14. INCOME TAXES

Income tax expense attributable to continuing operations for the years ended December 31, 2017, 2016, and 2015 consisted of the following (in thousands):


	2017		2016		2015
Current
Federal	$	12,448	$	11,605	$	9,814
State		780		511		396
Total current		13,228		12,116		10,210

Deferred
Federal		(667)		(3,078)		(125)
State		(63)		253		39
Foreign		107		(4)		(20)
Total deferred		(623)		(2,829)		(106)

Provision for income taxes on continuing operations	$	12,605	$	9,287	$	10,104

The total provision for income taxes for the years ended December 31, 2017, 2016, and 2015 was $12.7 million, $9.0 million, $9.9 million, respectively. Those amounts have been allocated to the following financial statement items:


	2017		2016		2015

Income from continuing operations	$	12,605	$	9,287	$	10,104
Income from discontinued operations		-		-		387
Stockholders' equity, unrealized (gains) losses on
investment securities & foreign currency		52		(74)		(357)
Additional paid in capital, share-based compensation tax benefit		-		(230)		(247)
Total provision for income taxes	$	12,657	$	8,983	$	9,887

Significant components of the Company’s deferred tax assets (liabilities) consisted of the following: (in thousands):


	December 31, 2017		December 31, 2016

Reserves on inventory and sales	$	233	$	446
Credit and loss carryforwards		494		527
Stock compensation		952		1,333
Accrued expenses and deferred costs		642		638
Inventory capitalization		229		252
Unrealized gain on investments		74		160
Total deferred tax assets		2,624		3,356

Prepaid expenses		(667)		(659)
Depreciation		(2,165)		(3,453)
Foreign currency		-		(23)
Total deferred tax liabilities		(2,832)		(4,135)

Net deferred tax liabilities	$	(208)	$	(779)

The reconciliation of the United States federal statutory tax provision to the Company's provision for income taxes on continuing operations for the years ended December 31, 2017, 2016, and 2015 (in thousands, except percentages):


	2017			2016			2015
Statutory federal tax	$	14,114	35.0%	$	9,493	35.0%	$	10,381	35.0%
State income taxes, net of federal benefit		446	1.1%		797	2.9%		414	1.4%
Foreign taxes		(77)	-0.2%		3	0.0%		15	0.1%
Domestic manufacturer deduction		(870)	-2.2%		(920)	-3.4%		(824)	-2.8%
Share-based compensation		(1,191)	-3.0%		-	0.0%		-	0.0%
Other permanent differences		147	0.4%		41	0.2%		4	0.0%
Research and development and jobs credits		-	0.0%		(163)	-0.6%		(247)	-0.8%
Effect of Federal tax law change		(222)	-0.6%		-	0.0%		-	0.0%
Other state income tax benefits		-	0.0%		-	0.0%		114	0.4%
Other		258	0.8%		36	0.1%		247	0.8%
Provision for income taxes on continuing operations	$	12,605	31.3%	$	9,287	34.2%	$	10,104	34.1%

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Act”). The Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Act reduces the corporate federal tax rate from a maximum of 35% to a flat 21% rate. The rate reduction took effect on January 1, 2018. As a result of the reduction in the corporate income tax rate from 35% to 21% under the Act, the Company revalued its net deferred tax liability resulting in a reduction of approximately $426 thousand, which had been recorded as a reduction of income tax expense in the Company’s consolidated statements of income for the year ended December 31, 2017. The impact to the Company’s earnings per common share was an increase of approximately $0.04 per share. The Company’s revaluation of its deferred tax liability is subject to further clarification of the Act.

In addition, the 2017 effective tax rate was impacted by the excess tax benefit from share-based compensation activity which is reflected as a reduction of the provision for income taxes, where as they were previously recognized in equity. In 2017, the effective tax rate was not impacted by the Company’s new state jobs credits and research & development credits.

In 2016 and 2015 effective tax rates were impacted by the Company’s extensive state income tax planning. This planning includes taking advantage of Maryland’s apportionment methodology. As a manufacturing entity based in Maryland, the Company utilizes the single sales factor apportionment method in addition to claiming new state jobs credits and research & development credits. The Company has separate company state net operating loss carry forwards totaling $22.0 million that start expiring in 2029.