Income Taxes

Significant components of the provision for income taxes including those related to noncontrolling interest and discontinued operations are as follows:



(In thousands)	2013			2012			2011
Current:
Federal	$	12,077		$	19,132		$	8,931
State	1,036			2,460			1,929
Foreign	2,153			1,175			1,719
Current provision	15,266			22,767			12,579
Deferred:
Federal	16,614			6,692			10,829
State	2,558			603			1,307
Foreign	(1,100		)	(784		)	(304		)
Deferred provision	18,072			6,511			11,832
	$	33,338		$	29,278		$	24,411

The differences between the actual tax expense and tax expense computed at the statutory U.S. Federal tax rate are explained as follows:



	2013			2012			2011
Federal statutory tax expense	$	33,957		$	27,386		$	24,639
State taxes, net of federal tax effect	2,469			2,164			2,096
Credit for increasing research activities	(1,338		)	—			(942		)
Deduction related to domestic production activities	(1,396		)	(1,192		)	(1,005		)
Foreign income tax differential	(26		)	(899		)	(629		)
Executive compensation limitation	320			1,672			40
Valuation allowance	—			—			2
Uncertain tax positions	773			611			654
Other tax credits	(256		)	—			(203		)
Other – net	(1,165		)	(464		)	(241		)
Total income tax expense	$	33,338		$	29,278		$	24,411

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Corporation’s deferred tax liabilities and assets are as follows:



(In thousands)	2013			2012			2011
Net long-term deferred tax liabilities:
Compensation	5,304			5,399			4,367
Stock-based compensation	8,911			7,069			5,582
Accrued post-retirement benefit obligations	5,972			5,918			5,749
OCI tax effected items	1,230			2,585			2,159
Warranty Accrual	2,723			2,565			2,536
Other – net	2,349			3,362			3,501
Total long-term deferred tax assets	26,489			26,898			23,894
Goodwill	(74,436		)	(66,127		)	(56,878		)
Tax over book depreciation	$	(20,081	)	$	(12,720	)	$	(6,300	)
Total long-term deferred tax liabilities	(94,517		)	(78,847		)	(63,178		)
Valuation allowance	(936		)	(919		)	(950		)
Total net long-term deferred tax liabilities	(68,964		)	(52,868		)	(40,234		)
Net current deferred tax assets:
Allowance for doubtful accounts	1,859			1,233			1,691
Vacation accrual	3,706			3,920			3,078
Inventory differences	3,695			3,660			3,676
Marketing accrual	1,317			1,348			1,323
Warranty accrual	2,412			2,022			2,212
Compensation	7,821			5,609			5,532
Other – net	7,371			7,042			4,300
Total current deferred tax assets	28,181			24,834			21,812
Deferred income	(4,148		)	(3,949		)	(3,933		)
Prepaids	(7,339		)	(812		)	(952		)
Total current deferred tax liabilities	(11,487		)	(4,761		)	(4,885		)
Valuation allowance	(643		)	(661		)	(666		)
Total net current deferred tax assets	16,051			19,412			16,261
Net deferred tax (liabilities) assets	$	(52,913	)	$	(33,456	)	$	(23,973	)

At December 28, 2013, the Corporation has approximately $22.2 million of U.S. state tax net operating losses and $3.3 million of U.S. state tax credits which expire over the next twenty years.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



(in thousands)	2013			2012			2011
Unrecognized tax benefits, beginning of period	$	2,927		$	3,098		$	3,193
Increases (decreases) in positions taken in a prior period	156			14			492
Decreases in positions taken in a prior period	(135		)	(8		)	(16		)
Increases in positions taken in a current period	791			626			670
Decrease due to settlements	—			—			—
Decrease due to lapse of statute of limitations	(930		)	(803		)	(1,241		)
Unrecognized tax benefits, end of period	$	2,809		$	2,927		$	3,098

The amount of unrecognized tax benefits which would impact the Corporation’s effective tax rate, if recognized, was $2.7 million at December 28, 2013, $2.9 million at December 29, 2012 and $3.0 million at December 31, 2011.

The Corporation recognized interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses consistent with the recognition of these items in prior reporting. Interest and penalties recognized in the Consolidated Statements of Income amounted to a benefit of $51,964. The Corporation had recorded a liability for interest and penalties related to unrecognized tax benefits of $0.2 million, $0.3 million and $0.3 million as of December 28, 2013, December 29, 2012, and December 31, 2011, respectively.

Tax years 2010 through 2013 remain open for examination by the Internal Revenue Service ("IRS"). The Corporation is currently under examination in various state jurisdictions, of which years 2008 through 2013 remain open to examination.

As of December 28, 2013, it is reasonably possible the amount of unrecognized tax benefits may increase or decrease within the twelve months following the reporting date. These increases or decreases in the unrecognized tax benefits would be due to new positions that may be taken on income tax returns, settlement of tax positions and the closing of statutes of limitation. It is not expected any of the changes will be material individually or in total to the results or financial position of the Corporation.

Deferred income taxes are provided to reflect differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The Corporation provides for taxes that may be payable if undistributed earnings of overseas subsidiaries were to be remitted to the United States, except for those earnings it considers to be permanently reinvested. There were approximately $26.2 million of accumulated earnings considered permanently reinvested in Canada, China, Hong Kong and India as of December 28, 2013. The Corporation believes the U.S tax cost on unremitted foreign earnings would be approximately $7.9 million if the amounts were not considered permanently reinvested.