INCOME TAXES

The U.S. and foreign income before income taxes for the respective years consisted of the following:



	2017		2016			2015
United States	$	41,463	$	28,881		$	11,886
Foreign	6,747		(5,226		)	3,867
	$	48,210	$	23,655		$	15,753

Income tax expense for the respective years consisted of the following:



	2017			2016			2015
Current:
Federal	$	13,154		$	9,471		$	4,916
State	2,361			1,492			882
Foreign	1,455			986			1,469
Deferred	(3,917		)	(1,795		)	(2,130		)
	$	13,053		$	10,154		$	5,137

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at the end of the respective years are presented below:



	2017		2016
Deferred tax assets:
Inventories	$	2,263	$	2,041
Compensation	14,260		13,956
Tax credit carryforwards	8,203		4,691
Net operating loss carryforwards	5,844		7,628
Other	8,041		7,558
Total gross deferred tax assets	38,611		35,874
Less valuation allowance	8,613		10,215
Deferred tax assets	29,998		25,659
Deferred tax liabilities:
Goodwill and other intangibles	1,805		1,571
Depreciation and amortization	6,802		5,744
Foreign statutory reserves	604		497
Net deferred tax assets	$	20,787	$	17,847

The net deferred tax assets recorded in the accompanying Consolidated Balance Sheet as of the years ended September 29, 2017 and September 30, 2016 were as follows:



	2017		2016
Non-current assets	$	22,632	$	19,063
Non-current liabilities	1,845		1,216
Net deferred tax assets	$	20,787	$	17,847

The significant differences between the statutory federal tax rate and the effective income tax rates for the Company for the respective years shown below were as follows:



	2017			2016		2015
Statutory U.S. federal income tax rate	35.0	%		35.0	%	35.0	%
Foreign rate differential	(1.1	)%		0.3	%	(1.5	)%
State income tax, net of federal benefit	4.0	%		6.1	%	2.4	%
Tax credit	(0.9	)%		(3.2	)%	(16.6	)%
Deferred tax asset valuation allowance	(0.3	)%		0.8	%	10.0	%
Uncertain tax positions, net of settlements	0.9	%		1.4	%	1.7	%
Goodwill impairment	—	%		6.6	%	—	%
Section 199 manufacturer's deduction	(2.8	)%		(4.2	)%	(3.7	)%
Taxes related to foreign income, net of credits	(8.7	)%	*	0.5	%	(0.8	)%
Amended tax returns	—	%		—	%	3.5	%
Other	1.0	%		(0.4	)%	2.6	%
	27.1	%		42.9	%	32.6	%

* Rate benefit is primarily from excess foreign tax credits generated by a dividend repatriation in the first quarter of fiscal 2017.

The Company’s net operating loss carryforwards and their expirations as of September 29, 2017 were as follows:



	State		Foreign		Total
Year of expiration
2018-2022	$	—	$	2,336	$	2,336
2023-2027	3,071		2,605		5,676
2028-2032	16,968		—		16,968
2033-2037	312		—		312
Indefinite	—		9,631		9,631
Total	$	20,351	$	14,572	$	34,923

The Company has tax credit carryforwards as follows:



	State		Federal		Total
Year of expiration
2018-2022	$	1,783	$	—	$	1,783
2023-2027	1,536		3,894		5,430
2028-2032	751		—		751
2033-2037	239		—		239
Indefinite	—		—		—
Total	$	4,309	$	3,894	$	8,203

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



Balance at October 2, 2015	$	3,881
Settlement	—
Lapse of statute of limitations	(391		)
Gross increases - tax positions in period	1,606
Balance at September 30, 2016	$	5,096
Settlement	(81		)
Lapse of statute of limitations	(380		)
Gross increases - tax positions in period	854
Balance at September 29, 2017	$	5,489

The total accrued interest and penalties with respect to income taxes was approximately $1,325 and $1,079 for the years ended September 29, 2017 and September 30, 2016, respectively. The Company’s liability for unrecognized tax benefits as of September 29, 2017 was $5,489, and if recognized, $5,094 would have an effective tax rate impact.

In accordance with its accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. Interest and penalties of $185, $194 and $148 were recorded as a component of income tax expense in the accompanying Consolidated Statements of Operations during fiscal years 2017, 2016 and 2015, respectively.

The Company files income tax returns, including returns for its subsidiaries, with federal, state, local and foreign taxing jurisdictions. At September 29, 2017, the Company was under income tax examination in Italy. The amount of unrecognized tax benefits recognized within the next twelve months may decrease due to expiration of the statute of limitations for certain years in various jurisdictions. However, it is possible that a jurisdiction may open an audit prior to the statute expiring or the aforementioned audit may result in adjustments to the Company’s tax filings. At this time, an estimate of the range of the reasonably possible change cannot be made.

The following tax years remain subject to examination by the Company's respective major tax jurisdictions:



Jurisdiction	Fiscal Years
United States	2014-2017
Canada	2013-2017
France	2014-2017
Germany	2013-2017
Italy	2012-2017
Switzerland	2007-2017

The Company has not provided additional U.S. income taxes on $112,638 of undistributed earnings of consolidated foreign subsidiaries included in shareholders’ equity attributable to the Company. Such earnings could become taxable upon the sale or liquidation of these foreign subsidiaries or upon dividend repatriation. If at some future date, these earnings cease to be indefinitely reinvested and are repatriated, the Company may be subject to additional U.S. income taxes and foreign withholding and other taxes on such amounts. It is not practicable to estimate the amount of unrecognized withholding taxes and deferred tax liability on such earnings.

As of September 29, 2017, the Company held approximately $39,205 of cash and cash equivalents in bank accounts in foreign jurisdictions.