ACCOUNTING FOR INCOME TAXES

Income tax expense consisted of the following for the years ended December 31 (dollars in thousands):



	2016			2015		2014
Current income tax expense (benefit)	$	(46,457	)	$	12,212	$	(67,059	)
Deferred income tax expense	124,543			55,237		139,299
Total income tax expense	$	78,086		$	67,449	$	72,240

State income taxes do not represent a significant portion of total income tax expense on the Consolidated Statements of Income for any periods presented.

A reconciliation of federal income taxes derived from statutory federal tax rates (35 percent in 2016, 2015 and 2014) applied to income before income taxes as set forth in the accompanying Consolidated Statements of Income is as follows for the years ended December 31 (dollars in thousands):



	2016					2015					2014
Federal income taxes at statutory rates	$	75,391		35.0	%	$	64,967		35.0	%	$	67,237		35.0	%
Increase (decrease) in tax resulting from:
Tax effect of regulatory treatment of utility plant differences	3,297			1.5		4,358			2.3		4,008			2.1
State income tax expense	1,316			0.6		1,012			0.5		506			0.2
Settlement of prior year tax returns and adjustment of tax reserves	13			—		(992		)	(0.5	)	1,104			0.6
Manufacturing deduction	—			—		(1,198		)	(0.6	)	(169		)	(0.1	)
Settlement of equity awards	(1,597		)	(0.7	)	—			—		—			—
Other	(334		)	(0.1	)	(698		)	(0.4	)	(446		)	(0.2	)
Total income tax expense	$	78,086		36.3	%	$	67,449		36.3	%	$	72,240		37.6	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and tax credit carryforwards. The total net deferred income tax liability consisted of the following as of December 31 (dollars in thousands):



	2016			2015
Deferred income tax assets:
Unfunded benefit obligation	$	80,230		$	75,716
Derivatives	31,872			47,009
Regulatory deferred tax credits	15,192			—
Tax credits	27,931			15,011
Power and natural gas deferrals	19,415			12,866
Deferred compensation	11,141			10,354
Other	29,512			29,471
Total gross deferred income tax assets	215,293			190,427
Valuation allowances for deferred tax assets	(7,946		)	(2,862		)
Total deferred income tax assets after valuation allowances	207,347			187,565
Deferred income tax liabilities:
Differences between book and tax basis of utility plant	812,916			723,661
Regulatory asset on utility, property plant and equipment	37,301			36,917
Regulatory asset for pensions and other postretirement benefits	84,040			82,253
Utility energy commodity derivatives	31,871			47,010
Long-term debt and borrowing costs	31,955			14,027
Settlement with Coeur d’Alene Tribe	11,711			12,084
Other regulatory assets	30,183			11,691
Other	8,298			7,399
Total deferred income tax liabilities	1,048,275			935,042
Net long-term deferred income tax liability	$	840,928		$	747,477

The realization of deferred income tax assets is dependent upon the ability to generate taxable income in future periods. The Company evaluated available evidence supporting the realization of its deferred income tax assets and determined it is more likely than not that deferred income tax assets will be realized.

As of December 31, 2016, the Company had $17.1 million of state tax credit carryforwards of which it is expected $7.9 million may expire unused; the Company has reflected the net amount of $9.2 million as an asset at December 31, 2016. State tax credits expire from 2019 to 2028.

The Company and its eligible subsidiaries file consolidated federal income tax returns. The Company also files state income tax returns in certain jurisdictions, including Idaho, Oregon and Montana. Subsidiaries are charged or credited with the tax effects of their operations on a stand-alone basis. The Internal Revenue Service (IRS) has completed its examination of all tax years through 2011 and all issues were resolved related to these years. The statute of limitations for the IRS to review the 2012 tax year has expired, leaving the 2013 through 2015 tax years still open for review. The Company believes that any open tax years for federal or state income taxes will not result in adjustments that would be significant to the consolidated financial statements.

The Company had net regulatory assets related to the probable recovery of certain deferred income tax liabilities from customers through future rates as of December 31 (dollars in thousands):



	2016		2015
Regulatory assets for deferred income taxes	$	109,853	$	101,240
Regulatory liabilities for deferred income taxes	28,966		17,609