12. INCOME TAXES

The provision for income taxes included the following components for the years ended December 31, 2016, 2015 and 2014:

	2016			2015		2014
	(Dollars in thousands)
Current:
Federal	$	5,965		$	8,801	$	7,339
State		1,027			1,314		1,131
Foreign		737			501		1,649
Total		7,729			10,616		10,119
Deferred		(2,645	)		346		1,115
Total provision	$	5,084		$	10,962	$	11,234

The differences between the U.S. federal statutory income tax rate and the Company’s effective tax rate were as follows for the years ended December 31, 2016, 2015 and 2014:

	2016			2015			2014
U.S. federal statutory income tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal tax benefit		3.5			3.4			2.8
Non-taxable municipal bond interest		(1.0	)		(1.0	)		(1.2	)
Foreign income tax rate differences		(0.6	)		0.4			(0.8	)
Life insurance deferred tax reversal		(14.2	)		—			—
Other		0.3			(0.1	)		0.4
Effective tax rate		23.0	%		37.7	%		36.2	%

The decrease in the provision for income taxes and the effective tax rate for 2016 was primarily due to a one-time adjustment related to corporate-owned life insurance policies. In the fourth quarter of 2016, the Company reviewed its liquidity needs and sources of capital, including evaluating whether it would need the cash available under corporate-owned life insurance policies on two former executives. It was determined that the chances were remote that the Company would need to surrender the policies to satisfy liquidity needs, and, as a result, the Company reversed the $3.1 million deferred tax liability related to the policies.

The foreign component of pretax net earnings was $2.7 million, $1.3 million and $5.0 million for 2016, 2015 and 2014, respectively. As of December 31, 2016, the total amount of unremitted foreign earnings was $7.3 million. A deferred tax liability has not been recorded on these unremitted earnings because the Company intends to permanently reinvest such earnings outside of the U.S. Future dividends, if any, would be paid only out of current year earnings. If the remaining unremitted foreign earnings at December 31, 2016 were to be repatriated in the future, the related deferred tax liability would not have a material impact on the Company’s financial statements.

The components of deferred taxes as of December 31, 2016, and 2015 were as follows:

	2016			2015
	(Dollars in thousands)
Deferred income tax assets:
Accounts receivable reserves	$	341		$	422
Pension liability		11,002			11,931
Accrued liabilities		2,648			2,383
Carryfoward losses		129			—
Foreign currency losses on intercompany loans		53			148
		14,173			14,884
Deferred income tax liabilities:
Inventory and related reserves		(3,744	)		(3,552	)
Cash value of life insurance		(441	)		(3,517	)
Property, plant and equipment		(1,483	)		(1,420	)
Intangible assets		(8,284	)		(7,753	)
Prepaid expenses and other assets		(264	)		(249	)
		(14,216	)		(16,491	)
Net deferred income tax liabilities	$	(43)		$	(1,607	)

The net deferred tax liabilities are classified in the Consolidated Balance Sheets as follows:

	2016			2015
	(Dollars in thousands)
Current deferred income tax liabilities	$	—		$	(1,537	)
Non-current deferred income tax benefits		660			—
Non-current deferred income tax liabilities		(703	)		(70	)
Net deferred income tax liabilities	$	(43)		$	(1,607	)

In 2015, the FASB issued guidance which simplified the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be classified as non-current in a classified statement of financial position. The Company adopted this guidance for the year ended December 31, 2016 on a prospective basis. Prior period balances were not adjusted.

Uncertain Tax Positions

The Company accounts for its uncertain tax positions in accordance with ASC 740, Income Taxes (“ASC 740”). ASC 740 provides that the tax effects from an uncertain tax position can be recognized in the Company’s consolidated financial statements only if the position is more likely than not of being sustained on audit, based on the technical merits of the position.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

	2016			2015		2014
	(Dollars in thousands)
Unrecognized tax benefits balance at January 1,	$	284		$	—	$	124
Increases related to current year tax positions		239			284		—
Decreases related to prior period positions		—			—		(69	)
Decreases due to settlements of tax positions		(248	)		—		(55	)
Unrecognized tax benefits balance at December 31,	$	275		$	284	$	—

The unrecognized tax benefits at December 31, 2016 and 2015, include $70,000 and $108,000, respectively, of interest related to such positions. The unrecognized tax benefits, if ultimately recognized, would reduce the Company’s annual effective tax rate. The liabilities for potential interest are included in the Consolidated Balance Sheets at December 31, 2016 and 2015.

The Company files a U.S. federal income tax return, various U.S. state income tax returns and several foreign returns. In general, the 2014 through 2016 tax years remain subject to examination by those taxing authorities.