Income Taxes

Income tax expense consists of:



	Years Ended December 31,
	2015			2014			2013
	(in thousands)
Current:
Federal	$	11,322		$	(10,569	)	$	9,379
State and local	3,587			3,100			3,134
Foreign	738			174			353
Total current	15,647			(7,295		)	12,866
Deferred
Federal	56,431			63,577			33,842
State and local	5,221			8,804			5,725
Foreign	(8		)	(12		)	7
Total deferred	61,644			72,369			39,574
Total income tax expense	$	77,291		$	65,074		$	52,440

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



	Years Ended December 31,
	2015			2014		2013
	(in thousands)
Computed income tax expense	$	73,760		$	57,612	$	48,768
State and local tax expense	4,207			6,709		5,544
Permanent differences, including domestic production activities deduction	(724		)	523		(626		)
Adjustments for uncertain tax positions	204			206		(166		)
Other, net	(156		)	24		(1,080		)
Total income tax expense	$	77,291		$	65,074	$	52,440

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



	December 31,
	2015			2014
	(in thousands)
Current deferred tax assets
Provisions not currently deductible	$	—		$	7,234
Tax credits and other	—			246
Net operating loss —state	—			208
Total current deferred tax asset	—			7,688
Non-current deferred tax assets
Provisions not currently deductible	8,192			392
Stock based compensation	110			136
Net operating loss carryforwards—federal and state	173			—
Net capital loss carryforwards—federal and state	1,859			1,859
Tax credits and other	519			—
Pensions and post retirement	3,223			3,095
Total non-current deferred tax asset	14,076			5,482
Total deferred tax asset	$	14,076		$	13,170
Non-current deferred tax liabilities
Investment in joint ventures/partnerships	$	(2,056	)	$	(2,269	)
Property, plant and equipment	(234,358		)	(171,562		)
Total deferred tax liability	$	(236,414	)	$	(173,831	)

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



	December 31,
	2015			2014
	(in thousands)
Current deferred tax assets	$	—		$	7,688

Non-current deferred tax assets	14,076			5,482
Non-current deferred tax liability	(236,414		)	(173,831		)
Non-current deferred tax liability, net	(222,338		)	(168,349		)

Current deferred tax asset	—			7,688
Non-current deferred tax liability, net	(222,338		)	(168,349		)
Net deferred tax liability	$	(222,338	)	$	(160,661	)

During the fourth quarter of 2015, the Company early adopted ASU 2015-17, Balance Sheet Classification of Deferred Taxes, on a prospective basis. Therefore, as of December 31, 2015, these deferred tax assets and liabilities are classified as non-current and netted in the consolidated balance sheet as they are attributable to the same tax-paying components of the Company, as well as the same tax jurisdictions. The adoption of ASU 2015-17 did not have an impact on the Company’s consolidated results of operations, net assets, or cash flows. As of December 31, 2014, these deferred tax assets and liabilities were 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 was not related to an asset or liability for financial reporting, including deferred taxes related to carryforwards, was classified according to the expected reversal date of the temporary differences as of December 31, 2014.

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 $2.6 million and $2.8 million as of December 31, 2015 and 2014, 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, 2015 and 2014 foreign tax credits would be available to offset these taxes such that the U.S. tax impact would be insignificant.

As of December 31, 2015, the Company had state net operating loss carryforwards in the amount of $3.7 million, which expire between 2015 and 2034. In 2014, ARI had state net operating loss carryforwards of $4.3 million.

In 2015, the Company continued to carry forward its federal capital losses of $4.8 million. In 2014, the Company had a federal net operating loss of $34.0 million, all of which was carried back to offset prior years' taxable income. The Company carried forward its alternative minimum tax credits of $1.3 million related to the 2014 carryback of the federal net operating loss. The entire balance of these alternative minimum tax credits were utilized in 2015.

As of December 31, 2015, the Company's gross unrecognized tax benefits were $1.7 million, of which $1.2 million, net of federal benefit on state matters, would impact the effective tax rate if reversed. 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.

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



	Years Ended December 31,
	2015			2014		2013
	(in thousands)
Beginning balance	$	1,422		$	1,142	$	1,744
Increases in tax positions for prior years	30			91		53
Increases in tax positions for current year	298			189		103
Settlements and decreases in tax positions	(66		)	—		(716		)
Expirations of statutes	—			—		(42		)
Ending balance	$	1,684		$	1,422	$	1,142

The total amount of interest and penalties included in the tax provision as an income tax expense for the years ended December 31, 2015 and 2014 was $0.1 million each year. The Company believes it is possible that within the next twelve months its unrecognized tax benefits could change up to $1.0 million as a result of the Company's analysis of state tax filing requirements.

The statute of limitation on the Company's 2011 federal income tax return expired in September 2015. The Company's federal income tax returns for tax years 2012 and beyond remain subject to examination, with the latest statute of limitations expiring in September 2019.

Certain of the Company's 2008 through 2011 state income tax returns and all of the Company's state income tax returns for 2012 and beyond remain open and subject to examination, with the latest statute of limitations expiring in December 2020, upon the filing of the 2015 state tax returns. The Company's foreign subsidiary's income tax returns for 2011 and beyond remain open to examination by foreign tax authorities.

The Company implemented the recent regulations concerning amounts paid to acquire, produce, or improve tangible property and recovery of basis upon disposition with the filing of its 2014 tax return. The Company is further evaluating whether any additional future deductions may be deemed appropriate under the regulations. Presently, the Company does not anticipate a material impact to its financial condition or results of operations.