Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Before Income Taxes

Polaris’ income from continuing operations before income taxes was generated from its United States and foreign operations as follows (in thousands):

	For the Years Ended December 31,
	2013		2012		2011
United States	$	535,265	$	458,635	$	329,060
Foreign	39,164		21,208		17,566
Income from continuing operations before income taxes	$	574,429	$	479,843	$	346,626

Components of Provision for Income Taxes

Components of Polaris’ provision for income taxes for continuing operations are as follows (in thousands):

	For the Years Ended December 31,
	2013			2012			2011
Current:
Federal	$	167,690		$	169,833		$	113,406
State	12,942			15,366			10,629
Foreign	15,457			8,593			6,374
Deferred	(2,729		)	(26,259		)	(11,358		)
Total provision for income taxes for continuing operations	$	193,360		$	167,533		$	119,051

Reconciliation of Federal Statutory Income Tax Rate to Effective Tax Rate

Reconciliation of the Federal statutory income tax rate to the effective tax rate is as follows:

	For the Years Ended December 31,
	2013		2012		2011
Federal statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	1.5		1.8		1.8
Domestic manufacturing deduction	(1.0	)	(1.5	)	(1.9	)
Research and development tax credit	(2.2	)	—		(0.8	)
Valuation allowance for foreign subsidiaries net operating losses	0.3		—		0.5
Other permanent differences	0.1		(0.4	)	(0.3	)
Effective income tax rate for continuing operations	33.7	%	34.9	%	34.3	%

Net Deferred Income Taxes

The net deferred income taxes consist of the following (in thousands):

	December 31,
	2013			2012
Current deferred income taxes:
Inventories	$	6,306		$	7,277
Accrued expenses	87,157			78,164
Derivative instruments	(107		)	851
Total current	93,356			86,292
Noncurrent deferred income taxes:
Cost in excess of net assets of business acquired	(13,594		)	5,193
Property and equipment	(36,069		)	(21,656		)
Compensation payable in common stock	42,385			40,329
Net unrealized gains in other comprehensive income	143			(1,698		)
Net operating loss carryforwards	5,782			4,744
Valuation allowance	(5,059		)	(4,523		)
Total noncurrent	(6,412		)	22,389
Total net deferred income tax asset	$	86,944		$	108,681

Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):

	For the Years Ended December 31,
	2013			2012
Balance at January 1,	$	6,704		$	7,341
Increases due to acquisition opening balance sheet positions	6,420			—
Gross increases for tax positions of prior years	561			83
Gross increases for tax positions of current year	3,755			938
Decreases due to settlements	(3,310		)	(1,658		)
Decreases for lapse of statute of limitations	(1,344		)	—
Currency translation effect on foreign balances	413			—
Balance at December 31,	13,199			6,704
Reserves related to potential interest at December 31,	1,093			359
Unrecognized tax benefits at December 31,	$	14,292		$	7,063