Note

– Income Taxes

December 22, 2017,

the United States enacted the tax reform legislation referred to herein as the “Tax Act”, which reduced the federal corporate tax rate on U.S. earnings to

21%

from

35%

and moved from a global taxation regime to a modified territorial regime. The change in the Company’s lower effective income tax rate of

20.7%

for

2019

and

20.5%

for

2018

compared to

32.6%

for

2017

was due primarily to the Tax Act.

January 2018,

FASB released guidance on accounting for the global intangible low-taxed income (“GILTI”) tax. The guidance indicates that either accounting for deferred taxes related to GILTI tax inclusions or treating the GILTI tax as a period cost are both acceptable methods subject to an accounting policy election. The Company elected to account for the GILTI tax in the period in which it is incurred.

The components of Income before income taxes are:

	2019		2018		2017
United States	$	41,234	$	45,271	$	33,277
Foreign countries		3,932		5,045		6,101
Total	$	45,166	$	50,316	$	39,378

The components of income tax expense are:

	2019			2018			2017
Current expense:
Federal	$	8,204		$	7,779		$	16,489
Foreign		1,140			1,179			1,243
State and local		1,205			1,042			1,231
		10,549			10,000			18,963
Deferred expense (benefit):
Federal		(720	)		405			(5,968	)
Foreign		(379	)		(125	)		51
State and local		(99	)		57			(223	)
		(1,198	)		337			(6,140	)
Income tax expense	$	9,351		$	10,337		$	12,823

The reconciliation between income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes is:

	201 9			201 8			201 7
Income taxes at statutory rate	$	9,485		$	10,566		$	13,782
State and local income taxes, net of federal tax benefit		803			832			555
Tax credits		(898	)		(506	)		(295	)
Domestic production activities deduction		-			-			(1,191	)
Lower foreign taxes differential		(65	)		(5	)		(842	)
Uncertain tax positions		164			172			346
Valuation allowance		71			37			100
Federal tax reform – deferred rate change		-			(581	)		(1,624	)
Deemed mandatory repatriation		-			(48	)		1,370
Foreign withholding tax		-			-			600
Other		(209	)		(130	)		22
Income tax expense	$	9,351		$	10,337		$	12,823

The Company made income tax payments of

$9.1

million,

$14.7

million, and

$13.5

million in

2019,

2018,

and

2017,

respectively.

Deferred income tax assets and liabilities consist of:

	2019			2018
Deferred tax assets:
Inventories	$	1,391		$	1,161
Accrued liabilities		2,095			2,306
Postretirement health benefits obligation		5,884			5,350
Pension		240			-
Lease liabilities		361			-
Other		1,360			840
Total deferred tax assets		11,331			9,657
Valuation allowance		(567	)		(496	)
Net deferred tax assets		10,764			9,161
Deferred tax liabilities:
Depreciation and amortization		(9,446	)		(9,351	)
Leases – right of use assets		(361	)		-
Pension		-			(1,113	)
Foreign withholding tax		(100	)		(600	)
Total deferred tax liabilities		(9,907	)		(11,064	)
Net deferred tax assets (liabilities)	$	857		$	(1,903	)

The Company has state tax credit carryforwards of

$0.7

million and

$0.6

million as of

December

31,

2019

and

2018,

respectively, that will expire incrementally between

2020

and

2024.

The Company has a valuation allowance of

$0.6

million as of

December 31, 2019

and

$0.5

million as of

December

31,

2018

against certain of its deferred tax assets. ASC

740,

“Income Taxes,” requires that a valuation allowance be recorded against deferred tax assets when it is more likely than

not

that some or all of a Company’s deferred tax assets will

not

be realized based on available positive and negative evidence.

Total unrecognized tax benefits were

$1.1

million and

$1.0

million at

December 31, 2019

and

2018,

respectively. The total amount of unrecognized tax benefits that, if ultimately recognized, would reduce the Company’s annual effective tax rate were

$0.9

million and

$0.8

million at

December 31, 2019

and

2018,

respectively.

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

	201 9			201 8			201 7
Balance at beginning of year	$	951		$	797		$	492
Additions based on tax positions related to the current year		372			268			239
Additions based on tax positions related to prior years		-			-			165
Reductions due to lapse of applicable statute of limitations		(193	)		(114	)		(99	)
Balance at end of year	$	1,130		$	951		$	797

The Company is subject to income taxes in the U.S. federal and various state, local and foreign jurisdictions. Income tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is

longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before

2015.

The Company has

$57,000

of unrecognized tax benefits recorded for periods for which the relevant statutes of limitations expire in the next

months.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense for all periods presented. The Company accrued approximately

$0.3

million,

$0.2

million and

$0.2

million for the payment of interest and penalties at

December

31,

2019,

2018

and

2017,

respectively.