Income Taxes

Income tax expense consists of:



	For the Year
	2014			2013			2012
	(In thousands)
Current tax provision:
U.S. Federal	$	(5,444	)	$	(6,004	)	$	(11,834	)
State and other	(1,569		)	(2,066		)	(2,171		)
	(7,013		)	(8,070		)	(14,005		)
Deferred tax provision:
U.S. Federal	(2,772		)	1,148			4,910
State and other	1,128			(286		)	1,079
	(1,644		)	862			5,989
Income tax expense	$	(8,657	)	$	(7,208	)	$	(8,016	)

A reconciliation of the federal statutory rate to the effective income tax rate on continuing operations follows:



	For the Year
	2014		2013		2012
Federal statutory rate	35	%	35	%	35	%
State, net of federal benefit	1		4		5
Recognition of previously unrecognized tax benefits	—		(15	)	—
State rate change due to acquisition	—		—		(2	)
Acquisition costs	—		—		4
Noncontrolling interests	—		(5	)	(7	)
Goodwill	1		—		—
Charitable contributions	(1	)	—		—
Oil and gas percentage depletion	(2	)	(2	)	(5	)
Other	—		—		1
Effective tax rate	34	%	17	%	31	%

Our 2013 effective tax rate includes a 15 percent benefit from recognition of $6,326,000 of previously unrecognized tax benefits upon lapse of the statute of limitations for a previously reserved tax position. Our 2012 effective tax rate includes a two percent non-cash benefit associated with state deferred tax rate changes due to our acquisition of Credo and operating in additional states.

Significant components of deferred taxes are:



	At Year-End
	2014			2013
	(In thousands)
Deferred Tax Assets:
Real estate	$	79,244		$	75,157
Employee benefits	17,352			17,902
Net operating loss carryforwards	3,012			3,076
Income producing properties	364			3,529
Oil and gas percentage depletion carryforwards	3,471			3,344
Accruals not deductible until paid	1,111			960
Gross deferred tax assets	104,554			103,968
Valuation allowance	(384		)	(375		)
Deferred tax asset net of valuation allowance	104,170			103,593
Deferred Tax Liabilities:
Oil and gas properties	(49,905		)	(46,966		)
Undeveloped land	(4,937		)	(5,961		)
Convertible debt	(7,816		)	(8,803		)
Timber	(888		)	(1,465		)
Gross deferred tax liabilities	(63,546		)	(63,195		)
Net Deferred Tax Asset	$	40,624		$	40,398

At year-end 2014, we had federal net operating loss carryforwards of approximately $7,500,000 as a result of our acquisition of Credo in 2012, and we had approximately $18,000,000 of state net operating loss carryforwards. These are subject to certain limitations. If not utilized, these carryforwards will expire in 2031 for federal purposes and 2015 to 2034 for state purposes. We had approximately $9,200,000 of oil and gas percentage depletion carryforwards that also were a result of our acquisition of Credo. These carryforwards are subject to certain limitations but do not expire.

At year-end 2014 and 2013, we have not provided a valuation allowance for our federal deferred tax asset because we believe it is likely it will be recoverable in future periods. We have provided a valuation allowance for some of our state net operating loss carryforwards. The change in our state valuation allowance for the year was $9,000. Our deferred tax liability on oil and gas properties includes purchase accounting amounts for the excess of fair value allocated to Credo oil and gas properties over the carryover tax basis received. Goodwill associated with our acquisition of Credo is not deductible for income tax purposes.

We file income tax returns in the U.S. federal jurisdiction and in various state jurisdictions. We are no longer subject to U.S. federal income tax examinations for years before 2011 and state examinations for years before 2010.

A reconciliation of the beginning and ending amount of tax benefits not recognized for book purposes is as follows:



	At Year-End
	2014		2013			2012
	(In thousands)
Balance at beginning of year	$	—	$	5,831		$	5,831
Reductions for tax positions of prior years	—		—			—
Reductions due to lapse of statute of limitations	—		(5,831		)	—
Balance at end of year that would affect the annual effective tax rate if recognized	$	—	$	—		$	5,831

We recognize interest accrued related to unrecognized tax benefits in income tax expense. In 2014, 2013 and 2012, we recognized approximately $0, $75,000 and $152,000 in interest expense. At year-end 2014 and 2013, we have no accrued interest or penalties.