Income Taxes

Income (loss) from continuing operations before tax and equity investment for the three years ended December 31 is as follows:



	Year Ended December 31,
(in thousands)	2014		2013			2012
Domestic	$	39,154	$	27,678		$	21,314
Foreign	148		(182		)	2,547
Total income from continuing operations before tax and equity investment	$	39,302	$	27,496		$	23,861

The (benefit from) provision for income taxes for the three years ended December 31 is as follows:



		Year Ended December 31,
(in thousands)		2014			2013			2012
Current
	Federal	$	(413	)	$	146		$	102
	State	2,164			1,677			1,834
	Foreign	877			572			661
	Total income taxes, current	$	2,628		$	2,395		$	2,597
Deferred
	Federal	$	14,110		$	9,168		$	5,951
	State	495			1,041			981
	Foreign	(225		)	(443		)	108
	Total income taxes, deferred	$	14,380		$	9,766		$	7,040
Total income tax provision		$	17,008		$	12,161		$	9,637

Deferred income taxes result from temporary differences in the financial basis and tax basis of assets and liabilities. The amounts shown on the following table represent the tax effect of temporary differences between the Company's consolidated tax return basis of assets and liabilities and the corresponding basis for financial reporting, as well as tax credit and net operating loss carryforwards.



(in thousands)	December 31,
Deferred Income Tax Sources	2014			2013
Current Deferred Income Tax Items:
Inventories	$	2,247		$	2,426
Environmental costs	913			1,220
Net operating loss carryforwards	20,556			13,323
Accrued liabilities	2,984			3,046
Other items, net	489			913
Current deferred income tax assets before valuation allowance	27,189			20,928
Valuation allowance	(470		)	(421		)
Deferred income tax assets - current	$	26,719		$	20,507
Foreign	$	(186	)	$	(433	)
Deferred income tax liabilities - current	$	(186	)	$	(433	)

Non-Current Deferred Income Tax Items:
Post-retirement and post-employment employee benefits	$	1,015		$	904
Net operating loss carryforwards	11,334			27,198
Pension liability	78,835			53,624
Impairment of long-lived assets	529			2,636
Minimum tax credit carryforwards	3,736			3,265
Miscellaneous other	1,146			1,953
Non-current deferred income tax assets before valuation allowance	96,595			89,580
Valuation allowance	(1,669		)	(1,729		)
Non-current deferred income tax assets	94,926			87,851
Property, plant and equipment	(13,708		)	(13,558		)
Intangible assets	(9,161		)	(9,378		)
Undistributed foreign earnings	(902		)	(568		)
Other items, net	555			(4,661		)
Non-current deferred income tax liabilities	(23,216		)	(28,165		)
Net non-current deferred income tax assets	$	71,710		$	59,686

Included in deferred income tax assets as of December 31, 2014 is a $28.8 million tax effect of the Company's U.S. federal NOLs of $82.4 million, as well as certain state NOLs. The U.S. federal NOLs expire between 2026 and 2029. Also included in deferred income tax assets are tax credit carryforwards of $3.7 million. The Company's 2014 tax provisions from continuing and discontinued operations reflect utilization of approximately $23.8 million of U.S. federal NOLs.

In 2005, the Company experienced an ownership change as defined by Section 382 of the Internal Revenue Code upon its emergence from bankruptcy. Section 382 imposes annual limitations on the utilization of net operating carryforwards post-ownership change. The Company believes it qualifies for the bankruptcy exception to the general Section 382 limitations. Under this exception, the annual limitation imposed by Section 382 resulting from an ownership change will not apply; instead the NOLs must be reduced by certain interest expense paid to creditors who became stockholders as a result of the bankruptcy reorganization. Thus, the Company's U.S. federal NOLs of $82.4 million as of December 31, 2014 include a reduction of $31.0 million ($10.8 million tax-effect).

The Company provides for income taxes on the undistributed earnings of non-U.S. corporate subsidiaries, except to the extent that such earnings are permanently invested outside the United States. As of December 31, 2014, $5.4 million of accumulated undistributed earnings of non-U.S. corporate subsidiaries were permanently invested. At existing U.S. and state statutory income tax rates, additional taxes of approximately $2.1 million would need to be provided if such earnings were remitted.

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income as follows:



	Year Ended December 31,
(in thousands)	2014			2013			2012
Income from continuing operations before tax and equity investment	$	39,302		$	27,496		$	23,861
Tax provision at statutory rate	$	13,755		$	9,624		$	8,351
Increase (decrease) in tax due to:
State income tax, net of federal effect	1,991			2,131			2,173
Net (decrease) increase in valuation allowance	(12		)	12			(454		)
(Decrease) increase in liability for uncertain tax positions	(70		)	(679		)	8
Foreign tax differential, principally foreign losses for which tax benefit is not available	600			192			(123		)
Other items, net	744			881			(318		)
Tax provision	$	17,008		$	12,161		$	9,637

U.S. GAAP provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is more likely than not of being sustained on audit, based on the technical merits of the position. At both December 31, 2014 and 2013, the Company had approximately $1.3 million of unrecognized state tax benefits recorded, all of which, net of federal benefit, would affect the Company's effective tax rate if recognized. The changes in the amount of unrecognized tax benefits in 2014 and 2013 were as follows:



	Year Ended December 31,
(in thousands)	2014			2013
Beginning balance	$	1,344		$	2,273
Additions for tax positions related to current year	144			404
Additions due to interest accrued	61			80
Tax positions of prior years:
Payments	—			(250		)
Settlements	—			(640		)
Due to lapsed statutes of limitations	(275		)	(488		)
Other	—			(35		)
Ending balance	$	1,274		$	1,344

The Company recognizes interest and penalties related to uncertain tax positions in its income tax provision. At both December 31, 2014 and 2013, approximately $0.1 million of interest related to uncertain tax positions was accrued. No penalties were accrued. It is reasonably possible that the total amount of unrecognized tax benefits will decrease by as much as $0.3 million during the next twelve months as a result of the lapse of the applicable statutes of limitations in certain taxing jurisdictions. Adjustments to the reserve could occur in light of changing facts and circumstances with respect to the on-going examinations discussed below.

The Company is generally no longer subject to federal, state or local income tax examinations by tax authorities for any year prior to 2011, except as set forth below. However, NOLs generated in prior years are subject to examination and potential adjustment by the Internal Revenue Service ("IRS") upon their utilization in future years' tax returns.

An IRS examination of our federal consolidated income tax return for 2010 was settled during 2013 with minor adjustments. In 2014, the IRS completed a limited review of our 2012 federal consolidated income tax return, accepting the return as filed. In addition, certain subsidiaries were examined by the Commonwealth of Massachusetts ("Commonwealth") for the years 2003 to 2005, and the Company settled that examination during 2013 for $0.3 million. The Commonwealth also examined the 2008 tax return and issued an assessment for $0.3 million which the Company continues to dispute, exercising all rights under the stipulated appeals process. Examinations of 2009 and 2010 are also being conducted by the Commonwealth, as well as examinations by the State of New York for 2009 to 2011. These examinations are currently in progress, and we do not believe an increase in the reserve for uncertain tax positions is necessary.