INCOME TAXES

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



	2019		2018		2017
United States	$	59,261	$	57,888	$	41,463
Foreign	7,246		10,218		6,747
	$	66,507	$	68,106	$	48,210

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



	2019			2018		2017
Current:
Federal	$	11,074		$	12,390	$	13,154
State	2,752			4,482		2,361
Foreign	1,422			1,678		1,455
Deferred	(154		)	8,887		(3,917		)
	$	15,094		$	27,437	$	13,053

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:



	2019		2018
Deferred tax assets:
Inventories	$	1,478	$	1,477
Compensation	6,890		6,930
Tax credit carryforwards	3,554		3,890
Net operating loss carryforwards	4,073		4,399
Other	7,103		6,458
Total gross deferred tax assets	23,098		23,154
Less valuation allowance	5,964		6,402
Deferred tax assets	17,134		16,752
Deferred tax liabilities:
Goodwill and other intangibles	1,988		1,236
Depreciation and amortization	5,143		4,759
Foreign statutory reserves	192		724
Net deferred tax assets	$	9,811	$	10,033

The net deferred tax assets recorded in the accompanying Consolidated Balance Sheets as of the years ended September 27, 2019 and September 28, 2018 were as follows:



	2019		2018
Non-current assets	$	11,449	$	11,748
Non-current liabilities	1,638		1,715
Net deferred tax assets	$	9,811	$	10,033

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:



	2019		2018			2017
Statutory U.S. federal income tax rate	21.0	%	24.5	%	**	35.0	%
State income tax, net of federal benefit	4.3	%	4.1	%		4.0	%
Uncertain tax positions, net of settlements	(0.5	)%	2.2	%		0.9	%
Foreign-derived intangible income ("FDII") deduction	(0.9	)%	—	%		—	%
Section 199 manufacturer's deduction	—	%	(2.2	)%		(2.8	)%
Taxes related to foreign income, net of credits	0.5	%	0.1	%		(9.8	)%	*
Compensation	(0.7	)%	1.5	%		—	%
Tax rate or law change	(0.2	)%	12.3	%		—	%
Other	(0.8	)%	(2.2	)%		(0.2	)%
	22.7	%	40.3	%		27.1	%

* Rate benefit is primarily from excess foreign tax credits generated by a dividend repatriation in the first quarter of fiscal 2018.

** The federal statutory rate is a blended rate which reflects 35% through December 31, 2017 and the lower rate of 21.0% beginning on January 1, 2018 due to tax reform.

The Tax Act included a new provision designed to tax global intangible low taxed income (“GILTI”) starting in fiscal 2019. The Company elected to record the tax effects of the GILTI provision as a period expense in the applicable tax year.

The Company’s net operating loss carryforwards and their expirations as of September 27, 2019 were as follows:



	State		Foreign		Total
Year of expiration
2020-2024	$	1,697	$	3,524	$	5,221
2025-2029	2,712		2,526		5,238
2030-2034	11,247		—		11,247
2035-2039	135		—		135
Indefinite	—		5,560		5,560
Total	$	15,791	$	11,610	$	27,401

The Company has tax credit carryforwards as follows:



	State		Federal		Total
Year of expiration
2020-2024	$	1,745	$	—	$	1,745
2025-2029	1,211		—		1,211
2030-2034	598		—		598
2035-2039	—		—		—
Indefinite	—		—		—
Total	$	3,554	$	—	$	3,554

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



	2018			2017
Beginning balance	$	8,829		$	5,489
Gross increases - tax positions in prior period	63			2,962
Gross decreases - tax positions in prior period	—			(105		)
Gross increases - tax positions in current period	855			1,064
Settlements	(463		)	—
Lapse of statute of limitations	(1,353		)	(581		)
Ending balance	$	7,931		$	8,829

The total accrued interest and penalties with respect to income taxes was approximately $1,942 and $1,863 for the years ended September 27, 2019 and September 28, 2018, respectively. The Company’s liability for unrecognized tax benefits as of September 27, 2019 was $7,931, and if recognized, $5,469 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 $79, $537 and $246 were recorded as a component of income tax expense in the accompanying Consolidated Statements of Operations during fiscal years 2019, 2018 and 2017, respectively.

The Company’s policy is to remit earnings from foreign subsidiaries only to the extent the remittance does not result in an incremental U.S. tax liability. The Company does not currently provide for the additional U.S. and foreign income taxes which would become payable upon remission of undistributed earnings of foreign subsidiaries. If all undistributed earnings were remitted, an additional income tax provision of approximately $1.3 million would have been necessary as of September 27, 2019.

The Company files income tax returns, including returns for its subsidiaries, with federal, state, local and foreign taxing jurisdictions. During the year ended September 27, 2019, the Company concluded income tax examinations in Italy and Germany. 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 that 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	2016-2019
Canada	2015-2019
France	2016-2019
Germany	2017-2019
Italy	2018-2019
Switzerland	2009-2019