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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 (loss) before income taxes, consisted of the following for the years set forth below (amounts in thousands):
| 2019 |  | 2018 |  | 2017
Domestic | $ | (52,234 | ) |  | $ | (298 | ) |  | $ | (65,422 | )
Foreign | 4,190 |  |  | 20,105 |  |  | 12,546 |
| $ | (48,044 | ) |  | $ | 19,807 |  |  | $ | (52,876 | )
The income tax provision was as follows for the years set forth below (amounts in thousands):
| 2019 |  | 2018 |  | 2017
Current |  |  |  |  |
Federal | $ | (4,599 | ) |  | $ | (2,379 | ) |  | $ | 458 |
State | 622 |  |  | (65 | ) |  | (614 | )
Foreign | 9,752 |  |  | 11,497 |  |  | 10,574 |
| 5,775 |  |  | 9,053 |  |  | 10,418 |
Deferred |  |  |  |  |  |  |  |
Federal | — |  |  | — |  |  | — |
State | — |  |  | — |  |  | — |
Foreign | (2,300 | ) |  | (2,291 | ) |  | 785 |
| (2,300 | ) |  | (2,291 | ) |  | 785 |
Income tax provision | $ | 3,475 |  |  | $ | 6,762 |  |  | $ | 11,203 |
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:
| 2019 |  | 2018 |  | 2017
Statutory U.S. federal tax rate | 21.0 | % |  | 21.0 | % |  | 35.0 | %
Unrecognized tax positions | 6.1 |  |  | (12.4 | ) |  | (2.3 | )
Impact of foreign income | (2.2 | ) |  | (8.8 | ) |  | (8.0 | )
Valuation allowance | (29.0 | ) |  | (0.2 | ) |  | 16.5 |
State taxes, net | (0.9 | ) |  | 0.3 |  |  | 0.8 |
Nondeductible royalty | (1.5 | ) |  | 3.8 |  |  | (1.4 | )
Tax Cuts and Jobs Act | — |  |  | 26.6 |  |  | (62.7 | )
Other, net | (0.7 | ) |  | 3.8 |  |  | 0.9 |
Effective tax rate | (7.2 | )% |  | 34.1 | % |  | (21.2 | )%
The effective tax rate for the year ended December 31, 2019, was (7.2)% as compared to 34.1% for the year ended December 31, 2018. For 2019 and 2017, the Company recorded a pre-tax loss 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 $13.9 million and $(0.1) million on the net deferred tax asset in 2019 and 2018, 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 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, 2019 and 2018, were as follows (amounts in thousands):
| 2019 |  | 2018
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 129,599 |  |  | $ | 121,804 |
Pension | 5,026 |  |  | 5,718 |
Inventory | 6,673 |  |  | 4,863 |
Warranty | 4,004 |  |  | 4,376 |
Employee benefits and related costs | 8,255 |  |  | 10,006 |
Prepaid royalties | 4,092 |  |  | 4,780 |
Interest limitation | 11,067 |  |  | 4,606 |
Lease liability | 7,164 |  |  | — |
Other | 17,847 |  |  | 19,360 |
Deferred tax assets | 193,727 |  |  | 175,513 |
Deferred tax liabilities: |  |  |  |  |
Fixed assets | (21,846 | ) |  | (25,207 | )
Intangible assets | (3,136 | ) |  | (3,474 | )
Lease assets | (7,047 | ) |  | — |
Other | (1,359 | ) |  | (1,820 | )
Deferred tax liabilities | (33,388 | ) |  | (30,501 | )
Subtotal | 160,339 |  |  | 145,012 |
Valuation allowance | (164,680 | ) |  | (151,554 | )
Net deferred tax liability | $ | (4,341 | ) |  | $ | (6,542 | )
As of December 31, 2019 and 2018, certain tax loss carryforwards of $129.6 million and $121.8 million were available with $3.4 million expiring between 2019 and 2024 and $126.2 million expiring after 2024. At December 31, 2019, a valuation allowance of $164.7 million has been established. The net change in the valuation allowance was $13.1 million and $3.3 million for 2019 and 2018, respectively. The majority of the valuation allowance is related to deferred tax assets in the U.S., Italy, Australia, and Luxembourg. The Company has $177.8 million of Federal net operating loss carryforward, a portion of which expires starting in 2034. Additionally, the Company has $261.6 million of state net operating losses and $309.2 million of foreign loss carryforwards. 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 re-measured at the enacted tax rate. The re-measured U.S. net deferred asset was fully offset by a change in the valuation allowance. The Company’s net cumulative undistributed foreign earnings were a cumulative loss and therefore no additional income tax expense related to the one-time deemed repatriation toll charge was recorded in 2017. As a result of the Tax Cuts and Jobs Act, the Company can repatriate future foreign earnings back to the U.S. when needed with minimal additional taxes other than state income and foreign withholding tax. The Company has not changed its indefinite reinvestment assertion in light of the Tax Cuts and Jobs Act and has not accrued any potential incremental taxes which could be incurred if any foreign earnings are repatriated. The Company has not calculated the potential foreign withholding taxes as the Company does not expect to repatriate those earnings. 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. Italy has open tax years from 2014-2019. Russia has open tax years from 2016-2019. Australia has open tax years from 2015-2019 and Brazil has open tax years from 2013-2019. The Company has applied the provisions of ASC 740, “Income Taxes” related to unrecognized tax benefits. At December 31, 2019, 2018, and 2017, the unrecognized tax benefits were $4.5 million, $8.9 million, and $11.4 million, respectively. As of December 31, 2019, $4.5 million of unrecognized tax benefits would have affected income tax expense if the tax benefits were recognized. 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 possible that the Company’s gross unrecognized tax benefits balance will decrease by approximately $3 million within the next twelve months. A reconciliation of the total amounts of unrecognized tax benefits at December 31 were as follows (amounts in thousands):
| 2019 |  | 2018 |  | 2017
Balance at January 1 | $ | 7,406 |  |  | $ | 9,365 |  |  | $ | 12,468 |
Increases to tax positions taken during the current year | — |  |  | 19 |  |  | 127 |
Increases to tax positions taken during the prior years | 973 |  |  | — |  |  | 6,045 |
Decreases to tax positions taken during prior years | (350 | ) |  | (1,336 | ) |  | (858 | )
Decreases due to lapse of statutes of limitations | (3,429 | ) |  | (637 | ) |  | (297 | )
Settlements | (506 | ) |  | — |  |  | (8,095 | )
Foreign exchange | 3 |  |  | (5 | ) |  | (25 | )
Balance at December 31 | $ | 4,097 |  |  | $ | 7,406 |  |  | $ | 9,365 |
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 $(1.0) million, $(0.5) million, and $0.5 million at December 31, 2019, 2018 and 2017. The reconciliation of unrecognized tax benefits above does not include accrued interest and penalties of $1.4 million, $2.4 million, and $2.9 million, at December 31, 2019, 2018, and 2017, 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://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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