NOTE 17 – INCOME TAXES

The provision for income taxes consisted of the following:

	Year ended December 31,
	2015		2014			2013
	(thousands of dollars)
Current federal provision	$	4,062	$	8,756		$	6,748
Current state provision		285		296			233

Deferred federal provision (benefit)		5,367		(1,893	)		1,173
Deferred state provision (benefit)		50		(12	)		(7	)

Income tax expense	$	9,764	$	7,147		$	8,147

The difference between the effective tax rate in income tax expense and the Federal statutory rate of 35% for the years ended December 31, 2015, 2014, and 2013, is as follows:

	2015			2014			2013
	(thousands of dollars)
Income taxes at U.S. statutory rate	$	9,927		$	7,952		$	9,675
State taxes, net of federal benefit		230			181			139
Permanent and other items		(393	)		(915	)		(644	)
Increase (decrease) in valuation allowance		-			(71	)		(1,023	)
Total tax expense	$	9,764		$	7,147		$	8,147

The Texas margin tax rate was reduced in a legislative reduction effective January 1, 2015. Permanent differences are primarily due to the Federal manufacturer's deduction and stock options.

Tax effects of temporary differences that give rise to significant portions of federal and state deferred tax assets and deferred tax liabilities were as follows:

	December 31,
	2015			2014
	(thousands of dollars)
Deferred tax liabilities:
Plant, pipeline and equipment	$	(14,996	)	$	(8,352	)
Intangible assets		(284	)		-
Other assets		(14	)		-
Investment in AMAK		( 2,522	)		( 4,382	)
Total deferred tax liabilities	$	(17,816	)	$	(12,734	)

Deferred tax assets:
Accounts receivable		283			276
Inventory		1,785			1,018
Mineral interests		376			376
Unrealized loss on swap agreements		62			196
Post-retirement benefits		330			327
Stock-based compensation		969			1,705
Intangible assets		-			229
Deferred revenue		-			164
Gross deferred tax assets		3,805			4,291
Valuation allowance		(376	)		(376	)
Total net deferred tax assets	$	3,429		$	3,915
Net deferred tax liabilities	$	(14,387	)	$	(8,819	)

The current and non-current classifications of the deferred tax balances are as follows:

	2015			2014
	(thousands of dollars)
Current:
Deferred tax asset	$	2,116		$	1,652

Non-current:

Deferred tax assets		4,637			3,269
Deferred tax liability		(20,764	)		(13,364	)
Valuation allowance		(376	)		(376	)
Non-current deferred tax liability, net		(16,503	)		(10,471	)

Total deferred liabilities, net	$	(14,387	)	$	(8,819	)

We have provided a valuation allowance in 2015 and 2014 against certain deferred tax assets because of uncertainties regarding their realization. The 2014 decrease in the valuation allowance of $71,000 is due largely to changes in our environmental accrual. The 2013 decrease in the valuation allowance of $1,023,000 is due largely to changes in our investment in AMAK.

We had no Saudi Arabian income tax liability in 2015, 2014, or 2013.

We file an income tax return in the U.S. federal jurisdiction and a margin tax return in Texas. Tax returns for various jurisdictions remain open for examination for the years 2011 through 2014.