Income Taxes

Income tax expense consists of:



	Years Ended December 31,
	2014			2013		2012
	(in thousands)
Current:
Federal	$	(10,569	)	$	9,379	$	1,217
State and local	3,100			3,134		3,551
Foreign	174			353		137
Total current	(7,295		)	12,866		4,905
Deferred
Federal	63,577			33,842		32,458
State and local	8,804			5,725		4,643
Foreign	(12		)	7		16
Total deferred	72,369			39,574		37,117
Total income tax expense	$	65,074		$	52,440	$	42,022

The reconciliation of income taxes computed at the United States federal statutory tax rate to income tax expense is:



	Years Ended December 31,
	2014		2013			2012
	(in thousands)
Computed income tax expense	$	57,612	$	48,768		$	37,046
State and local tax expense	6,709		5,544			4,351
Excludable loss from foreign joint venture	—		—			366
Non-deductible items	523		(626		)	127
Adjustments for uncertain tax positions	206		(166		)	(14		)
Other, net	24		(1,080		)	146
Total income tax expense	$	65,074	$	52,440		$	42,022

The tax effects of temporary differences that have given rise to deferred tax assets and liabilities are presented below:



	December 31,
	2014			2013
	(in thousands)
Current deferred tax assets
Provisions not currently deductible	$	7,234		$	8,962
Tax credits and deferred revenues	246			74
Net operating loss —state	208			24
Total current deferred tax asset	7,688			9,060
Non-current deferred tax assets
Provisions not currently deductible	392			308
Stock based compensation	136			270
Net operating loss carryforwards—federal and state	—			189
Net capital loss carryforwards—federal and state	1,859			1,988
Pensions and post retirement	3,095			1,603
Total non-current deferred tax asset	5,482			4,358
Total deferred tax asset	$	13,170		$	13,418
Non-current deferred tax liabilities
Investment in joint ventures/partnerships	$	(2,269	)	$	(2,294	)
Property, plant and equipment	(171,562		)	(101,276		)
Total deferred tax liability	$	(173,831	)	$	(103,570	)

The net deferred tax asset (liability) is classified in the consolidated balance sheets as follows:



	December 31,
	2014			2013
	(in thousands)
Current deferred tax assets	$	7,688		$	9,060

Non-current deferred tax assets	5,482			4,358
Non-current deferred tax liability	(173,831		)	(103,570		)
Non-current deferred tax liability, net	(168,349		)	(99,212		)

Current deferred tax asset	7,688			9,060
Non-current deferred tax liability, net	(168,349		)	(99,212		)
Net deferred tax liability	$	(160,661	)	$	(90,152	)

In the consolidated balance sheets, these deferred tax assets and liabilities are classified as either current or non-current based on the classification of the related asset or liability for financial reporting. A deferred tax asset or liability that is not related to an asset or liability for financial reporting, including deferred taxes related to carryforwards, is classified according to the expected reversal date of the temporary differences as of the end of the year.

ARI considers its Canadian earnings to be permanently reinvested, and therefore has not recorded a provision for U.S. income tax or foreign withholding taxes on the cumulative undistributed earnings of its Canadian subsidiary. Such undistributed earnings from ARI's Canadian subsidiary have been included in consolidated retained earnings in the amount of $2.8 million and $3.4 million as of December 31, 2014 and 2013, respectively. If ARI were to change its intentions and such earnings were remitted to the U.S., these earnings would be subject to U.S. income taxes. However, as of December 31, 2014 and 2013 foreign tax credits would be available to offset these taxes such that the U.S. tax impact would be insignificant.

As of December 31, 2014, the Company had state net operating loss carry-forwards in the amount of $4.3 million, which expire between 2015 and 2034. In 2013, ARI had state net operating loss carryforwards of $3.6 million.

In 2014, the Company had a federal net operating loss of $32.0 million, all of which will be carried back to offset prior years' taxable income. The Company will carry forward its alternative minimum tax credits of $0.1 million related to the carryback of the federal net operating loss. In 2013, the Company had federal capital losses of $6.7 million, of which $1.9 million was carried back to offset capital gains in a prior year's taxable income.

As of December 31, 2014, the Company's gross unrecognized tax benefits were $1.4 million, of which $1.0 million, net of federal benefit on state matters, would impact the effective tax rate if reversed. As of December 31, 2013, the Company's gross unrecognized tax benefits were $1.1 million, of which $0.8 million, net of federal benefit on state matters, would impact the effective tax rate if reversed.

The aggregate changes in the balance of unrecognized tax benefits were as follows:



	Years Ended December 31,
	2014		2013			2012
	(in thousands)
Beginning balance	$	1,142	$	1,744		$	1,813
Increases in tax positions for prior years	91		53			34
Increases in tax positions for current year	189		103			611
Settlements	—		(716		)	(704		)
Expirations of statutes	—		(42		)	(10		)
Ending balance	$	1,422	$	1,142		$	1,744

The total amount of interest and penalties included in the tax provision as an income tax expense (benefit) for the years ended December 31, 2014 and 2013 was $0.1 million and $(0.2) million, respectively. The Company believes it is possible that within the next twelve months its unrecognized tax benefits could change up to $0.9 million as a result of the Company's analysis of state tax filing requirements.

The statute of limitation on the Company's 2009 and 2010 federal income tax return expired in September 2014. The Company's federal income tax returns for tax years 2011 and beyond remain subject to examination, with the latest statute of limitations expiring in September 2018.

Certain of the Company's 2008 through 2010 state income tax returns and all of the Company's state income tax returns for 2011 and beyond remain open and subject to examination, with the latest statute of limitations expiring in December 2018. The Company's foreign subsidiary's income tax returns for 2010 and beyond remain open to examination by foreign tax authorities.

The Company is continuing to evaluate the impact of the recent regulations concerning amounts paid to acquire, produce, or improve tangible property and recovery of basis upon disposition. Presently, the Company does not anticipate a material impact to its financial condition or results of operations.