5. Income Taxes

The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred taxes are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax laws that will be in effect when the differences are expected to reverse.

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2014 and 2013 were as follows (amounts in thousands):



	2014			2013
Deferred tax assets:
Allowance for uncollectible accounts	$	6,397		$	5,127
Accrued employee benefits	4,195			3,420
Stock compensation	1,228			1,503
Accrued self-insurance	2,526			2,257
Acquisition costs	1,510			1,155
Net operating loss carry forward	927			873
Intangible asset impairment	49			55
Uncertain tax position—state tax portion	215			215
Uncertain tax position - interest expense	186			—
Other	121			61
Valuation allowance	(44		)	(44		)
Deferred tax assets	$	17,310		$	14,622
Deferred tax liabilities:
Amortization of intangible assets	(29,370		)	(25,202		)
Tax depreciation in excess of book depreciation	(7,994		)	(7,171		)
Prepaid expenses	(697		)	(786		)
Non-accrual experience accounting method	(1,459		)	(1,223		)
Deferred state tax receivable	—			(49		)
Deferred tax liabilities	(39,520		)	(34,431		)
Net deferred tax liability	$	(22,210	)	$	(19,809	)

Based on the Company’s historical pattern of taxable income, the Company believes it will produce sufficient income in the future to realize its deferred income tax assets. Management provides a valuation allowance for any net deferred tax assets when it is more likely than not that a portion of such net deferred tax assets will not be recovered.

The components of the Company’s income tax expense from continuing operations, less noncontrolling interest, were as follows (amounts in thousands):



	2014		2013		2012
Current:
Federal	$	10,195	$	11,962	$	12,930
State	1,916		1,546		2,377
	12,111		13,508		15,307
Deferred:
Federal	2,187		1,448		1,955
State	215		903		249
	2,402		2,351		2,204
Total income tax expense (benefit)	$	14,513	$	15,859	$	17,511

A reconciliation of the difference between the federal statutory tax rate and the Company's effective tax rate for income taxes for each period is as follows:



	2014		2013		2012
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	3.5		3.5		3.5
Nondeductible expenses	2.3		3.1		2.2
Credits and other	(0.9	)	—		(1.7	)
Effective tax rate	39.9	%	41.6	%	39.0	%

A reconciliation of the differences between income tax expense on net income attributable to LHC Group, Inc., computed at the federal statutory rate and provisions for income taxes for each period is as follows (amounts in thousands):



	2014			2013			2012
Income taxes computed at federal statutory tax rate	$	12,723		$	13,360		$	15,733
State income taxes, net of federal benefit	1,407			1,641			1,739
Nondeductible expenses	766			1,022			844
Other items	(99		)	101			40
Income tax credits	(284		)	(265		)	(845		)
Total income tax expense (benefit)	$	14,513		$	15,859		$	17,511

The Company is subject to both federal and state income tax for jurisdictions within which it operates. Within these jurisdictions, the Company is open to examination for tax years ended after December 31, 2011.

As of December 31, 2014, $3.4 million was recorded in income tax payable as an unrecognized tax benefit which, if recognized, would decrease the Company’s effective tax rate. A reconciliation of the total amounts of unrecognized tax benefits follows (amounts in thousands):




Total unrecognized tax benefits as of December 31, 2013	$	3,415
Increases (decreases) in unrecognized tax benefits as a result of:
Tax positions taken during the current period	—
Total unrecognized tax benefits as of December 31, 2014	$	3,415

The Company recognizes interest and penalties related to uncertain tax positions in interest expense and general and administrative expenses, respectively. During the years ended December 31, 2014, 2013 and 2012, the Company recognized $0.2 million , $0.2 million and $0.1 million in interest expense, respectively, and recorded an accrued liability of interest payments related to uncertain tax positions.