Income Taxes

The components of income (loss) before income taxes from continuing operations for each of the years ended December 31 were as follows:



	2014			2013		2012
				(In thousands)
United States	$	411,182		$	415,202	$	(47,175	)
Foreign	(52		)	416		1,708
Income (loss) before income taxes from continuing operations	$	411,130		$	415,618	$	(45,467	)

Income tax expense (benefit) from continuing operations for the years ended December 31 was as follows:



	2014			2013			2012
				(In thousands)
Current:
Federal	$	32,726		$	45,518		$	(26,858	)
State	5,390			4,311			858
Foreign	—			(29		)	(75		)
	38,116			49,800			(26,075		)
Deferred:
Income taxes:
Federal	81,017			78,953			(1,224		)
State	4,989			8,031			(6,323		)
Investment tax credit - net	1,009			(206		)	44
	87,015			86,778			(7,503		)
Change in uncertain tax positions	(5,183		)	—			1,974
Change in accrued interest	21			158			458
Total income tax expense (benefit)	$	119,969		$	136,736		$	(31,146	)

Components of deferred tax assets and deferred tax liabilities at December 31 were as follows:



	2014			2013
	(In thousands)
Deferred tax assets:
Regulatory matters	$	134,567		$	125,607
Accrued pension costs	97,690			74,320
Alternative minimum tax credit carryforward	23,844			33,304
Compensation-related	38,654			31,550
Asset retirement obligations	34,296			29,578
Legal and environmental contingencies	10,049			10,710
Other	59,389			45,101
Total deferred tax assets	398,489			350,170
Deferred tax liabilities:
Depreciation and basis differences on property, plant and equipment	906,455			813,597
Basis differences on oil and natural gas producing properties	270,939			266,168
Regulatory matters	97,521			64,914
Intangible asset amortization	22,505			13,579
Other	29,676			26,170
Total deferred tax liabilities	1,327,096			1,184,428
Net deferred income tax liability	$	(928,607	)	$	(834,258	)

As of December 31, 2014 and 2013, no valuation allowance has been recorded associated with the previously identified deferred tax assets. The alternative minimum tax credit carryforwards do not expire.

The following table reconciles the change in the net deferred income tax liability from December 31, 2013, to December 31, 2014, to deferred income tax expense:



	2014
(In thousands)
Change in net deferred income tax liability from the preceding table	$	94,349
Deferred taxes associated with other comprehensive loss	2,360
Other	(9,694		)
Deferred income tax expense for the period	$	87,015

Total income tax expense (benefit) differs from the amount computed by applying the statutory federal income tax rate to income (loss) before taxes. The reasons for this difference were as follows:



Years ended December 31,	2014					2013					2012
	Amount			%		Amount			%		Amount			%
	(Dollars in thousands)
Computed tax at federal statutory rate	$	143,895		35.0		$	145,466		35.0		$	(15,914	)	35.0
Increases (reductions) resulting from:
State income taxes, net of federal income tax	10,483			2.5		10,524			2.5		2,469			(5.4	)
Domestic production activities	(5,460		)	(1.3	)	(677		)	(.2	)	—			—
Nonqualified benefit plans	(1,624		)	(.4	)	(5,173		)	(1.2	)	(2,359		)	5.2
Depletion allowance	(4,010		)	(1.0	)	(3,764		)	(.9	)	(3,728		)	8.2
Federal renewable energy credit	(3,655		)	(.9	)	(3,404		)	(.8	)	(3,401		)	7.5
Deductible K-Plan dividends	(2,062		)	(.5	)	(1,593		)	(.4	)	(2,829		)	6.2
AFUDC equity	(2,031		)	(.5	)	(1,074		)	(.3	)	(1,500		)	3.3
Resolution of tax matters and uncertain tax positions	(7,367		)	(1.8	)	(859		)	(.2	)	2,559			(5.6	)
Deferred tax rate changes	9			—		741			.2		(3,083		)	6.8
Other	(8,209		)	(1.9	)	(3,451		)	(.8	)	(3,360		)	7.3
Total income tax expense (benefit)	$	119,969		29.2		$	136,736		32.9		$	(31,146	)	68.5

The income tax benefit in 2012 resulted largely from the Company's write-downs of oil and natural gas properties, as discussed in Note 1.

Deferred income taxes have been accrued with respect to temporary differences related to the Company's foreign operations. The amount of cumulative undistributed earnings for which there are temporary differences is approximately $3.6 million at December 31, 2014. The amount of deferred tax liability, net of allowable foreign tax credits, associated with the undistributed earnings at December 31, 2014, was approximately $1.4 million.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state, local and foreign jurisdictions. The Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years ending prior to 2007. The Company and the Internal Revenue Service have agreed to a settlement for the 2007 through 2009 tax years.

A reconciliation of the unrecognized tax benefits (excluding interest) for the years ended December 31 was as follows:



	2014			2013		2012
				(In thousands)
Balance at beginning of year	$	14,914		$	14,914	$	11,206
Additions for tax positions of prior years	—			—		3,708
Settlements	(14,777		)	—		—
Balance at end of year	$	137		$	14,914	$	14,914

Included in the balance of unrecognized tax benefits at December 31, 2013, was $8.4 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $155,000, including approximately $18,000 for the payment of interest and penalties at December 31, 2014, and was $9.0 million, including approximately $2.5 million for the payment of interest and penalties at December 31, 2013.

It is likely that substantially all of the unrecognized tax benefits, as well as interest, at December 31, 2014, will be settled in the next twelve months.

For the years ended December 31, 2014, 2013 and 2012, the Company recognized approximately $1.8 million, $1.2 million and $740,000, respectively, in interest expense. Penalties were not material in 2014, 2013 and 2012. The Company recognized interest income of approximately $540,000, $660,000 and $290,000 for the years ended December 31, 2014, 2013 and 2012, respectively. The Company had accrued liabilities of approximately $1.8 million and $2.8 million at December 31, 2014 and 2013, respectively, for the payment of interest.