INCOME TAXES

Income tax expense consisted of the following (in thousands):



	Years Ended December 31,
	2013			2012			2011
Current:
Federal	$	55,227		$	69,590		$	6,275
State	6,616			10,088			6,664
Foreign	1,472			(478		)	1,347
	63,315			79,200			14,286
Deferred:
Federal	(9,668		)	(8,630		)	50,297
State	1,279			(438		)	7,566
	(8,389		)	(9,068		)	57,863
Total income tax expense	$	54,926		$	70,132		$	72,149

The effective income tax rate differs from the federal corporate tax rate of 35% in 2013, 2012 and 2011 as follows (in thousands):



	Years Ended December 31,
	2013			2012			2011
Tax at statutory rate	$	49,599		$	60,608		$	61,217
State income taxes, net of federal tax benefits	5,132			6,273			9,250
Non-deductible meals and entertainment	1,577			2,686			2,571
Income tax credits	(1,574		)	(758		)	(1,517		)
Other, net	192			1,323			628
Total income tax expense	$	54,926		$	70,132		$	72,149

At December 31, deferred tax assets and liabilities consisted of the following (in thousands):



	December 31,
	2013		2012
Deferred tax assets:
Insurance and claims accruals	$	76,596	$	73,211
Allowance for uncollectible accounts	5,672		7,813
Other	8,437		9,416
Gross deferred tax assets	90,705		90,440
Deferred tax liabilities:
Property and equipment	282,642		288,032
Prepaid expenses	6,906		6,774
Other	3,079		3,026
Gross deferred tax liabilities	292,627		297,832
Net deferred tax liability	$	201,922	$	207,392

These amounts are presented in the accompanying Consolidated Balance Sheets as of December 31 as follows (in thousands):



	December 31,
	2013		2012
Current deferred tax asset	$	25,315	$	25,139
Non-current deferred tax liability	227,237		232,531
Net deferred tax liability	$	201,922	$	207,392

We have not recorded a valuation allowance because we believe that all deferred tax assets are more likely than not to be realized as a result of our historical profitability, future taxable income and reversal of deferred tax liabilities.

Tax adjustments in 2013 for uncertain tax positions decreased the total amount of unrecognized tax benefits. We recognized a $1.8 million decrease in the net liability for unrecognized tax benefits for the year ended December 31, 2013 and a $0.5 million increase for the year ended December 31, 2012. We accrued interest expense of $0.3 million during 2013, excluding the reversal of accrued interest related to the adjustment of uncertain tax positions, and $0.2 million during 2012. If recognized, $5.5 million of unrecognized tax benefits as of December 31, 2013 and $7.4 million as of December 31, 2012 would impact our effective tax rate. Interest of $1.7 million as of December 31, 2013 and $3.6 million as of December 31, 2012 has been reflected as a component of the total liability. We expect no other significant increases or decreases for uncertain tax positions during the next twelve months.

The reconciliations of beginning and ending gross balances of unrecognized tax benefits for 2013 and 2012 are shown below (in thousands).



	December 31,
	2013			2012
Unrecognized tax benefits, beginning balance	$	11,563		$	10,827
Gross increases – tax positions in prior period	286			279
Gross increases – current-period tax positions	742			788
Settlements	(3,947		)	(331		)
Unrecognized tax benefits, ending balance	$	8,644		$	11,563

We file U.S. federal income tax returns, as well as income tax returns in various states and several foreign jurisdictions. The years 2010 through 2012 are open for examination by the U.S. Internal Revenue Service (“IRS”), and various years are open for examination by state and foreign tax authorities. State and foreign jurisdictional statutes of limitations generally range from three to four years.

In May 2010, the IRS began an audit of our 2007 and 2008 federal income tax returns. During the second quarter of 2012, we received a notice of deficiency including proposed penalties related to our like-kind exchange program for tractors and trailers. The proposed tax deficiency related to timing differences for recognition of gains on sales of equipment. Prior to holding a scheduled appeals conference in June 2013, the IRS appeals officer decided to no longer contest this issue based on the merits of our position. In July 2013, we entered into a stipulation with the IRS that there are no deficiencies in federal income tax and no penalties due for the tax years 2007 and 2008. The IRS decision has no impact on our financial condition, results of operations or income tax rate because we had not previously accrued a liability for any proposed interest or penalties related to this issue.