Income Taxes

Significant components of the provision for income taxes from continuing operations are as follows:



	For the Years Ended December 31,
	2013		2012		2011
	(in thousands)
Current:
Federal	$	86,437	$	32,656	$	1,866
State and local	6,595		3,250		74
Foreign	413		963		263
Total current expense	93,445		36,869		2,203
Deferred:
Federal	11,658		27,870		42,148
State and local	389		1,385		2,032
Total deferred expense (benefit)	12,047		29,255		44,180
Total income tax expense (benefit)	$	105,492	$	66,124	$	46,383

The reconciliation of income tax expense computed at the federal statutory tax rates to income tax expense from continuing operations is as follows:



	For the Years Ended December 31,
	2013			2012			2011
	(in thousands)
Expected provision at federal statutory tax rate	$	98,843		$	61,104		$	42,991
State and foreign tax expense, net of federal benefit	4,695			3,726			2,255
Interest and dividend on preferred stock	—			—			710
Meals and entertainment	772			649			469
Fines and penalties	134			84			(36		)
Federal credits	(58		)	(182		)	(103		)
Adjustment to deferred tax assets and liabilities	(54		)	(3		)	(3		)
Other	1,160			746			100
Total income tax expense (benefit)	$	105,492		$	66,124		$	46,383

The Company accounts for income taxes using the asset and liability method. Deferred taxes are recorded based on differences between the financial statement basis and tax basis of assets and liabilities and available tax loss and credit carryforwards. At December 31, 2013 and 2012, the significant components of the Company's deferred taxes consisted of the following:



	December 31,
	2013			2012
	(in thousands)
Deferred tax assets:
Net operating loss	$	188		$	83
Deferred loss	1,428			—
Deferred revenue	6,241			5,829
Nondeductible accruals	9,734			6,744
Other	2,767			1,073
Deferred tax assets	20,358			13,729
Deferred tax liabilities:
Capitalized interest	736			1,125
Deferred gain	—			364
Fuel hedging	—			97
Accrued engine maintenance	45,911			29,497
Property, plant and equipment	6,384			3,271
Deferred tax liabilities	53,031			34,354
Net deferred tax assets (liabilities)	$	(32,673	)	$	(20,625	)
Deferred taxes included within:
Assets:
Other current assets	$	16,243		$	12,591
Liabilities:
Other long-term liabilities	$	48,916		$	33,216

In assessing the realizability of the deferred tax assets, management considered whether it is more likely than not that some or all of the deferred tax assets would be realized. In evaluating the Company’s ability to utilize its deferred tax assets, it considered all available evidence, both positive and negative, in determining future taxable income on a jurisdiction by jurisdiction basis. Management does not believe that the realization of deferred tax assets is in jeopardy and thus a valuation allowance for 2013 will not be necessary.

During 2013, the Company filed an amended 2009 income tax return in order to correct its net operating loss carryforward (NOL) as of December 31, 2009. See Note 18. The amendment of the 2009 tax return resulted in a decrease to the Company's NOL of $7.9 million as of December 31, 2009. In addition, during the preparation of its 2012 tax return, the Company uncovered certain adjustments relating to the NOL carryforward balance as of December 31, 2011. These adjustments resulted in an increase to the NOL carryforward of $3.7 million. The net decrease to the NOL carryforwards of $4.2 million changed the NOL carryforwards as of December 31, 2011 from $20.8 million, as previously reported in 2012 and 2011, to $16.6 million. At December 31, 2011, the Company had available for federal income tax purposes an alternative minimum tax (AMT) credit carryforward of $3.2 million and federal NOL carryforwards of $16.6 million which were fully utilized against federal taxable income during 2012. As of December 31, 2013 and 2012, the Company did not have any NOLs or AMT credits to utilize against federal taxable income. As of December 31, 2013, the Company had approximately $4.7 million of State NOLs which can be used to offset future state taxable income. State net operating losses begin to expire in 2017.

Excess tax benefits are recognized in the financial statements upon actual realization of the related tax benefit which occurred in 2012 upon utilization of the remaining NOLs and AMT credit carryforwards during the year. During 2013, the Company recognized a windfall tax benefit of $1.9 million which was recorded as a reduction to income tax payable and a corresponding entry to additional paid in capital.

During 2013, the Company recorded a foreign tax credit of $0.4 million against its 2013 federal income tax liability which was fully utilized during the year. Previously the Company deducted income taxes paid in foreign countries in arriving at federal taxable income.

On September 13, 2013, the United States Treasury and Internal Revenue Service issued final tangible personal property regulations that broadly apply to amounts paid to acquire, produce or improve tangible property, as well as dispositions of such property. In review of these regulations, the Company has concluded that there is no material impact on its financial position, results of operations or cash flows.

On January 25, 2012, the Company experienced a subsequent ownership change under the principles of IRC §382, as a result of the secondary offering outlined in more detail in Note 3. Although the Company was subject to the limitations of IRC §382 on the utilization of its NOL and the tax credit carryforwards in 2012, the limitation was sufficiently in excess of the tax attribute carryforwards as not to prohibit complete utilization during the year.

The Company accrues interest related to unrecognized tax benefits in its provision for income taxes, and any associated penalties are recorded in selling, general and administrative expenses.

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Company's tax years from 2006 through 2012 are still subject to examination in the United States due to net operating loss carryovers generated in such years. Various state and foreign jurisdiction tax years remain open to examination and the Company was under examination in certain jurisdictions during 2012, and the outcome of these audits were immaterial to the financial statements. The Company believes that the effect of any additional assessment(s) will be immaterial to its financial statements.