NOTE 12: INCOME TAXES

The following table presents the significant components of the income tax provision from continuing operations:



	Fiscal Year Ended September 30,
	2015			2014			2013

	(in thousands)
Current:
Federal	$	(6,149	)	$	10,060		$	23,437
State and foreign	2,000			(11,132		)	593
	(4,149		)	(1,072		)	24,030
Deferred:
Federal	(5,643		)	(1,220		)	(17,689		)
State and foreign	(16,903		)	(4,954		)	2,756
	(22,546		)	(6,174		)	(14,933		)
Total income tax (benefit) expense	$	(26,695	)	$	(7,246	)	$	9,097

The following table presents a reconciliation of income taxes calculated at the statutory rate and the provision for income taxes attributable to continuing operations:



	Fiscal Year Ended September 30,
	2015			2014			2013

	(in thousands)
Income taxes (benefit) at the federal statutory rate	$	(31,798	)	$	(3,933	)	$	11,071
Non-deductible expense related to incentive stock options	13			—			—
State income tax, net of federal benefit	(701		)	(1,543		)	271
Change in valuation allowance	6,055			481			680
Federal tax credits	(4,567		)	(124		)	(314		)
Foreign tax credit and valuation allowance	(3,440		)	(2,174		)	(3,263		)
Tax basis balance sheet adjustment	4,488			—			—
Effect of permanently reinvesting foreign earnings	880			(445		)	86
Other	2,375			492			566
Total income tax (benefit) expense	$	(26,695	)	$	(7,246	)	$	9,097
Effective tax rate	29		%	64		%	29		%

The amount of income tax allocated to discontinued operations was a benefit of $9.5 million and $7.3 million during fiscal 2015 and 2014, respectively, and an expense of $10.4 million during fiscal 2013.

The following table shows significant components of our deferred tax assets and liabilities:



	September 30,
	2015			2014

	(in thousands)
Deferred tax assets:
Albemarle & Bond loss carryforward	$	—		$	4,067
Cash Converters International impairment	10,438			—
Tax over book inventory	11,402			15,599
Accrued liabilities	31,034			16,536
Pawn service charges receivable	—			3,450
Book over tax depreciation	4,988			—
Book over tax amortization	—			1,066
Prepaid expenses	2,316			—
Stock compensation	431			—
Foreign tax credit	4,567			—
Foreign income and dividends	9,767			—
State and foreign net operating loss carry-forwards	14,904			198
Total deferred tax assets	89,847			40,916
Deferred tax liabilities:
Tax over book amortization	14,507			—
Foreign income and dividends	—			476
Tax over book depreciation	—			8,299
Stock compensation	—			875
Prepaid expenses	—			1,388
Total deferred tax liabilities	14,507			11,038
Net deferred tax asset	75,340			29,878
Valuation allowance	(6,219		)	(164		)
Net deferred tax asset	$	69,121		$	29,714

Deferred taxes are not provided for temporary differences of approximately $15.9 million representing losses of non-United States subsidiaries intended to be permanently reinvested outside the United States. We estimate that, upon distribution of our share of these earnings, we would be subject to United States income taxes of approximately $0.9 million as of September 30, 2015. We provided deferred income taxes on all undistributed earnings from Cash Converters International. Any taxes paid to foreign governments on these earnings may be used in whole or in part as credits against the United States tax on any dividends distributed from such earnings.

A full valuation allowance was recognized on the net operating loss carryforward of one of our Canadian operations as it is more likely than not that the deferred tax asset will not be realized based on the weight of available evidence. This net operating loss carryforward totaling $20.7 million will expire during the years 2030 to 2036.

No valuation allowance was recognized on the net operating loss carryforward totaling $28.9 million of one of our Mexican operations as it is more likely than not that the loss will be fully utilized based on the weight of available evidence. This net operating loss carryforward will expire in 2025.

Additionally, we have a $4.6 million foreign tax credit that will expire in 2025 that we expect is more likely than not to be fully utilized based on the weight of available evidence

We recognize interest and penalties related to unrecognized tax benefits as “Income tax expense” in our consolidated statements of operations, which were nominal during fiscal 2015, 2014 and 2013.

We are subject to United States, Mexico, United Kingdom and Canada income taxes as well as income taxes levied by various state and local jurisdictions. With few exceptions, we are no longer subject to examinations by tax authorities for years before the tax year ended September 30, 2010. Management believes that adequate provisions have been made for any adjustments that may result from tax examinations.