
14.	Income Taxes

Income from continuing operations for the three years ended December 31 was as follows:



	2014		2013		2012
U.S. operations	$	52,315	$	54,702	$	47,220
Foreign operations	17,223		5,176		12,670
Total	$	69,538	$	59,878	$	59,890

Income tax expense (benefit) for the three years ended December 31 was as follows:



	2014			2013			2012
Current:
Federal	$	11,903		$	13,551		$	8,158
Foreign	3,373			3,567			4,633
State	1,543			1,136			1,089
	$	16,819		$	18,254		$	13,880
Deferred:
Federal	$	2,650		$	1,856		$	4,423
Foreign	(524		)	(424		)	(126		)
State	(58		)	(39		)	129
	$	2,068		$	1,393		$	4,426
Total:
Federal	$	14,553		$	15,407		$	12,581
Foreign	2,849			3,143			4,507
State	1,485			1,097			1,218
Total Income Tax Expense	$	18,887		$	19,647		$	18,306

U.S. income taxes have not been provided on approximately $28,434 of undistributed earnings of non-U.S. subsidiaries. We do not have any plans to repatriate the undistributed earnings. Any repatriation from foreign subsidiaries that would result in incremental U.S. taxation is not being considered. It is management’s belief that reinvesting these earnings outside the U.S. is the most efficient use of capital.

We have Dutch and German tax loss carryforwards of approximately $13,012 and $13,492, respectively. If unutilized, the Dutch tax loss carryforward will expire after 9 years. The German tax loss carryforward has no expiration date. Because of the uncertainty regarding realization of the Dutch tax loss carryforward, a valuation allowance was established. This valuation allowance decreased in 2014 due to results of operations.

We have Dutch foreign tax credit carryforwards of $1,043. Because of the uncertainty regarding utilization of the Dutch foreign tax credit carryforward, a valuation allowance was established.

A valuation allowance for the remaining deferred tax assets is not required since it is more likely than not that they will be realized through carryback to taxable income in prior years, future reversals of existing taxable temporary differences and future taxable income.

Our effective income tax rate varied from the U.S. federal statutory tax rate for the three years ended December 31 as follows:



	2014		2013		2012
Tax at statutory rate	35.0	%	35.0	%	35.0	%
Increases (decreases) in the tax rate from:
State and local taxes, net of federal benefit	1.7		1.7		1.0
Effect of foreign operations	(4.6	)	(3.3	)	(6.2	)
Effect of changes in valuation allowances	(0.9	)	3.7		2.3
Domestic production activities deduction	(1.6	)	(1.6	)	(1.5	)
Other, net	(2.4	)	(2.7	)	—
Effective income tax rate	27.2	%	32.8	%	30.6	%

Deferred tax assets and liabilities were comprised of the following as of December 31:



	2014			2013
Deferred Tax Assets:
Employee wages and benefits, principally due to accruals for financial reporting purposes	16,696			14,831
Warranty reserves accrued for financial reporting purposes	2,895			2,803
Receivables, principally due to allowance for doubtful accounts and tax accounting method for equipment rentals	1,549			1,593
Tax loss carryforwards	6,845			8,696
Tax credit carryforwards	1,043			4,078
Other	1,246			2,523
Gross Deferred Tax Assets	$	30,274		$	34,524
Less: valuation allowance	(5,699		)	(7,243		)
Total Net Deferred Tax Assets	$	24,575		$	27,281
Deferred Tax Liabilities:
Inventories, principally due to changes in inventory reserves	$	305		$	306
Property, Plant and Equipment, principally due to differences in depreciation and related gains	6,745			7,446
Goodwill and Intangible Assets	5,611			6,253
Total Deferred Tax Liabilities	$	12,661		$	14,005
Net Deferred Tax Assets	$	11,914		$	13,276

The valuation allowance at December 31, 2014 principally applies to Dutch tax loss and tax credit carryforwards that, in the opinion of management, are more likely than not to expire unutilized. However, to the extent that tax benefits related to these carryforwards are realized in the future, the reduction in the valuation allowance will reduce income tax expense.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



	2014			2013
Balance at January 1,	$	3,660		$	3,480
Increases as a result of tax positions taken during a prior period	—			155
Increases as a result of tax positions taken during the current year	610			508
Decreases relating to settlement with tax authorities	(6		)	—
Reductions as a result of a lapse of the applicable statute of limitations	(1,033		)	(295		)
Decreases as a result of foreign currency fluctuations	(202		)	(188		)
Balance at December 31,	$	3,029		$	3,660

Included in the balance of unrecognized tax benefits at December 31, 2014 and 2013 are potential benefits of $2,684 and $3,384, respectively, that if recognized, would affect the effective tax rate from continuing operations.

We recognize potential accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. In addition to the liability of $3,029 and $3,660 for unrecognized tax benefits as of December 31, 2014 and 2013, there was approximately $557 and $525, respectively, for accrued interest and penalties. To the extent interest and penalties are not assessed with respect to uncertain tax positions, the amounts accrued will be revised and reflected as an adjustment to income tax expense.

We and our subsidiaries are subject to U.S. federal income tax as well as income tax of numerous state and foreign jurisdictions. We are generally no longer subject to U.S. federal tax examinations for taxable years before 2011 and, with limited exceptions, state and foreign income tax examinations for taxable years before 2007.

We are currently undergoing income tax examinations in various state and foreign jurisdictions covering 2007 to 2011. Although the final outcome of these examinations cannot be currently determined, we believe that we have adequate reserves with respect to these examinations.

We do not anticipate that total unrecognized tax benefits will change significantly within the next 12 months.