(10) Income Taxes

For the years ended December 31, 2012, 2013, and 2014, income tax expense from continuing operations consisted of the following (in thousands):


	2012		2013		2014
Current income tax expense (benefit)	$	15,000		(4,000)		—
Deferred income tax expense		106,229		190,210		445,672
Total income tax expense from continuing operations	$	121,229		186,210		445,672

Income tax expense from continuing operations differs from the amount that would be computed by applying the U.S. statutory federal income tax rate of 35% to consolidated income for the years ended December 31, 2012, 2013, and 2014 as a result of the following (in thousands):


	2012		2013		2014
Federal income tax expense	$	121,276		56,708		391,754
State income tax expense, net of federal benefit		4,761		21,429		25,545
Nondeductible equity-based compensation		—		127,736		29,141
Noncontrolling interest in Antero Midstream Partners LP		—		—		(787)
Change in valuation allowance		(4,872)		(20,919)		(120)
Other		64		1,256		139
Total income tax expense from continuing operations	$	121,229		186,210		445,672

For the years ended December 31, 2012, 2013, and 2014, income tax expense (benefit) was allocated to continuing and discontinued operations as follows (in thousands):


	2012		2013		2014
Continuing operations	$	121,229		186,210		445,672
Discontinued operations and sale of discontinued operations		(272,553)		3,249		1,354
Total income tax expense (benefit)	$	(151,324)		189,459		447,026

Deferred income taxes reflect the impact of temporary differences between assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. The tax effect of the temporary differences giving rise to net deferred tax assets and liabilities at December 31, 2013 and 2014 is as follows (in thousands):


	2013		2014
Deferred tax assets:
Net operating loss carryforwards	$	449,961		431,681
Minimum tax credit carryforward		11,000		11,000
Equity-based compensation		—		10,032
Other		5,373		12,785
Total deferred tax assets		466,334		465,498
Valuation allowance		(26,759)		(26,639)
Net deferred tax assets		439,575		438,859
Deferred tax liabilities:
Unrealized gains on derivative instruments		328,534		601,859
Oil and gas properties		458,812		600,050
Investment in Antero Midstream Partners LP		—		31,746
Total deferred tax liabilities		787,346		1,233,655
Net deferred tax liabilities	$	(347,771)		(794,796)

In assessing the realizability of deferred tax assets, management considers whether some portion or all of the deferred tax assets will be realized based on a more likely than not standard of judgment. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes that the Company will not realize the benefits of certain of these deductible differences and has recorded a valuation allowance of approximately $27 million at December 31, 2013 and 2014, which is primarily related to capital loss carryforwards and certain state NOL carryforwards related to states in which the Company no longer operates. The amount of the deferred tax asset considered realizable could be reduced in the near term if estimates of future taxable income during the carryforward period are revised.

The calculation of the Company’s tax liabilities involves uncertainties in the application of complex tax laws and regulations. The Company gives financial statement recognition to those tax positions that it believes are more‑likely than‑not to be sustained upon examination by the Internal Revenue Service or state revenue authorities. The financial statements include unrecognized benefits at December 31, 2014 of $11 million that, if recognized, would result in a reduction of noncurrent income taxes payable (included in other long‑term liabilities) and an increase in noncurrent deferred tax liabilities. No impact to the Company’s 2014 effective tax rate would result. As of December 31, 2014, interest of $0.8 million has been accrued on unrecognized tax benefits. A reconciliation of beginning and ending amount of unrecognized tax benefits is as follows:


	2014
Balance at beginning of year	$	11,000
Revised estimate of unrecognized tax position		—
Balance at end of year	$	11,000

As of December 31, 2014, the Company’s corporate subsidiaries have U.S. Federal and state net operating loss carryforwards (NOLs) of $1.1 billion and $1.0 billion, respectively, which expire at various dates from 2024 to 2034.

The tax years 2011 through 2014 remain open to examination by the U.S. Internal Revenue Service. The Company and its subsidiaries file tax returns with various state taxing authorities; these returns remain open to examination for tax years 2010 through 2014. During 2014, the tax returns of Antero Resources Finance Corporation (which was merged with the Antero Resources Corporation in December 2013) were examined by the Internal Revenue Service for its tax years 2011 and 2012. There were no adjustments to these tax returns as a result of the examination. The Company’s state tax returns are being examined by West Virginia taxing authorities for tax years 2010 through 2013. The Company does not expect any material adjustments to tax liabilities will result from the examination.