Income Taxes

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



(In thousands)	2014			2013			2012
Current:
Federal	$	22,738		$	12,077		$	19,132
State	4,623			1,036			2,460
Foreign	972			2,153			1,175
Current provision	28,333			15,266			22,767
Deferred:
Federal	13,692			16,614			6,692
State	2,013			2,558			603
Foreign	(262		)	(1,100		)	(784		)
Deferred provision	15,443			18,072			6,511
	$	43,776		$	33,338		$	29,278

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



	2014			2013			2012
Federal statutory tax expense	$	36,836		$	33,957		$	27,386
State taxes, net of federal tax effect	4,118			2,469			2,164
Credit for increasing research activities	(2,569		)	(1,338		)	—
Deduction related to domestic production activities	(1,751		)	(1,396		)	(1,192		)
Valuation allowance	2,474			—			—
Goodwill Impairment	4,298			—			—
Uncertain tax positions	1,099			773			611
Other – net	(729		)	(1,127		)	309
Total income tax expense	$	43,776		$	33,338		$	29,278

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)	2014			2013
Net long-term deferred tax liabilities:
Compensation	7,066			5,304
Stock-based compensation	9,906			8,911
Accrued post-retirement benefit obligations	6,341			5,972
OCI tax effected items	3,887			1,230
Warranty Accrual	3,095			2,723
Other – net	4,198			2,349
Total long-term deferred tax assets	34,493			26,489
Goodwill	(80,366		)	(74,436		)
Tax over book depreciation	$	(41,770	)	$	(20,081	)
Total long-term deferred tax liabilities	(122,136		)	(94,517		)
Valuation allowance	(1,768		)	(936		)
Total net long-term deferred tax liabilities	(89,411		)	(68,964		)
Net current deferred tax assets:
Allowance for doubtful accounts	1,240			1,859
Vacation accrual	3,875			3,706
Inventory differences	5,691			3,695
Marketing accrual	1,454			1,317
Warranty accrual	2,928			2,412
Compensation	9,751			7,821
Other – net	6,576			7,371
Total current deferred tax assets	31,515			28,181
Deferred income	(4,836		)	(4,148		)
Prepaids	(7,724		)	(7,339		)
Total current deferred tax liabilities	(12,560		)	(11,487		)
Valuation allowance	(1,645		)	(643		)
Total net current deferred tax assets	17,310			16,051
Net deferred tax (liabilities) assets	$	(72,101	)	$	(52,913	)

At January 3, 2015, the Corporation has approximately $9.7 million of U.S. state tax net operating losses and $2.6 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)	2014			2013
Unrecognized tax benefits, beginning of period	$	2,809		$	2,927
Increases in positions due to purchase accounting	400			—
Increases (decreases) in positions taken in a prior period	406			156
Decreases in positions taken in a prior period	(124		)	(135		)
Increases in positions taken in a current period	1,422			791
Decrease due to settlements	—			—
Decrease due to lapse of statute of limitations	(663		)	(930		)
Unrecognized tax benefits, end of period	$	4,250		$	2,809

The amount of unrecognized tax benefits which would impact the Corporation’s effective tax rate, if recognized, was $4.2 million at January 3, 2015, $2.7 million at December 28, 2013 and $2.9 million at December 29, 2012.

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 were immaterial. The Corporation had recorded a liability for interest and penalties related to unrecognized tax benefits of $0.2 million, $0.2 million and $0.3 million as of January 3, 2015, December 28, 2013, and December 29, 2012, respectively.

Tax years 2011 through 2014 remain open for examination by the Internal Revenue Service ("IRS"). The Corporation is currently under examination in various state jurisdictions, of which years 2009 through 2014 remain open to examination.

As of January 3, 2015, 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 $31.4 million of accumulated earnings considered permanently reinvested in Canada, China, and Hong Kong as of January 3, 2015. The Corporation believes the U.S tax cost on unremitted foreign earnings would be approximately $9.6 million if the amounts were not considered permanently reinvested.