Note G — Income Taxes

A reconciliation of the federal statutory rate of 35% to actual follows:



	Year Ended December 31,
	2015		2014		2013
Tax at statutory rate	35.0	%	35.0	%	35.0	%
Goodwill impairment	(18.8	)%	—	%	—	%
State income taxes, net of federal benefit	2.8	%	1.8	%	2.6	%
Effect of foreign operations, net of foreign tax credits	(0.9	)%	0.3	%	0.4	%
Effect of current and prior year credits	0.4	%	(2.0	)%	—	%
Adjustments to deferred taxes	—	%	(2.4	)%	—	%
Other, net	(0.5	)%	(0.4	)%	0.2	%
Total	18.0	%	32.3	%	38.2	%

The components of income tax expense (benefit) are as follows:



	Year Ended December 31,
	2015			2014			2013
	(In thousands)
Current expense (benefit)
Federal	$	29,668		$	14,943		$	45,784
State	(6,432		)	4,032			5,888
Foreign	2,574			1,673			5,659
Total current	25,810			20,648			57,331
Deferred expense (benefit)
Federal	(175,842		)	24,556			20,721
State	(39,331		)	(90		)	2,521
Foreign	(589		)	817			(1,134		)
Total deferred	(215,762		)	25,283			22,108
Total	$	(189,952	)	$	45,931		$	79,439

Deferred tax assets (liabilities) consist of the following:



	December 31,
	2015			2014
	(In thousands)
Deferred tax assets
State net operating loss carryforwards	$	16,032		$	16,937
Foreign net operating loss carryforwards	20,396			18,182
Accrued liabilities	62,115			72,058
Intangible assets	56,609			—
Property assets	3,308			—
Other assets including credits	5,413			6,993
Foreign tax credit carryforwards	13,576			12,306
	177,449			126,476
Valuation allowance	(31,829		)	(24,709		)
Deferred tax liabilities
Rental merchandise	(263,158		)	(285,371		)
Property assets	—			(2,222		)
Intangible assets	—			(157,527		)
	(263,158		)	(445,120		)
Net deferred taxes	$	(117,538	)	$	(343,353	)

At December 31, 2015, there are approximately $355.9 million of state NOL carryforwards expiring between 2016 and 2033, offset by a valuation allowance of $16.1 million. Of the total remaining state NOL carryforwards, approximately 17.0% represent acquired NOLs. Utilization of these NOLs is subject to applicable annual limitations for U.S. state tax purposes. At December 31, 2015, the Mexico NOL carryforwards were approximately $60.4 million, which expire between 2020 and 2025, and are offset with a full valuation allowance. The Puerto Rico NOL is $5.8 million and it will expire in 2025. In addition, at December 31, 2015, we also had approximately $13.6 million in foreign tax credit (“FTC”) carryforwards expiring between 2020 and 2025, offset by a valuation allowance of $5.7 million. We establish a valuation allowance to the extent we consider it more likely than not that the deferred tax assets attributable to our NOLs, FTCs or other deferred tax assets will not be recovered.

We are subject to federal, state, local and foreign income taxes. Along with our U.S. subsidiaries, we file a U.S. federal consolidated income tax return. With few exceptions, we are no longer subject to U.S. federal, state, foreign and local income tax examinations by tax authorities for years before 2012. We are currently under examination in various states. We do not anticipate that adjustments as a result of these audits, if any, will result in a material change to our consolidated statement of earnings, financial condition, statement of cash flows or earnings per share.

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



	Year Ended December 31,
	2015			2014			2013
Balance at beginning of year	$	13,376		$	13,173		$	10,167
Additions based on tax positions related to current year	1,508			425			50
Additions for tax positions of prior years	20,684			2,400			3,742
Reductions for tax positions of prior years	(8,354		)	(2,225		)	(786		)
Settlements	(50		)	(397		)	—
Balance at end of year	$	27,164		$	13,376		$	13,173

Included in the balance of unrecognized tax benefits at December 31, 2015, is $24.4 million, net of federal benefit, which, if ultimately recognized, will affect our annual effective tax rate.

As of December 31, 2015, we have accrued approximately $1.9 million for the payment of interest for uncertain tax positions. During the year ended December 31, 2015, we recorded $786,000 of interest income primarily related to the reversal of accrued interest for a matter settled during the year in our favor, partially offset by interest expense of approximately $654,000 for remaining uncertain tax positions, both of which are excluded from the reconciliation of unrecognized tax benefits presented above.