Income Taxes

The provision for income taxes from continuing operations consists of the following (in thousands):



	YEARS ENDED DECEMBER 31,
	2016		2015		2014
Current:
Federal	$	16,677	$	22,265	$	15,782
State	3,829		4,632		2,527
Deferred	2,676		1,951		250
	$	23,182	$	28,848	$	18,559

The provision for income taxes from continuing operations shown above varied from the statutory federal income tax rate for those periods as follows:



	YEARS ENDED DECEMBER 31,
	2016		2015		2014
Federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of Federal tax effect	6.8		6.1		3.2
Non-deductible compensation	0.2		—		1.1
Non-deductible meals and entertainment	1.0		0.7		1.1
Other	(1.6	)	(1.5	)	(1.7	)
Effective tax rate	41.4	%	40.3	%	38.7	%

The 2016 rate was unfavorably impacted by certain one-time non-cash adjustments. The 2015 rate was unfavorably impacted by a change in the overall mix of income in the various state jurisdictions and the increase in particular uncertain tax positions.

Deferred income tax assets and liabilities are composed of the following (in thousands):



	DECEMBER 31,
	2016			2015
Deferred taxes, current:
Assets:
Accounts receivable reserves	$	812		$	982
Accrued liabilities	3,005			2,753
Deferred compensation obligation	1,060			895
Pension and post-retirement benefit plans	755			—
Other	11			74
Deferred tax assets, current	5,643			4,704
Liabilities:
Prepaid expenses	(260		)	(186		)
Fixed assets	(232		)	—
Other	(352		)	—
Deferred tax asset, net – current	4,799			4,518
Deferred taxes, non-current:
Assets:
Accrued liabilities	395			613
Deferred compensation obligation	8,146			6,956
Stock-based compensation	2,196			1,817
Pension and post-retirement benefit plans	5,274			5,303
Goodwill and intangible assets	3,869			7,543
Other	219			320
Deferred tax assets, non-current	20,099			22,552
Liabilities:
Fixed assets	(1,361		)	(1,198		)
Other	(3		)	(331		)
Deferred tax liabilities, non-current	(1,364		)	(1,529		)
Valuation allowance	(85		)	(85		)
Deferred tax asset, net – non-current	18,650			20,938
Net deferred tax asset	$	23,449		$	25,456

At December 31, 2016, Kforce had approximately $5.6 million of state tax net operating losses (“NOLs”) which will be carried forward to be offset against future state taxable income. The state tax NOLs expire in varying amounts through 2033.

In evaluating the realizability of Kforce’s deferred tax assets, management assesses whether it is more likely than not that some portion, or all, of the deferred tax assets, will be realized. Management considers, among other things, the ability to generate future taxable income (including reversals of deferred tax liabilities) during the periods in which the related temporary differences will become deductible.

Kforce is periodically subject to IRS audits, as well as state and other local income tax audits for various tax years. During 2016 and 2015, there were no on-going IRS examinations. Although Kforce has not experienced any material liabilities in the past due to income tax audits, Kforce can make no assurances concerning any future income tax audits.

Uncertain Income Tax Positions

The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended (in thousands):



	DECEMBER 31,
	2016			2015			2014
Beginning balance	$	788		$	278		$	403
Additions for tax positions of prior years	454			625			90
Reductions for tax positions of prior years	(25		)	(8		)	(11		)
Lapse of statute of limitations	(102		)	(25		)	(24		)
Settlements	—			(82		)	(180		)
Ending balance	$	1,115		$	788		$	278

As of December 31, 2016, the amount of unrecognized tax benefit that would impact the effective tax rate, if recognized, is $0.7 million. Kforce does not expect any significant changes to its uncertain tax positions in the next 12 months.

Kforce and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states. Kforce Global Solutions, Inc. files income tax returns in the Philippines. With a few exceptions, Kforce is no longer subject to federal, state, local, or non-U.S. income tax examinations by tax authorities for years before 2012.