10. Income Taxes

Income before taxes is as follows:



	2013		2012		2011
Income before taxes
United States	$	96,915	$	81,482	$	65,271
Foreign		3,766		4,458		3,429
Total income before taxes	$	100,681	$	85,940	$	68,700

The components of income tax expense consist of the following:



	2013		2012		2011
United States
Current payable
Federal	$	30,200	$	25,535	$	20,741
State		4,952		4,494		3,696
Deferred
Federal		1,652		1,308		628
State		253		220		120
Total U.S. tax expense		37,057		31,557		25,185
International
Current payable		1,275		1,252		1,109
Deferred		(500)		(346)		(174)
Total international tax expense		775		906		935
Total income tax expense	$	37,832	$	32,463	$	26,120

Our deferred tax assets and liabilities consist of the following at September 30:



	2013		2012
Deferred tax assets:
Allowance for doubtful accounts	$	866	$	958
Inventories		658		521
Lease expense		544		394
Employee benefits		334		439
Acquisition-related costs		444		-
Other		164		368
Total deferred tax assets		3,010		2,680
Deferred tax liabilities:
Investments		(786)		-
Property and equipment		(8,876)		(7,684)
Prepaid expenses		(227)		(395)
Other		(115)		(201)
Total deferred tax liabilities		(10,004)		(8,280)
Net deferred liabilities	$	(6,994)	$	(5,600)

Other deferred tax assets totaling $711 and $770 as of September 30, 2013 and 2012, respectively, arising from the Company’s foreign subsidiary, are subject to full valuation allowance.

Income tax expense differed from income taxes at the U.S. federal statutory tax rate for all periods presented as follows:



	2013	2012	2011
Taxes computed at statutory rate	35.0%	35.0%	35.0%
State income taxes (net of federal income tax benefit)	3.4	3.6	3.7
Foreign	(0.9)	(1.1)	(0.9)
Other	0.1	0.3	0.2
	37.6%	37.8%	38.0%

In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. As of September 30, 2013, the Company has not made a provision for U.S. income or additional foreign withholding taxes on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. It is not practicable to estimate the amount of deferred tax liability related to investments in foreign subsidiaries because of the complexities of the hypothetical calculation.

A reconciliation of the unrecognized tax benefits is as follows:



	2013		2012		2011
Unrecognized tax benefits – Beginning of year	$	-	$	23	$	198
Gross increases related to prior period tax positions		-		-		-
Gross decreases related to prior period tax positions		-		(8)		(175)
Gross increases related to current period tax positions		-		-		-
Settlements		-		(15)		-
Unrecognized tax benefits – End of year	$	-	$	-	$	23

For the fiscal years ended September 30, 2013, 2012 and 2011, the amount included in our income tax expense for tax-related interest and penalties was not significant. Of the $23 unrecognized tax benefits as of September 30, 2011, $15 would have impacted our effective rate, if recognized. We expect no material changes to our unrecognized tax benefits during the next fiscal year. Our policy for classifying interest and penalties associated with unrecognized tax benefits is to include such items in income tax expense.

We filed Form 3115 Application of Change in Accounting Method with the Internal Revenue Service (“IRS”) during the fiscal year ended September 30, 2008. We filed an advance consent request for a non-automatic account method change for tax purposes for which we received approval during fiscal year 2011. Resolution decreased the liability for unrecognized tax benefits by approximately $175.

We completed an examination by the IRS for the fiscal years ended September 30, 2010 and 2009. With few exceptions, we are no longer subject to income tax examination for years before 2008 in the U.S. and 2008 in significant state and local jurisdictions. We are no longer subject to income tax examinations for years before 2011 in significant foreign jurisdictions.