activities deduction | 0.4 |  |  | 28.3 |  |  | (2.2 | )
Share-based payments | (5.7 | ) |  | 90.4 |  |  | — |
Research & Development credit | (3.6 | ) |  | 82.9 |  |  | (1.3 | )
Other, net | (3.2 | ) |  | 10.2 |  |  | 0.3 |
Effective income tax rate | 6.4 | % |  | (380.2 | )% |  | 29.9 | %
Deferred tax assets and liabilities were comprised of the following as of December 31:
| 2018 |  | 2017
Deferred Tax Assets: |  |  |
Inventories, principally due to changes in inventory reserves | $ | 3,335 |  |  | $ | 4,757 |
Employee wages and benefits, principally due to accruals for financial reporting purposes | 11,642 |  |  | 11,031 |
Warranty reserves accrued for financial reporting purposes | 2,610 |  |  | 2,578 |
Receivables, principally due to allowance for doubtful accounts and tax accounting method for equipment rentals | 1,728 |  |  | 2,138 |
Tax loss carryforwards | 7,765 |  |  | 11,383 |
Tax credit carryforwards | 4,708 |  |  | 1,575 |
Other | 4,712 |  |  | 3,630 |
Gross Deferred Tax Assets | $ | 36,500 |  |  | $ | 37,092 |
Less: valuation allowance | (11,519 | ) |  | (9,691 | )
Total Net Deferred Tax Assets | $ | 24,981 |  |  | $ | 27,401 |
Deferred Tax Liabilities: |  |  |  |  |
Property, Plant and Equipment, principally due to differences in depreciation and related gains | 9,882 |  |  | 9,042 |
Goodwill and Intangible Assets | 45,628 |  |  | 60,450 |
Total Deferred Tax Liabilities | $ | 55,510 |  |  | $ | 69,492 |
Net Deferred Tax Liabilities | $ | (30,529 | ) |  | $ | (42,091 | )
Tax credit carryforwards consist of $1,812 foreign tax credits, $1,268 state tax credits, and $1,628 of Netherlands tax credits. We have non-U.S. cumulative tax losses of $35,593 in various countries. Cumulative losses can be used to offset the income tax liabilities on future income in these countries. $18,649 of these losses have unlimited carryforward periods. $16,944 of these losses have a limited carryforward period which must be utilized during 2019 to 2026. The valuation allowance at December 31, 2018 principally applies to the Netherlands tax loss and tax credit carryforwards, a Sweden tax loss carryforward, and state tax credit carryforwards that, in the opinion of management, are more likely than not to expire unutilized. However, to the extent that tax benefits related to these carryforwards are realized in the future, the reduction in the valuation allowance will reduce income tax expense. A valuation allowance for the remaining tax loss carryforwards is not required since it is more likely than not that they will be realized through carryback to taxable income in prior years, future reversals of existing taxable temporary differences and future taxable income. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| 2018 |  | 2017
Balance at January 1 | $ | 2,232 |  |  | $ | 2,477 |
Increases as a result of tax positions taken during a prior period | 74 |  |  | — |
Increases as a result of tax positions taken during the current year | 370 |  |  | 329 |
Increase related to prior period tax positions of acquired entities | 3,833 |  |  | 236 |
Decreases relating to settlement with tax authorities | — |  |  | (68 | )
Reductions as a result of a lapse of the applicable statute of limitations | (1,274 | ) |  | (770 | )
Increases as a result of foreign currency fluctuations | 418 |  |  | 28 |
Balance at December 31 | $ | 5,653 |  |  | $ | 2,232 |
Included in the balance of unrecognized tax benefits at December 31, 2018 and 2017 are potential benefits of $5,473 and $1,992, respectively, that if recognized, would affect the effective tax rate from continuing operations. We recognize potential accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. In addition to the liability of $5,653 and $2,232 for unrecognized tax benefits as of December 31, 2018 and 2017, there was approximately $416 and $482, respectively, for accrued interest and penalties. To the extent interest and penalties are not assessed with respect to uncertain tax positions, the amounts accrued will be revised and reflected as an adjustment to income tax expense. We and our subsidiaries are subject to U.S. federal income tax as well as income tax of numerous state and foreign jurisdictions. We are generally no longer subject to U.S. federal tax examinations for taxable years before 2015 and, with limited exceptions, state and foreign income tax examinations for taxable years before 2014. The Internal Revenue Service completed its examination of the U.S. income tax return for the 2015 tax year during the third quarter of 2018. The IRS's adjustments to certain tax positions were not material. We are currently undergoing income tax examinations in various state and foreign jurisdictions covering 2014 to 2016. Although the final outcome of these examinations cannot be currently determined, we believe that we have adequate reserves with respect to these examinations. We do not anticipate that total unrecognized tax benefits will change significantly within the next 12 months.

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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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