Income Taxes

The effective tax rate from continuing operations was 36.4% in 2014, 33.5% in 2013 and 37.2% in 2012. A reconciliation of the Federal statutory income tax rate to the Company’s effective tax rate is as follows:



	Percent of Income before Income Taxes
	2014		2013		2012
Statutory Federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes — net of Federal tax benefit	(4.5	)	2.9		4.6
Foreign tax rate differential	1.8		(0.2	)	0.5
Domestic production deduction	(6.6	)	(3.1	)	(3.0	)
Non-deductible expenses	7.0		1.3		1.0
Changes in unrecognized tax benefits	(2.5	)	(0.2	)	(0.9	)
Foreign tax incentives	(3.0	)	(2.2	)	(1.4	)
Valuation allowances	9.0		—		0.8
Other	0.2		—		0.6
Effective tax rate for the year	36.4	%	33.5	%	37.2	%

Income from continuing operations before income taxes was attributable to the following sources:



	2014			2013		2012
United States	$	21,074		$	38,089	$	42,021
Foreign	(6,991		)	1,696		175
Totals	$	14,083		$	39,785	$	42,196

Income tax expense (benefit) from continuing operations consisted of the following:



	2014						2013					2012
	Current			Deferred			Current		Deferred			Current		Deferred
Federal	$	8,298		$	(1,208	)	$	13,273	$	(1,413	)	$	11,871	$	896
Foreign	(277		)	(710		)	629		(920		)	339		(389		)
State and local	(234		)	(747		)	2,170		(396		)	2,876		96
	$	7,787		$	(2,665	)	$	16,072	$	(2,729	)	$	15,086	$	603

Significant components of the Company’s deferred taxes as of December 31, 2014 and 2013 are as follows:



	2014			2013
Deferred income tax liabilities
Property, plant and equipment	$	11,629		$	11,136
Tax-deductible goodwill	7,728			7,890
Non-deductible intangibles	1,843			2,313
State deferred taxes	687			1,150
Other	483			446
	22,370			22,935
Deferred income tax assets
Compensation	6,716			5,982
Inventory valuation	636			602
Allowance for uncollectible accounts	260			452
Non-deductible accruals	2,631			1,956
Other	15			108
Net operating loss carryforwards	5,050			3,655
	15,308			12,755
Valuation Allowance	(4,326		)	(4,264		)
	10,982			8,491
Net deferred income tax liability	$	11,388		$	14,444

ASC 740 Income Taxes requires that deferred tax assets be reduced by a valuation allowance, if based on all available evidence, it is more likely than not that the deferred tax asset will not be realized. Available evidence includes the reversal of existing taxable temporary differences, future taxable income exclusive of temporary differences, taxable income in carryback years and tax planning strategies. At December 31, 2014, the Company has deferred tax assets of $5.1 million resulting from foreign net operating tax loss carryforwards, as well as $4.3 million of related valuation allowances, primarily from Brazil of approximately $14.9 million. These net operating tax loss carryforwards will begin to expire in 2034.

No provision has been recorded for unremitted earnings of foreign subsidiaries as it is the Company’s intention to indefinitely reinvest the earnings of those subsidiaries. Accordingly, at December 31, 2014, the Company had not recorded a deferred tax liability related to investments in its foreign subsidiaries that are essentially permanent in duration. The amount of such temporary differences was estimated to be approximately $15.9 million and may become taxable in the U.S. upon a repatriation of assets or a sale or liquidation of the subsidiaries. It is not practical to estimate the related amount of unrecognized tax liability.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:



	2014			2013			2012
Balance at January 1	$	840		$	910		$	1,049
Increases related to current year tax positions	—			—			—
Increases related to acquired businesses	—			—			236
Increases related to previous year tax positions	5			—			580
Reductions due to lapse of applicable statute of limitations	(362		)	(48		)	(256		)
Reduction due to settlements	—			(22		)	(699		)
Balance at December 31	$	483		$	840		$	910

The total amount of gross unrecognized tax benefits that would reduce the Company’s effective tax rate was $0.5 million, $0.8 million and $0.9 million at December 31, 2014, 2013 and 2012, respectively. The amount of accrued interest expense included as a liability within the Company’s Consolidated Statements of Financial Position was $0.1 million as of each of December 31, 2014, 2013 and 2012. The December 31, 2014 balance of unrecognized tax benefits includes approximately $0.5 million of unrecognized tax benefits for which it is reasonably possible that they will be recognized within the next twelve months. This amount represents a decrease in unrecognized benefits related to state income tax audits, and expiring statutes in U.S. Federal, state, and Non-U.S. jurisdictions.

The Company and its subsidiaries file U.S. Federal, state and local, and non-U.S. income tax returns. As of December 31, 2014 the Company is no longer subject to U.S. Federal and state examinations by tax authorities for tax years before 2011 and 2010, respectively. In addition, the Company is subject to non-U.S. income tax examinations for tax years of 2009 through 2014.