11. Income Taxes

The components of the Company's earnings (loss) before income taxes (benefits) follow:

	Year ended March 31,

	2014			2013			2012
Domestic	$	16,844		$	(493	)	$	72,270
Foreign		(36,057	)		(62,050	)		(257,729	)


	$	(19,213	)	$	(62,543	)	$	(185,459	)

Total income tax expense (benefit) differed from the amounts computed by applying the tax rate to earnings (loss) before income taxes as a result of the following:

	Year ended March 31,

	2014			2013			2012
Net earnings (loss) before taxes	$	(19,213	)	$	(62,543	)	$	(185,459	)
U.S. federal corporate statutory rate		35.00	%		35.00	%		35.00	%


Expected tax		(6,725	)		(21,890	)		(64,911	)
Earnings (loss) of non-taxable entities		(6,296	)		1,377			(25,295	)
Canadian statutory tax rate differences		3,559			6,145			22,768
Change in valuation allowance		(1,248	)		(452	)		(8,413	)
Adjustments and assessments		(690	)		(4,796	)		(7,529	)
Non-deductible expense related to asset impairment		—			—			59,304
Taxable capital gains		—			—			3,895
Non-deductible expenses and other		1,144			674			494


Income tax benefit	$	(10,256	)	$	(18,942	)	$	(19,687	)

The Company is not a taxable entity in the United States. Income taxes on its income are the responsibility of individual unitholders and have accordingly not been recorded in the consolidated financial statements. Niska Partners has Canadian corporate subsidiaries, which are taxable corporations subject to income taxes, which are included in the consolidated financial statements.

As at March 31, 2014, Niska Partners' Canadian subsidiaries had accumulated non-capital losses of approximately $76.2 million (March 31, 2013—$34.9 million) that can be carried forward and applied against future taxable income. These non-capital losses have resulted in deferred income tax assets of $18.4 million (March 31, 2013—$8.5 million). Additionally, Niska Partners' Canadian subsidiaries had recognized deferred income tax assets related to capital losses of $18.9 million at March 31, 2014 (March 31, 2013—$20.6 million). The capital losses represent $2.4 million (March 31, 2013—$2.6 million) of deferred tax assets, of which $2.4 million (March 31, 2013—$2.3 million) have been offset by valuation allowances due to the uncertainty of their realization. Of the total tax assets related to losses, $0.1 million will begin to expire at the end of 2029.

For the year ended March 31, 2014, Niska Partners recognized $ nil (March 31, 2013—$ nil; March 31, 2012—$0.3 million) of potential interest and penalties associated with uncertain tax positions. The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and other foreign jurisdictions. The Company is subject to income tax examinations for the fiscal years ended 2006 through 2014 in most jurisdictions.

Deferred income tax assets and liabilities reflect the tax effect of differences between the basis of assets and liabilities for book and tax purposes. The tax effect of temporary differences that give rise to significant components of the deferred income tax liabilities and deferred income tax assets are presented below:

	As at March 31,

	2014			2013
Deferred income tax assets:
Risk management liabilities	$	33,386		$	8,904
Non-capital loss carry forwards		18,434			8,451
Deferred charges		6,890			1,166
Capital losses		2,358			2,577
Other		2,403			806


		63,471			21,904
Valuation allowance		(4,004	)		(2,607	)


Total deferred income tax assets	$	59,467		$	19,297




Deferred income tax liabilities:
Property, plant and equipment	$	114,298		$	114,148
Intangible assets		15,137			17,636
Partnership deferral income		37,499			11,007
Risk management assets		17,049			11,477
Other		535			267


Total deferred income tax liabilities		184,518			154,535


Net deferred income tax liabilities	$	125,051		$	135,238

The classification of net deferred income tax liabilities recorded on the balance sheets is as follows:

	As at March 31,

	2014		2013
Deferred income tax liabilities:
Current	$	5,678	$	14,303
Long-term		119,373		120,935


	$	125,051	$	135,238

Uncertain Income Tax Positions

When accounting for uncertainty in income taxes, a company recognizes a tax benefit in the financial statements for an uncertain tax position if management's assessment is that the position is "more likely than not" (i.e. a likelihood greater than fifty percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term "tax position" refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods.

The following table indicates the changes to the Company's unrecognized tax benefits for the years ended March 31, 2014 and 2013. The term "unrecognized tax benefits" refers to the differences between a tax position taken or expected to be taken in a tax return and the benefit measured and recognized in the financial statements. Interest and penalties are not included.

	As at March 31,

	2014		2013
Balance at April 1,	$	1,160	$	3,267
Additions based on tax positions taken in the current year		375		—
Additions (reductions) based on tax positions taken in a prior year		200		(1,411	)
Settlements with taxing authorities in the current year		—		(696	)


Balance at March 31,	$	1,735	$	1,160

Substantially all of the $1.7 million of unrecognized tax benefits at March 31, 2014, would have an impact on the effective tax rate if subsequently recognized.

The Company engages in ongoing discussions with tax authorities regarding the resolution of tax matters in various jurisdictions. Both the outcome of these tax matters and the timing of the resolution and/or closure of the tax audits are highly uncertain. It is management's assessment that no unrecognized tax benefits will be recognized within the next twelve months.