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, 2016 and 2015 were as follows (amounts in thousands):



	2016			2015
Deferred tax assets:
Allowance for uncollectible accounts	$	9,735		$	9,048
Accrued employee benefits	5,532			5,260
Stock compensation	1,004			1,068
Accrued self-insurance	2,762			2,517
Acquisition costs	1,781			1,651
Net operating loss carry forward	1,880			983
Intangible asset impairment	38			43
Uncertain tax position—state tax portion	63			215
Uncertain tax position - interest expense	90			254
Other	155			93
Capital loss carryforward	154			—
Valuation allowance	(44		)	(44		)
Deferred tax assets	$	23,150		$	21,088
Deferred tax liabilities:
Amortization of intangible assets	(45,622		)	(35,355		)
Tax depreciation in excess of book depreciation	(8,397		)	(8,201		)
Prepaid expenses	(817		)	(655		)
Non-accrual experience accounting method	(255		)	(606		)
Deferred tax liabilities	(55,091		)	(44,817		)
Net deferred tax liability	$	(31,941	)	$	(23,729	)

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):



	2016		2015		2014
Current:
Federal	$	12,563	$	18,094	$	10,195
State	2,371		3,232		1,916
	14,934		21,326		12,111
Deferred:
Federal	6,223		1,389		2,187
State	1,019		133		215
	7,242		1,522		2,402
Total income tax expense	$	22,176	$	22,848	$	14,513

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:



	2016		2015		2014
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	3.8		3.9		3.5
Nondeductible expenses	2.6		2.5		2.3
Uncertain tax position	(3.3	)	—		—
Credits and other	(0.4	)	—		(0.9	)
Effective tax rate	37.7	%	41.4	%	39.9	%

The Company is subject to both federal tax 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, 2012. Tax year ending December 31, 2011 is still open due to being under current examination.

As of December 31, 2016, $1.3 million was recorded in income tax payable as an unrecognized tax benefit which, if recognized, would decrease the Company’s effective tax rate. All of the Company's unrecognized tax benefit is due to the settlement with the United States of America, which was announced September 30, 2011. On July 31, 2014, the Internal Revenue Service ("IRS") issued a notice of proposed adjustment asserting that a portion of the original tax deduction claimed by the Company associated with the settlement of the United States of America should be disallowed. In December 2016, the Company signed a final settlement offer from the IRS that reduced the unrecognized tax benefit from $3.4 million to $1.3 million. The Company received approval from Joint Committee Review in February 2017 to finalize the settlement. Due to the approval being received subsequent to year-end, the Company will continue to show the amount as an uncertain tax position as of December 31, 2016. A reconciliation of the total amounts of unrecognized tax benefits follows (amounts in thousands):




Total unrecognized tax benefits as of December 31, 2015	$	3,415
Increases (decreases) in unrecognized tax benefits as a result of:
Tax positions taken during the current period	(2,100		)
Total unrecognized tax benefits as of December 31, 2016	$	1,315

The Company recognizes interest and penalties related to uncertain tax positions in interest expense and general and administrative expenses, respectively. During the year ended December 31, 2016, the Company recognized a decrease of $0.4 million in interest expense and associated liability due to the decrease in the overall uncertain tax position. During the years ended December 31, 2015 and 2014, the Company recognized $0.2 million each year in interest expense, and recorded an accrued liability of interest payments related to uncertain tax positions.