Income Taxes

Income before income taxes and income taxes (benefit) are comprised of the following:



(Thousands)	2014			2013			2012
Income before income taxes:
Domestic	$	39,789		$	16,528		$	23,379
Foreign	14,381			7,267			10,263
Total income before income taxes	$	54,170		$	23,795		$	33,642
Income taxes:
Current income taxes:
Domestic	$	14,487		$	4,325		$	7,825
Foreign	3,457			2,205			3,615
Total current	$	17,944		$	6,530		$	11,440
Deferred income taxes (benefit):
Domestic	$	(4,604	)	$	(2,958	)	$	(3,084	)
Foreign	(553		)	319			(44		)
Valuation allowance	(338		)	197			666
Total deferred	$	(5,495	)	$	(2,442	)	$	(2,462	)
Total income taxes	$	12,449		$	4,088		$	8,978

The reconciliation of the federal statutory and effective income tax rates follows:



	2014		2013		2012
Federal statutory rate	35.0	%	35.0	%	35.0	%
State and local income taxes, net of federal tax effect	0.8		(0.8	)	(0.3	)
Effect of excess of percentage depletion over cost depletion	(5.1	)	(11.8	)	(7.3	)
Manufacturing production deduction	(2.5	)	(2.4	)	(2.2	)
Officers’ compensation	0.2		0.4		1.1
Adjustment to unrecognized tax benefits	0.3		0.3		(0.6	)
Foreign rate differential	(3.2	)	(3.1	)	(3.1	)
Research and experimentation tax credit	(1.3	)	(7.4	)	—
Retiree medical expense	—		—		(2.0	)
Valuation allowance	(0.6	)	2.2		4.0
Other items	(0.6	)	4.8		2.1
Effective tax rate	23.0	%	17.2	%	26.7	%

Included in domestic income taxes, as shown in the Consolidated Statements of Income, are $0.6 million, $(0.2) million, and $(0.1) million of state and local income taxes in 2014, 2013, and 2012, respectively.

The Company had domestic and foreign income tax payments of $13.1 million, $8.2 million, and $13.2 million in 2014, 2013, and 2012, respectively.

Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting bases and the tax bases of assets and liabilities. Deferred tax assets and (liabilities) recorded in the Consolidated Balance Sheets consist of the following:



	December 31,
(Thousands)	2014			2013
Asset (liability)
Post-employment benefits other than pensions	$	5,543		$	10,989
Other reserves	17,764			13,744
Environmental reserves	1,808			1,789
Inventory	4,808			3,934
Pensions	24,158			9,867
Net operating loss and credit carryforwards	5,714			5,588
Miscellaneous	345			303
Subtotal	60,140			46,214
Valuation allowance	(4,444		)	(4,782		)
Total deferred tax assets	55,696			41,432
Depreciation	(16,226		)	(18,669		)
Amortization	(7,001		)	(7,371		)
Capitalized interest expense	(141		)	(184		)
Mine development	(571		)	(2,309		)
Derivative instruments and hedging activities	(1,250		)	(130		)
Total deferred tax liabilities	(25,189		)	(28,663		)
Net deferred tax asset	$	30,507		$	12,769

The Company had deferred income tax assets offset with a valuation allowance for state and foreign net operating losses and state investment tax credit carryforwards. The Company intends to maintain a valuation allowance on these deferred tax assets until a realization event occurs to support reversal of all or a portion of the allowance.

At December 31, 2014, for income tax purposes, the Company had foreign net operating loss carryforwards of $6.5 million that do not expire, and $6.3 million that expire in calendar years 2015 through 2023. The Company had state net operating loss carryforwards of $19.6 million that expire in calendar years 2017 through 2033. The Company had state tax credits of $2.6 million that expire in calendar years 2015 through 2028.

The Company files income tax returns in the U.S. federal jurisdiction, and in various state, local, and foreign jurisdictions. With limited exceptions, the Company is no longer subject to U.S. federal examinations for years before 2010, state and local examinations for years before 2010, and foreign examinations for tax years before 2008. The Company is not presently under examination for its income tax filings.

A reconciliation of the Company’s unrecognized tax benefits for the year-to-date periods ending December 31, 2014 and 2013 is as follows:



(Thousands)	2014			2013
Balance as of January 1	$	1,679		$	1,767
Additions to tax provisions related to the current year	12			—
Additions to tax positions related to prior years	483			484
Reduction to tax positions related to prior years	—			(17		)
Lapses on statutes of limitations	(384		)	(555		)
Balance as of December 31	$	1,790		$	1,679

At December 31, 2014, the Company had $1.8 million of unrecognized tax benefits, of which $1.0 million would affect the Company’s effective tax rate if recognized.

The Company classifies all interest and penalties as income tax expense. The amount of interest and penalties, net of related federal tax benefit, recognized in earnings was immaterial during 2014, 2013, and 2012. As of December 31, 2014 and 2013, accrued interest and penalties, net of related federal tax benefit, were immaterial.

A provision has not been made with respect to $53.2 million of unremitted earnings at December 31, 2014 because such earnings may be considered to be reinvested indefinitely. It is not practical to estimate the amount of unrecognized deferred tax liability for undistributed foreign earnings.