Note 13. Provision for Taxes

Earnings before taxes and the provision for taxes consisted of the following:

		Years Ended March 31,
		2015		2014		2013
		(In thousands)
Pretax earnings:
U.S.	$	541,371	$	516,207	$	389,342
Non-U.S.		20,047		21,315		19,145
Total pretax earnings	$	561,418	$	537,522	$	408,487

Current provision (benefit)
Federal	$	112,634	$	131,246	$	116,788
State		14,248		12,641		12,199
Non-U.S.		2,599		3,787		3,344
		129,481		147,674		132,331
Deferred provision (benefit)
Federal		67,306		37,979		8,466
State		5,256		7,553		1,458
Non-U.S.		2,634		1,925		1,524
		75,196		47,457		11,448

Provision for income tax expense	$	204,677	$	195,131	$	143,779

Income taxes paid (net of income tax refunds received)	$	195,072	$	138,384	$	144,682

The difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to income before taxes was as follows:

	Years Ended March 31,
	2015	2014	2013
	(In percentages)
Statutory federal income tax rate	35.00%	35.00%	35.00%
Increase (reduction) in rate resulting from:
State taxes, net of federal benefit	2.21%	2.38%	2.08%
Foreign rate differential	(0.32)%	(0.33)%	(0.45)%
Federal tax credits	(0.29)%	(0.32)%	(0.51)%
Dividend received deduction	(0.03)%	(0.03)%	(0.03)%
Other	(0.11)%	(0.40)%	(0.89)%
Actual tax expense of operations	36.46%	36.30%	35.20%

Significant components of our deferred tax assets and liabilities were as follows:

		March 31,
		2015		2014
		(In thousands)
Deferred tax assets:
Net operating loss and credit carry forwards	$	1,228	$	2,040
Accrued expenses		171,761		150,935
Policy benefit and losses, claims and loss expenses payable, net		19,560		22,479
Unrealized losses		–		1,857
Other		–		–
Total deferred tax assets	$	192,549	$	177,311

Deferred tax liabilities:
Property, plant and equipment	$	680,501	$	593,654
Deferred policy acquisition costs		18,369		16,250
Unrealized gains		20,216		–
Other		262		3
Total deferred tax liabilities		719,348		609,907
Net deferred tax liability	$	526,799	$	432,596

The net operating loss and credit carry-forwards in the above table are primarily attributable to $18.1 million of state net operating losses that will begin to expire March 31, 2016 if not utilized.

ASC 740 prescribes a minimum recognition and measurement methodology that a tax position is required to meet before being recognized in the financial statements. The total amount of unrecognized tax benefits at April 1, 2014 was $16.9 million. This entire amount of unrecognized tax benefits if resolved in our favor, would favorably impact our effective tax rate. During the current year we recorded tax expense (net of settlements), resulting from uncertain tax positions in the amount of $3.1 million. At March 31, 2015, the amount of unrecognized tax benefits and the amount that would favorably affect our effective tax rate was $20.0 million.

A reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period are as follows:

		Unrecognized Tax Benefits
		March 31,
		2015		2014
		(In thousands)

Unrecognized tax benefits beginning balance	$	16,850	$	13,862
Additions based on tax positions related to the current year		3,079		3,000
Settlements		–		(12)
Unrecognized tax benefits ending balance	$	19,929	$	16,850

We recognize interest related to unrecognized tax benefits as interest expense, and penalties as operating expenses. At April 1, 2014, the amount of interest and penalties accrued on unrecognized tax benefits was $4.7 million, net of tax. During the current year we recorded expense from interest and penalties in the amount of $0.5 million, net of tax. At March 31, 2015, the amount of interest and penalties accrued on unrecognized tax benefits was $5.2 million, net of tax.

We file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With some exceptions, we are no longer subject to audit for years prior to the fiscal year ended March 31, 2012. No provision was made for U.S. taxes payable on undistributed foreign earnings since these amounts are permanently reinvested.