Income Taxes

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



(In thousands)	2015			2014			2013
Current:
Federal	$	27,768		$	22,738		$	12,077
State	5,258			4,623			1,036
Foreign	1,713			972			2,153
Current provision	34,739			28,333			15,266
Deferred:
Federal	15,348			13,692			16,614
State	2,217			2,013			2,558
Foreign	(540		)	(262		)	(1,100		)
Deferred provision	17,025			15,443			18,072
	$	51,764		$	43,776		$	33,338

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



	2015			2014			2013
Federal statutory tax expense	$	55,020		$	36,836		$	33,957
State taxes, net of federal tax effect	4,269			4,118			2,469
Credit for increasing research activities	(3,320		)	(2,569		)	(1,338		)
Deduction related to domestic production activities	(3,320		)	(1,751		)	(1,396		)
Valuation allowance	—			2,474			—
Goodwill Impairment	—			4,298			—
Change in uncertain tax positions	(1,344		)	1,099			773
Other – net	459			(729		)	(1,127		)
Total income tax expense	$	51,764		$	43,776		$	33,338

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)	2015			2014
Deferred Taxes
Allowance for doubtful accounts	$	1,089		$	1,240
Compensation	15,491			16,817
Inventory differences	4,497			5,691
Marketing accrual	1,355			1,454
Stock-based compensation	11,923			9,906
Accrued post-retirement benefit obligations	6,682			6,341
OCI tax effected items	3,169			3,887
Vacation accrual	4,181			3,875
Warranty Accrual	6,052			6,023
Other – net	12,167			10,774
Total deferred tax assets	$	66,606		$	66,008
Deferred income	(4,907		)	(4,836		)
Goodwill	(79,471		)	(80,366		)
Prepaids	(7,876		)	(7,724		)
Tax over book depreciation	(59,308		)	(41,770		)
Total deferred tax liabilities	$	(151,562	)	$	(134,696	)
Valuation allowance	(3,978		)	(3,413		)
Total net deferred tax liabilities	$	(88,934	)	$	(72,101	)

Current net deferred tax assets	—			17,310
Long term net deferred tax liabilities	(88,934		)	(89,411		)
Total net deferred tax liabilities	$	(88,934	)	$	(72,101	)

The valuation allowance for deferred tax assets is as follows:



Valuation allowance for deferred tax asset (in thousands)	Balance at beginning of period	Charged to expenses	Adjustments to balance sheet		Balance at end of period
Year ended January 2, 2016	3,413	—	565		3,978
Year ended January 3, 2015	1,579	2,474	(640	)	3,413
Year ended December 28, 2013	1,580	—	(1	)	1,579

At January 2, 2016, the Corporation has approximately $6.4 million of U.S. state tax net operating losses and $2.2 million of U.S. state tax credits which expire over the next twenty years.

The Corporation has adopted ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes on a prospective basis for the fiscal year ended January 2, 2016. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet.

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



(in thousands)	2015			2014
Unrecognized tax benefits, beginning of period	$	4,250		$	2,809
Increases in positions due to purchase accounting	—			400
Increases in positions taken in a prior period	82			406
Decreases in positions taken in a prior period	(1,611		)	(124		)
New positions taken in a current period	793			1,422
Decrease due to settlements	—			—
Decrease due to lapse of statute of limitations	(656		)	(663		)
Unrecognized tax benefits, end of period	$	2,858		$	4,250

The amount of unrecognized tax benefits which would impact the Corporation’s effective tax rate, if recognized, was $2.8 million at January 2, 2016 and $4.2 million at January 3, 2015.

As of January 2, 2016, 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.

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 $0.1 million, $0.0 million and $0.1 million in January 2, 2016, January 3, 2015 and December 28, 2013, respectively. The Corporation had recorded a liability for interest and penalties related to unrecognized tax benefits of $0.1 million and $0.2 million as of January 2, 2016 and January 3, 2015, respectively.

Tax years 2012 through 2015 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.

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 $33.9 million of accumulated earnings considered permanently reinvested in Canada, China, and Hong Kong as of January 2, 2016. The Corporation believes the U.S tax cost on unremitted foreign earnings would be approximately $10.3 million if the amounts were not considered permanently reinvested.