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INCOME TAXES | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income (loss) before income taxes, consisted of the following for the years set forth below (amounts in thousands):
| 2017 |  | 2016 |  | 2015
Domestic | $ | (65,422 | ) |  | $ | (56,334 | ) |  | $ | (34,876 | )
Foreign | 12,546 |  |  | 19,860 |  |  | (20,196 | )
| $ | (52,876 | ) |  | $ | (36,474 | ) |  | $ | (55,072 | )
The income tax provision (benefit) was as follows for the years set forth below (amounts in thousands):
| 2017 |  | 2016 |  | 2015
Current |  |  |  |  |
Federal | $ | 458 |  |  | $ | (2,040 | ) |  | $ | 3,143 |
State | (614 | ) |  | (62 | ) |  | 55 |
Foreign | 10,574 |  |  | 6,063 |  |  | 7,114 |
| 10,418 |  |  | 3,961 |  |  | 10,312 |
Deferred |  |  |  |  |  |  |  |
Federal | — |  |  | — |  |  | 24,924 |
State | — |  |  | — |  |  | 3,433 |
Foreign | 785 |  |  | (680 | ) |  | (3,913 | )
| 785 |  |  | (680 | ) |  | 24,444 |
Income tax provision (benefit) | $ | 11,203 |  |  | $ | 3,281 |  |  | $ | 34,756 |
The income tax provision differs from the amount of income tax determined by applying the statutory U.S. federal income tax rate to pre-tax income (loss) as a result of the following:
| 2017 |  | 2016 |  | 2015
Statutory U.S. federal tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Unrecognized tax positions | (2.3 | ) |  | 6.5 |  |  | — |
Impact of foreign income | (8.0 | ) |  | 26.9 |  |  | 12.8 |
Valuation allowance | 16.5 |  |  | (73.6 | ) |  | (131.5 | )
State taxes, net | 0.8 |  |  | 0.1 |  |  | (6.6 | )
Benefit from a U.S. check-the-box election | — |  |  | — |  |  | 33.5 |
Debt forgiveness | 0.2 |  |  | — |  |  | (2.1 | )
Nondeductible royalty | (1.4 | ) |  | (1.9 | ) |  | (1.5 | )
Tax Cuts and Jobs Act | (62.7 | ) |  | — |  |  | — |
Other, net | 0.7 |  |  | (2.0 | ) |  | (2.7 | )
Effective tax rate | (21.2 | )% |  | (9.0 | )% |  | (63.1 | )%
The effective tax rate for the year ended December 31, 2017, was a negative 21.2% as compared to a negative 9.0% for the year ended December 31, 2016. The Company recorded a pre-tax loss in each of 2017 and 2016 and had a negative effective tax rate which represents tax expense in the consolidated financial statements. In jurisdictions where the Company operates its businesses, management analyzes the ability to utilize its deferred tax assets arising from losses in its cyclical business. The Company continues to record a valuation allowance in several jurisdictions, including the U.S., various U.S. states, Italy, Australia, and Luxembourg as these amounts remain more likely than not that the deferred tax assets would not be utilized. The Company recorded a valuation allowance of $8.7 million and $26.8 million on the net deferred tax asset in 2017 and 2016, respectively. This amount is primarily related to net operating losses generated from operations in these certain countries. The Company is involved in various tax matters, for some of which the outcome is uncertain. The IRS issued a final audit report during 2017 for the tax years 2010 through 2014. The Company recorded a net expense of $0.5 million to reflect the final audit results. The Company believes that it has adequate tax reserves to address these open tax matters acknowledging that the outcome and timing of these events are uncertain. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2017 and 2016, were as follows (amounts in thousands):
| 2017 |  | 2016
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 118,303 |  |  | $ | 119,748 |
Pension | 5,462 |  |  | 8,236 |
Inventory | 4,957 |  |  | 4,329 |
Warranty | 4,847 |  |  | 6,237 |
Employee benefits and related costs | 14,061 |  |  | 18,882 |
Prepaid royalties | 4,383 |  |  | 5,173 |
Other | 20,930 |  |  | 22,160 |
Deferred tax assets | 172,943 |  |  | 184,765 |
Deferred tax liabilities: |  |  |  |  |
Fixed assets | (28,769 | ) |  | (41,757 | )
Intangible assets | (4,301 | ) |  | (4,214 | )
Other | (1,396 | ) |  | (4,543 | )
Deferred tax liabilities | (34,466 | ) |  | (50,514 | )
Subtotal | 138,477 |  |  | 134,251 |
Valuation allowance | (148,243 | ) |  | (142,771 | )
Net deferred tax liability | $ | (9,766 | ) |  | $ | (8,520 | )
As of December 31, 2017 and 2016, certain tax loss carryforwards of $118.3 million and $119.7 million were available with $1.8 million expiring between 2017 and 2022 and $116.5 million expiring after 2022. At December 31, 2017, a valuation allowance of $148.2 million has been established. The net change in the valuation allowance was $5.5 million and $25.0 million for 2017 and 2016, respectively. The Company has $168.8 million of Federal net operating loss carryforward, a portion of which expires starting in 2034. Additionally, the Company has $205.3 million of state net operating losses and $273.8 million of foreign loss carryforwards. The majority of the valuation allowance is related to deferred tax assets in the U.S., Italy, Australia, and Luxembourg. The Tax Cuts and Jobs Act was enacted on December 22, 2017. The Tax Cuts and Jobs Act includes a number of changes in existing tax law impacting businesses, including a one-time deemed repatriation of cumulative undistributed foreign earnings and a permanent reduction in the U.S. federal statutory rate from 35% to 21%, effective on January 1, 2018. Under U.S. GAAP, changes in tax rates and tax law are accounted for in the period of enactment and deferred tax assets and liabilities are remeasured at the enacted tax rate. Consistent with guidance issued by the Securities Exchange Commission (“SEC”), which provides for a measurement period of one year from the enactment date to finalize the accounting for effects of the Tax Cuts and Jobs Act, the Company provisionally recorded no additional income tax expense related to the Tax Cuts and Jobs Act. The remeasured U.S. net deferred asset was fully offset by a change in the valuation allowance. Based on information available, the Company estimates the net cumulative undistributed foreign earnings to be a cumulative loss and therefore recorded no additional income tax expense related to the one-time deemed repatriation toll charge. As a result of the Tax Cuts and Jobs Act, the Company can repatriate the cumulative undistributed foreign earnings back to the U.S. when needed with minimal additional taxes other than state income and foreign withholding tax. The Company is still evaluating whether to change its indefinite reinvestment assertion in light of the Tax Cuts and Jobs Act and considers that conclusion to be incomplete under guidance issued by the SEC. If the Company subsequently changes its assertion during the measurement period, the Company will account for the change in assertion as part of the Tax Cuts and Jobs Act enactment. The Company or one of its subsidiaries files income tax returns in the U.S., Federal and State, and various foreign jurisdictions. The Company’s major locations are in the U.S., Italy, Australia, Russia, and Brazil. The IRS issued a final audit report in 2017 for the 2010-2014 U.S. Federal tax returns and the Company adjusted its uncertain tax reserves. The Company also has ongoing tax audits with non-U.S. jurisdictions. Italy has open tax years from 2012-2017. Russia has open tax years from 2016-2017. Australia has open tax years from 2013-2017 and Brazil has open tax years from 2011-2017. The Company has applied the provisions of ASC 740, “Income Taxes” related to unrecognized tax benefits. At December 31, 2017, 2016, and 2015, the unrecognized tax benefits were $11.4 million, $16.1 million, and $18.0 million, respectively. As of December 31, 2017, $11.4 million of unrecognized tax benefits would have affected income tax expense if the tax benefits were recognized. The majority of these recognized tax benefits would result in a net operating loss carryforward which would require a valuation allowance. The majority of the accrual in unrecognized tax benefits relates to potential state tax exposures. Although management cannot predict with any degree of certainty the timing of ultimate resolution of matters under review by various taxing jurisdictions, it is unlikely that the Company’s gross unrecognized tax benefits balance will change significantly within the next twelve months. A reconciliation of the total amounts of unrecognized tax benefits at December 31 were as follows (amounts in thousands):
| 2017 |  | 2016 |  | 2015
Balance at January 1 | $ | 12,468 |  |  | $ | 14,698 |  |  | $ | 15,320 |
Increases to tax positions taken during the current year | 127 |  |  | 288 |  |  | 7 |
Increases to tax positions taken during the prior years | 6,045 |  |  | 3,201 |  |  | 591 |
Decreases to tax positions taken during prior years | (858 | ) |  | (5,257 | ) |  | (534 | )
Decreases due to lapse of statutes of limitations | (297 | ) |  | (4 | ) |  | (492 | )
Settlements | (8,095 | ) |  | (476 | ) |  | (175 | )
Foreign exchange | (25 | ) |  | 18 |  |  | (19 | )
Balance at December 31 | $ | 9,365 |  |  | $ | 12,468 |  |  | $ | 14,698 |
The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense. The amount of interest and penalties related to unrecognized tax benefits recorded in income tax expense was $0.5 million, $0.4 million, and $0.5 million at December 31, 2017, 2016 and 2015. The reconciliation of unrecognized tax benefits above does not include accrued interest and penalties of $2.9 million, $3.6 million, and $3.3 million, at December 31, 2017, 2016, and 2015, respectively.

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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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