Income Taxes

Components of the provision for income taxes are as follows:



	2017			2016			2015
Current:
Federal - US	$	1,993,000		$	3,408,000		$	4,466,000
Federal - Foreign	613,000			—			405,000
State and local	24,000			2,000			18,000
	2,630,000			3,410,000			4,889,000
Deferred:
Federal	(407,000		)	490,000			1,143,000
Federal- Foreign	52,000			(86,000		)	27,000
State and local	11,000			22,000			59,000
	(344,000		)	426,000			1,229,000
Provision for income taxes	$	2,286,000		$	3,836,000		$	6,118,000

A reconciliation of the income tax provision based on the federal statutory income tax rate to the Company's income tax provision for the years ended December 31 is as follows:



	2017			2016			2015
Provision at federal statutory rate - US	$	2,634,000		$	3,823,000		$	6,177,000
Adjustments for US tax law changes	(185,000		)	—			—
Excess tax benefit — equity transactions	(126,000		)	—			—
Effect of foreign taxes	(58,000		)	34,000			(84,000		)
State and local tax expense	35,000			24,000			76,000
Other	(14,000		)	(45,000		)	(51,000		)
Provision for income taxes	$	2,286,000		$	3,836,000		$	6,118,000

The Tax Cuts and Jobs Act (“the “Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate income tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, creates new taxes on certain foreign sourced earnings, provides for acceleration of business asset expensing, and reduces the amount of executive pay that may qualify as a tax deduction, among other changes. FASB ASC 740 requires the recognition of the effects of tax law changes in the period of enactment. However, due to the complexities of the new tax legislation, the SEC has issued SAB 118 which allows for the recognition of provisional amounts during a measurement period.

The Company’s accounting for the income tax effects of the Act is generally complete. Specifically, the charge recorded related to the re-measurement of our deferred tax balance was a net benefit of $484,000, which we believe to be complete and accurate. The Act's one-time transition tax calculation is complex, and as such our accounting for this item is provisional at this time. We have made a reasonable estimate of the effects of the one-time transition tax, and the provisional amount recorded related to the transition tax, net of estimated foreign tax credits, was a charge of $299,000. A more thorough analysis of the Company’s overall foreign earnings and profits, including expense allocations and foreign tax credit calculations, will be completed to finalize this calculation, which is expected to occur no later than the second quarter of 2018.

During first quarter 2017, the Company adopted Accounting Standards Update 2016-09, Compensation - Stock Compensation. The new standard provided for changes to accounting for stock compensation, including recording excess tax benefits and tax deficiencies related to share based payment awards in income tax expense in the reporting period in which they occurred. Tax benefits and tax deficiencies before this update were recorded in additional paid in capital. Tax benefits and deficiencies for the years ended December 31 2017, 2016 and 2015 were a benefit of $126,000, a deficiency of $16,000 and a benefit of $211,000, respectively.

In October 2016, the Internal Revenue Service entered into a unilateral agreement with the Large Taxpayer Division of Mexico's Servicio de Administracion Tributaria (SAT) to provide for a Fast Track methodology to resolve all pending Advanced Pricing Agreements (APA) for the Maquiladora industry. The Company's Mexican subsidiary filed an APA and qualifies for and has adopted this methodology.

The Company performs an analysis to evaluate the balance of deferred tax assets that will be realized. The analysis is based on the premise that the deferred tax benefits will be realized through the generation of future taxable income. Based on the analysis, the Company has not recorded a valuation allowance on the deferred tax assets as of December 31, 2017 and 2016.

Deferred tax assets consist of the following at December 31:



	2017			2016
Current asset (liability):
Accrued liabilities	$	608,000		$	938,000
Accounts receivable	156,000			110,000
Inventory	371,000			588,000
Other, net	(292,000		)	(255,000		)
Total current asset	843,000			1,381,000

Non-current asset (liability):
Property, plant, and equipment	(3,345,000		)	(5,274,000		)
Post retirement benefits	2,060,000			3,212,000
Other, net	47,000			(311,000		)
Total non-current liability	(1,238,000		)	(2,373,000		)
Total deferred tax liability - net	$	(395,000	)	$	(992,000	)

At December 31, 2017 and 2016 the Company had no liability for unrecognized tax benefits under guidance relating to tax uncertainties. The Company does not anticipate that the unrecognized tax benefits will significantly change within the next twelve months.

The Company files income tax returns in the U.S. federal jurisdiction, Mexico and various state and local jurisdictions. The Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for the years before 2014, and no longer subject to Mexican income tax examinations by Mexican authorities for the years before 2012.