Income Taxes

The components of income tax expense from continuing operations for 2014, 2013 and 2012 were as follows:



	2014			2013			2012
	(In thousands)
Current
Federal	$	—		$	—		$	631
State	5,527			8,178			6,888
Deferred
Federal	169,106			124,836			103,971
State	12,375			9,605			(13,237		)
Investment tax credits	(6		)	(20		)	(27		)
	$	187,002		$	142,599		$	98,226

Reconciliations of the provision for income taxes computed at the statutory rate to the reported provisions for income taxes from continuing operations for 2014, 2013 and 2012 are set forth below:



	2014			2013			2012
	(In thousands)
Tax at statutory rate of 35%	$	166,887		$	130,655		$	101,648
Common stock dividends deductible for tax reporting	(2,307		)	(2,153		)	(2,096		)
State taxes (net of federal benefit)	11,636			11,559			(4,127		)
Change in valuation allowance	6,969			1,085			—
Other, net	3,817			1,453			2,801
Income tax expense	$	187,002		$	142,599		$	98,226

Deferred income taxes reflect the tax effect of differences between the basis of assets and liabilities for book and tax purposes. The tax effect of temporary differences that gave rise to significant components of the deferred tax liabilities and deferred tax assets at September 30, 2014 and 2013 are presented below:



	2014			2013
	(In thousands)
Deferred tax assets:
Employee benefit plans	$	116,157		$	115,970
Interest rate agreements	10,565			—
Net operating loss carryforwards	236,626			196,296
Charitable and other credit carryforwards	21,614			20,939
Other	28,849			38,013
Total deferred tax assets	413,811			371,218
Valuation allowance	(6,969		)	(1,085		)
Net deferred tax assets	406,842			370,133
Deferred tax liabilities:
Difference in net book value and net tax value of assets	(1,655,894		)	(1,445,450		)
Pension funding	(17,890		)	(23,480		)
Gas cost adjustments	(31,252		)	(19,182		)
Interest rate agreements	—			(21,726		)
Other	(37,173		)	(39,045		)
Total deferred tax liabilities	(1,742,209		)	(1,548,883		)
Net deferred tax liabilities	$	(1,335,367	)	$	(1,178,750	)
Deferred credits for rate regulated entities	$	(109	)	$	(51	)

At September 30, 2014, we had $224.2 million of federal net operating loss carryforwards, $12.4 million of state net operating loss carryforwards (net of federal effects), $10.1 million of federal alternative minimum tax credit carryforwards, $1.0 million of state tax credits and $10.5 million in charitable contribution carryforwards. The alternative minimum tax credit carryforwards do not expire. The federal net operating loss carryforwards are available to offset taxable income and will begin to expire in 2029. Depending on the jurisdiction in which the state net operating loss was generated, the state net operating loss carryforwards will begin to expire between 2016 and 2030. The state tax credits will begin to expire in 2018.

The Company’s charitable contribution carryforwards expire in 2014 - 2019. We believe it is more likely than not that the benefit from certain charitable contribution carryforwards will not be realized. Due to the uncertainty of realizing a benefit from the deferred tax asset recorded for charitable contribution carryforwards, a valuation allowance of 7.0 million and 1.1 million was recognized for the years ended September 30, 2014 and 2013.

At September 30, 2014, we had recorded liabilities associated with unrecognized tax benefits totaling $12.6 million. The following table reconciles the beginning and ending balance of our unrecognized tax benefits:



	2014			2013
	(In thousands)
Unrecognized tax benefits - beginning balance	$	4,158		$	2,817
Increase resulting from prior period tax positions	3,846			—
Increase resulting from current period tax positions	4,625			1,341
Unrecognized tax benefits - ending balance	12,629			4,158
Accrued interest and penalties	411			—
Gross unrecognized tax benefits	13,040			4,158
Less: deferred federal and state income tax benefits	(4,564		)	(1,455		)
Total unrecognized tax benefits that, if recognized, would impact the effective income tax rate as of the end of the year	$	8,476		$	2,703

Additionally, results for fiscal 2012 were favorably impacted by a state tax benefit of $13.6 million (net of federal effects). Due to the completion of the sale of our Missouri, Iowa and Illinois service areas in the fiscal fourth quarter, the Company updated its analysis of the tax rate at which deferred taxes would reverse in the future to reflect the sale of these service areas. The updated analysis supported a reduction in the deferred tax rate which when applied to the balance of taxable income deferred to future periods resulted in a reduction of the Company’s overall deferred tax liability.

We file income tax returns in the U.S. federal jurisdiction as well as in various states where we have operations. We have concluded substantially all U.S. federal income tax matters through fiscal year 2007.