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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes |
NOTE 6: | INCOME TAXES
Income tax expense is composed of the following:
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Current: |  |  |  |  |
Federal | $ | 8,844 |  |  | $ | 14,020 |  |  | $ | 12,637 |
State | 1,317 |  |  | 379 |  |  | 342 |
| 10,161 |  |  | 14,399 |  |  | 12,979 |
Deferred: |  |  |  |  |
Federal | 55 |  |  | (3,764 | ) |  | (254 | )
State | 1,480 |  |  | 300 |  |  | 808 |
| 1,535 |  |  | (3,464 | ) |  | 554 |
Total | $ | 11,696 |  |  | $ | 10,935 |  |  | $ | 13,533 |
Income tax expense also included tax expense allocated to comprehensive income for 2018, 2017, and 2016, of $73, $37, and $84, respectively (see the Consolidated Statements of Comprehensive Income). On December 22, 2017, the United States enacted tax reform legislation commonly known as the Tax Cuts and Jobs Act (the "Tax Act"), resulting in significant modifications to the then existing law, impacting the measurement of income taxes for the year ended December 31, 2017, and the years thereafter. The Tax Act established new tax laws or modified existing tax laws starting in 2018, including but not limited to, (1) reducing the federal corporate income tax rate to a flat 21 percent rate, (2) eliminating the corporate alternative minimum tax, (3) repealing the domestic production activity deduction, (4) adding a new limitation on deductible interest, (5) changing the limitations on the deductibility of certain executive compensation, and, (6) starting in the quarter ended September 30, 2017, changing the bonus depreciation rules to allow full expensing of qualified property. In response to the Tax Act, the SEC staff issued SAB 118, which provided guidance on accounting for the tax effects of the Tax Act. SAB 118 provided for a measurement period not to extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740 - Income Taxes. The Company, following the guidance in SAB 118, recorded a provisional discrete net tax benefit in its Consolidated Statement of Income through net income of $3,343 in the year ended December 31, 2017. This net benefit was driven by a re-measurement of the carrying value of its deferred tax assets and liabilities because of the corporate rate reduction. This net benefit provided a 6.3 percent reduction in the Company’s effective tax rate for the year ended December 31, 2017. The Company has evaluated the elements of the Tax Act, including filing its federal income tax return during the quarter ended December 31, 2018. The Company was not required to make a measurement period adjustment. Therefore, the accounting for the Tax Act is now complete, and the discrete net benefit recorded for the year ended December 31, 2017, is no longer provisional. In addition, the Company has incorporated the law changes and subsequent guidance related to the Tax Act into its December 31, 2018, provision for income taxes contained herein. A reconciliation of income tax expense at the normal statutory federal rate to income tax expense included in the accompanying Consolidated Statements of Income is below:
| Year Ended December 31, |
| 2018 |  | 2017 |  | 2016 |
"Expected" provision at federal statutory rate | $ | 10,286 |  |  | $ | 18,465 |  |  | $ | 15,651 |  |
State income taxes, net(a) | 2,029 |  |  | 1,612 |  |  | 1,672 |  |
Change in valuation allowance | 1,304 |  |  | (578 | ) |  | (718 | ) |
Domestic production activity deduction | — |  |  | (957 | ) |  | (1,247 | ) |
Share-based compensation(a) | (1,201 | ) |  | (4,254 | ) |  | (1,408 | ) |
Compensation limits | — |  |  | 931 |  |  | — |  |
Federal and state tax credits | (807 | ) |  | (1,058 | ) |  | (1,065 | ) |
Tax benefit from the Tax Act | — |  |  | (3,343 | ) |  | — |  |
Other | 85 |  |  | 117 |  |  | 648 |  |
Income tax expense | $ | 11,696 |  |  | $ | 10,935 |  |  | $ | 13,533 |  |
Effective tax rate | 23.9 | % |  | 20.7 | % |  | 30.3 | % |
(a) | The Company received federal excess tax benefits on share-based compensation awards in 2018, 2017, and 2016 of $1,201, $4,254, and $1,408, respectively, and state benefits of $236, $371 and $163, respectively, for excess tax benefits. The state benefits are part of the State income taxes, net, balances in the above table.
The tax effects of temporary differences giving rise to deferred income taxes shown on the Consolidated Balance Sheets are as follows:
| December 31,
| 2018 |  | 2017
Deferred income tax assets: |  |  |
Post-retirement liability | $ | 770 |  |  | $ | 910 |
Deferred income | 393 |  |  | 543 |
Share-based compensation | 1,581 |  |  | 1,158 |
Capital loss carryforwards | 379 |  |  | — |
State tax credit carryforwards | 3,245 |  |  | 3,488 |
State operating loss carryforwards | 1,505 |  |  | 1,434 |
Inventories | 1,476 |  |  | 1,346 |
Other | 1,231 |  |  | 766 |
Gross deferred income tax assets | $ | 10,580 |  |  | $ | 9,645 |
Less: valuation allowance | (1,452 | ) |  | (148 | )
Net deferred income tax assets | 9,128 |  |  | 9,497 |
Deferred income tax liabilities: |  |  |
Fixed assets | (10,497 | ) |  | (9,255 | )
Other | (308 | ) |  | (254 | )
Gross deferred income tax liabilities | (10,805 | ) |  | (9,509 | )
Net deferred income tax liability | $ | (1,677 | ) |  | $ | (12 | )
A schedule of the change in valuation allowance is as follows:
|  | Valuation allowance
Balance at December 31, 2016 |  | $ | 726 |
Decrease |  | (578 | )
Balance at December 31, 2017 |  | $ | 148 |
Increase |  | 1,304 |
Balance at December 31, 2018 |  | $ | 1,452 |
As of December 31, 2018, the Company’s total valuation allowance of $1,452 related to net operating loss carryforwards in states in which it is not "more likely than not" to create enough state taxable income to fully utilize the carryforwards before expiration of the carryforward periods, and capital loss carryforwards that the Company is not "more likely than not" to use before they expire. Based upon final information received in 2018 concerning the sale of the Company’s equity ownership interest in ICP during 2017, the Company was required to revise the estimate of its ability to use its capital loss carryforwards. This revision increased its deferred tax assets and corresponding valuation allowance by $379. The remainder of the change in the Company’s valuation allowance was an increase of $925 related to additional net operating loss carryforwards. The total net increase in the Company's valuation allowance was $1,304 for the year ended December 31, 2018. The carrying value of the Company’s deferred tax assets, liabilities, and the corresponding valuation allowances for the years ended December 31, 2018, and December 31, 2017, reflect the completed accounting concerning the Tax Act. As of December 31, 2017, the Company’s total valuation allowance of $148 related to net operating loss carryforwards in states in which the Company is not "more likely than not" to create enough state taxable income to fully utilize the carryforwards before expiration of the carryforward periods. Due to capital gains estimated to be realized as part of the sale of the Company’s equity ownership interest in ICP during 2017, the Company was able to utilize all of its federal capital loss carryforwards in 2017, and reduce its valuation allowance and corresponding deferred tax asset by $690. The remainder of the change in the valuation allowance was an increase of $112 for additional net operating loss carryforwards for a net reduction of the Company's valuation allowance of $578. As of December 31, 2018, the Company had $21,575 in gross state net operating loss carryforwards. As of December 31, 2017, the Company had $19,979 in state net operating loss carryforwards. Due to varying state carryforward periods, the state net operating loss carryforwards will expire in varying years between calendar years 2019 and 2038. The Company has gross state tax credit carryforwards of $4,107 as of December 31, 2018 and $4,416 as of December 31, 2017. State credits, if not used to offset income tax expense in their respective jurisdictions, will expire in varying years between 2020 and 2034. The Company treats accrued interest and penalties related to tax liabilities, if any, as a component of income tax expense. During 2018, 2017, and 2016, the Company’s activity in accrued interest and penalties was not significant. The following is a reconciliation of the total amount of unrecognized tax benefits (excluding interest and penalties) for 2018, 2017, and 2016:
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Beginning of year balance | $ | 185 |  |  | $ | 43 |  |  | $ | 613 |
Additions based on prior year tax positions | 2 |  |  | 130 |  |  | 2 |
Additions based on current year tax positions | 11 |  |  | 12 |  |  | 21 |
Reduction for prior year tax positions | (5 | ) |  | — |  |  | (48 | )
Reductions for settlements | — |  |  | — |  |  | (545 | )
End of year balance | $ | 193 |  |  | $ | 185 |  |  | $ | 43 |
For each period presented, substantially all of the amount of unrecognized benefits (excluding interest and penalties) would impact the effective tax rate, if recognized. The Company reasonably expects that the amount of unrecognized tax benefit will not decrease by a significant amount in the next 12 months. The Company is currently under federal income tax audit for tax year 2016, and by the state of Michigan related to Corporate Income Tax for tax years 2013 through 2016. The Company does not expect either audit to result in a significant adjustment. The Company has been audited for United States income tax purposes through tax year 2013, resulting in no significant adjustments. All tax years after 2014 remain open to adjustment due to use of net operating loss and credit carryforwards in tax years through 2015. The Company is subject to examination for its state tax returns for years 2014 and forward, with the exception of certain net operating losses and credit carryforwards originating in years prior to 2014 that remain subject to adjustment.

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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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