H. INCOME TAXES:

The following table summarizes the provision for income taxes:



	For Years Ended December 31 (in thousands)
	2015		2014		2013
Current:
Federal	$	20,568	$	13,448	$	20,224
State		724		1,377		(3,345)
		21,292		14,825		16,879
Deferred:
Federal		(989)		(651)		(531)
State		(9)		(354)		745
		(998)		(1,005)		214
Total tax provision	$	20,294	$	13,820	$	17,093

The effective rate of the provision for income taxes as shown in the Consolidated Statements of Comprehensive Income differs from the applicable statutory federal income tax rate for the following reasons:



	Percent of Pre-tax Income
	2015	2014	2013
Statutory rate	35.0%	35.0%	35.0%
State tax, net of federal benefit	0.8%	1.6%	(2.9%)
Tax exempt interest and dividends	0.0%	(0.1%)	(0.2%)
Other	(2.7%)	(2.5%)	(2.6%)
Effective rate	33.1%	34.0%	29.3%

As shown in the preceding table, the effective tax rate for 2013 is lower than rates for the other periods primarily as a result of a revision to the filing approach used for one of the states in which the Company files returns. The revised filing approach resulted in a tax refund of approximately $4,000,000 related to tax years 2009, 2010, and 2011, which was recorded during 2013.

Deferred tax assets and liabilities are recorded based on the differences between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes. The tax effects of the cumulative temporary differences resulting in deferred tax assets and liabilities are as follows at December 31:



	(In thousands)
	2015		2014
Deferred tax assets
Goodwill and other intangibles	$	4,915	$	4,239
Doubtful accounts		3,561		3,365
Insurance (primarily product liability)		1,934		1,994
Vacation		993		954
Inventory		520		778
Other		847		905
Total deferred tax assets		12,770		12,235

Deferred tax liabilities
Depreciation		9,440		8,529
State tax refunds		-		1,371
Other		(6)		-
Total deferred tax liabilities		9,434		9,900

Net deferred tax assets (liabilities)	$	3,336	$	2,335

The Company establishes tax reserves in accordance with FASB ASC 740, Income Taxes. As of December 31, 2015, the carrying amount of the Company’s gross unrecognized tax benefits was $312,000 which, if recognized, would affect the Company’s effective income tax rate.

The following is a reconciliation of the Company’s unrecognized tax benefits for the years ended December 31, 2015 and 2014:



	(In thousands)
	2015		2014
Balance at January 1	$	238	$	204
Increases for tax positions taken related to the current year		83		66
Increases for tax positions taken related to prior years		23		-
Decreases for tax positions taken related to prior years		-		(8)
Lapse of statute of limitations		(32)		-
Settlements		-		(24)
Balance at December 31	$	312	$	238

It is the Company’s practice to include tax related interest expense, interest income, and penalties in tax expense. For the year ended December 31, 2015, $482,000 of interest income associated with the tax refund mentioned above is included in tax expense. During the years ended December 31, 2015 and 2014, the Company accrued approximately $13,000 and $9,000 in interest expense, respectively.

The Company is subject to U.S. federal income tax as well as income taxes of multiple states. The Company is currently under audit by the Internal Revenue Service for the tax years 2012 and 2013. During January of 2015, the state of Wisconsin completed its audits of the tax years 2009 through 2012. For all states in which it does business, the Company is subject to state audit statutes.