H. INCOME TAXES:

The following table summarizes the provision for income taxes from continuing operations:



	For Years Ended December 31 (in thousands)
	2016		2015		2014
Current:
Federal	$	14,391	$	21,346	$	15,190
State		656		412		1,260
		15,047		21,758		16,450
Deferred:
Federal		5,799		(989)		(651)
State		561		(9)		(354)
		6,360		(998)		(1,005)
Total tax provision	$	21,407	$	20,760	$	15,445

The effective rate of the provision for income taxes on earnings from continuing operations before 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
	2016	2015	2014
Statutory rate	35.0%	35.0%	35.0%
State tax, net of federal benefit	1.2%	0.4%	1.3%
Tax exempt interest and dividends	(0.2%)	0.0%	(0.1%)
Other	(2.2%)	(2.4%)	(2.8%)
Effective rate	33.8%	33.0%	33.4%

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)
	2016		2015
Deferred tax assets
Goodwill and other intangibles	$	-	$	4,915
Doubtful accounts		2,878		3,561
Insurance (primarily product liability)		1,594		1,934
Vacation		893		993
Inventory		628		520
Deferred compensation		338		304
Other		430		549
Total deferred tax assets		6,761		12,776

Deferred tax liabilities
Depreciation		8,067		9,440
Goodwill and other intangibles		1,698		-
Total deferred tax liabilities		9,765		9,440

Net deferred tax assets (liabilities)	$	(3,004)	$	3,336

The Company establishes tax reserves in accordance with FASB ASC 740, Income Taxes. As of December 31, 2016, the carrying amount of the Company’s gross unrecognized tax benefits was $288,000 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, 2016 and 2015:



	(In thousands)
	2016		2015
Balance at January 1	$	312	$	238
Increases for tax positions taken related to the current year		80		83
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		(96)		-
Balance at December 31	$	288	$	312

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 tax refunds is included in tax expense. During the years ended December 31, 2016 and 2015, the Company accrued approximately $15,000 and $13,000 in interest expense, respectively.

The Company is subject to U.S. federal income tax as well as income taxes of multiple states. During June of 2016, the Internal Revenue Service completed its audits of the tax years 2012 and 2013. As a result of the audits, the tax amortization period of certain intangible assets was shortened. 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.