Income Taxes

The Company files a consolidated federal income tax return. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company applies recognition thresholds and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return as it relates to accounting for uncertainty in income taxes. In addition, it is the Company’s policy to recognize interest accrued and penalties, if any, related to unrecognized benefits as income tax expense in its statement of earnings. The Company does not expect significant changes to its tax positions or liability for tax uncertainties during the next 12 months.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations for years prior to 2012.

Total income taxes expense (benefit) for the years ended December 31, 2015, 2014 and 2013 was included within the following sections of the consolidated financial statements as follows (in thousands):



	2015			2014			2013
Earnings from continuing operations	$	113,790		$	48,103		$	48,654
Discontinued operations	(694		)	(643		)	9
Shareholders’ equity	(2,227		)	(3,177		)	(7,381		)
Total	$	110,869		$	44,283		$	41,282

Income tax expense from continuing operations for the years ended December 31, 2015, 2014 and 2013 was comprised of the following (in thousands):



	2015		2014		2013
Current:
Federal	$	83,228	$	8,640	$	7,895
State	14,268		4,396		3,598
Deferred:
Federal	11,715		27,505		31,509
State	4,579		7,562		5,652
Income tax expense	$	113,790	$	48,103	$	48,654

Income tax expense from continuing operations for the years ended December 31, 2015, 2014 and 2013 differed from the amount computed by applying the U.S. federal income tax rate of 35% to earnings before income taxes as a result of the following (in thousands):



	2015			2014			2013
Statutory federal income tax	$	173,572		$	102,967		$	106,101
Less federal income tax assumed directly by noncontrolling interests	(76,364		)	(66,783		)	(64,219		)
State income taxes, net of federal income tax benefit	11,604			6,616			5,539
Increase in valuation allowances	317			4,662			924
Interest related to unrecognized tax benefits	(548		)	(161		)	(155		)
Other	5,209			802			464
Income tax expense	$	113,790		$	48,103		$	48,654

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. Decreases in interest and penalty obligations of $0.2 million, $0.1 million and $0.2 million were recognized in the consolidated statement of earnings for the years ended December 31, 2015, 2014 and 2013, respectively, resulting in a total recognition of interest and penalty obligations of approximately $0.8 million and $1.2 million in the consolidated balance sheet at December 31, 2015 and 2014, respectively.

The Company primarily has unrecognized tax benefits that represent an amortization deduction which is temporary in nature. A reconciliation of the beginning and ending amount of the liability associated with unrecognized tax benefits for the years ended December 31, 2015, 2014 and 2013 is as follows (in thousands):



	2015			2014			2013
Balance at beginning of year	$	7,336		$	6,330		$	9,235
Additions for tax positions of current year	—			204			46
Increases (decreases) for tax positions taken during a prior period	(1,006		)	1,069			—
Lapse of statute of limitations	(3,178		)	(267		)	(2,951		)
Balance at end of year	$	3,152		$	7,336		$	6,330

The Company believes that the total amount of increases in unrecognized tax benefits within the next 12 months is not considered significant. The total amount of unrecognized tax benefits that would affect the Company’s effective tax rate if recognized is approximately $0.1 million.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2015 and 2014 were as follows (in thousands):



	2015			2014
Deferred tax assets:
Allowance for uncollectible accounts	$	3,276		$	1,096
Accrued assets and other	36,600			27,537
Share-based compensation	10,710			7,719
Interest on unrecognized tax benefits	113			245
Accrued liabilities and other	4,080			3,931
Medical malpractice	19,035			16,240
Operating and capital loss carryforwards	29,718			22,709
Valuation allowances	(21,814		)	(17,457		)
Total deferred tax assets	81,718			62,020
Deferred tax liabilities:
Prepaid expenses	1,789			2,435
Property and equipment, principally due to differences in depreciation	16,787			15,235
Goodwill, intangible assets and other, principally due to differences in amortization	762,640			655,358
Total deferred tax liabilities	781,216			673,028
Net deferred tax liabilities	$	699,498		$	611,008

The Company has provided valuation allowances on its gross deferred tax assets to the extent that management does not believe that it is more likely than not that such asset will be realized. Capital loss carryforwards began to expire in 2014, and state net operating losses began to expire in 2015.