Note 13. Provision for Taxes

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

		Years Ended March 31,
		2016		2015		2014
		(In thousands)
Pretax earnings:
U.S.	$	745,194	$	541,371	$	516,207
Non-U.S.		23,717		20,047		21,315
Total pretax earnings	$	768,911	$	561,418	$	537,522

Current provision (benefit)
Federal	$	118,974	$	112,634	$	131,246
State		15,988		14,248		12,641
Non-U.S.		3,303		2,599		3,787
		138,265		129,481		147,674
Deferred provision (benefit)
Federal		125,950		67,306		37,979
State		12,561		5,256		7,553
Non-U.S.		3,134		2,634		1,925
		141,645		75,196		47,457

Provision for income tax expense	$	279,910	$	204,677	$	195,131

Income taxes paid (net of income tax refunds received)	$	141,901	$	195,072	$	138,384

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,
	2016	2015	2014

Statutory federal income tax rate	35.00%	35.00%	35.00%
Increase (reduction) in rate resulting from:
State taxes, net of federal benefit	2.34%	2.21%	2.38%
Foreign rate differential	(0.24)%	(0.32)%	(0.33)%
Federal tax credits	(0.19)%	(0.29)%	(0.32)%
Dividend received deduction	(0.02)%	(0.03)%	(0.03)%
Other	(0.49)%	(0.11)%	(0.40)%
Actual tax expense of operations	36.40%	36.46%	36.30%

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

		March 31,
		2016		2015
		(In thousands)
Deferred tax assets:
Net operating loss and credit carry forwards	$	1,462	$	1,228
Accrued expenses		185,088		171,761
Policy benefit and losses, claims and loss expenses payable, net		21,911		19,560
Unrealized losses		–		–
Total deferred tax assets	$	208,461	$	192,549

Deferred tax liabilities:
Property, plant and equipment	$	831,914	$	680,501
Deferred policy acquisition costs		20,557		18,369
Unrealized gains		9,593		20,216
Other		9		262
Total deferred tax liabilities		862,073		719,348
Net deferred tax liability	$	653,612	$	526,799

The net operating loss and credit carry-forwards in the above table are primarily attributable to $22.0 million of state net operating losses that will begin to expire March 31, 2017 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 March 31, 2015 was $19.9 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 $4.0 million. At March 31, 2016, the amount of unrecognized tax benefits and the amount that would favorably affect our effective tax rate was $23.9 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,
		2016		2015
		(In thousands)

Unrecognized tax benefits beginning balance	$	19,929	$	16,850
Additions based on tax positions related to the current year		4,313		3,695
Reductions for tax positions of prior years		(327)		(616)
Settlements		(3)		–
Unrecognized tax benefits ending balance	$	23,912	$	19,929

We recognize interest related to unrecognized tax benefits as interest expense, and penalties as operating expenses. At March 31, 2015, the amount of interest and penalties accrued on unrecognized tax benefits was $5.2 million, net of tax. During the current year we recorded expense from interest and penalties in the amount of $0.7 million, net of tax. At March 31, 2016, the amount of interest and penalties accrued on unrecognized tax benefits was $5.9 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, 2013. No provision was made for U.S. taxes payable on undistributed foreign earnings since these amounts are permanently reinvested; the amount of this unrecognized deferred tax liability is not practical to determine at this time.