13) Income Taxes

Income tax expense is comprised of the following for the indicated periods (in thousands):


	Years Ended September 30,
	2013		2012		2011
Current:
Federal	$	14,486	$	2,168	$	3,216
State		3,759		1,495		3,676
Deferred		1,676		12,913		15,831

	$	19,921	$	16,576	$	22,723

The provision for income taxes differs from income taxes computed at the Federal statutory rate as a result of the following (in thousands):


	Years Ended September 30,
	2013			2012			2011
Income from continuing operations before taxes	$	49,827		$	42,565		$	47,067

Provision for income taxes:
Tax at Federal statutory rate	$	17,440		$	14,898		$	16,473
Impact of Partnership income or loss not subject to federal income taxes		97			697			1,631
State taxes net of federal benefit		3,192			2,801			3,493
Permanent differences		37			28			54
Change in valuation allowance		(658	)		(14	)		672
Change in unrecognized tax benefit		55			(1,669	)		189
Other		(242	)		(165	)		211

	$	19,921		$	16,576		$	22,723

The components of the net deferred taxes and the related valuation allowance for the years ended September 30, 2013 and September 30, 2012 using current tax rates are as follows (in thousands):


	September 30,
	2013		2012
Deferred tax assets:
Net operating loss carryforwards	$	6,760	$	8,626
Vacation accrual		2,580		2,586
Pension accrual		2,672		5,201
Allowance for bad debts		3,158		2,845
Fair value of derivative instruments		2,314		—
Insurance accrual		21,073		18,085
Inventory		941		869
Alternative minimum tax credit carryforward		261		261
Other, net		1,906		2,188

Total deferred tax assets		41,665		40,661
Valuation allowance		—		(658	)

Net deferred tax assets	$	41,665	$	40,003

Deferred tax liabilities:
Property and equipment	$	2,225	$	1,947
Intangibles		26,285		20,164
Fair value of derivative instruments		—		484

Total deferred tax liabilities	$	28,510	$	22,595

Net deferred taxes	$	13,155	$	17,408

As of the calendar tax year ended December 31, 2012, Star Acquisitions, a wholly-owned subsidiary of the Partnership, had a Federal net operating loss carry forward (“NOLs”) of approximately $10.6 million. The Federal NOLs, which will expire between 2018 and 2024, are generally available to offset any future taxable income but are also subject to annual limitations of between $1.0 million and $2.2 million.

FASB ASC 740-10-05-6 Income Taxes, Uncertain Tax Position, provides financial statement accounting guidance for uncertainty in income taxes and tax positions taken or expected to be taken in a tax return. At September 30, 2013, we had unrecognized income tax benefits totaling $0.8 million including related accrued interest and penalties of $0.1 million. These unrecognized tax benefits are primarily the result of State tax uncertainties. If recognized, these tax benefits would be recorded as a benefit to the effective tax rate.

Tax Uncertainties (in thousands)


Balance at September 30, 2012	$	700
Additions based on tax positions related to the current year		—
Additions for tax positions of prior years		84
Reduction for tax positions of prior years		—
Reductions due to lapse in statue of limitations/settlements		—

Balance at September 30, 2013	$	784

We believe that the total liability for unrecognized tax benefits will not materially change during the next 12 months ending September 30, 2014. Our continuing practice is to recognize interest and penalties related to income tax matters as a component of income tax expense. We file U.S. Federal income tax returns and various state and local returns. A number of years may elapse before an uncertain tax position is audited and finally resolved. For our Federal income tax returns we have four tax years subject to examination. In our major state tax jurisdictions of New York, Connecticut, Pennsylvania and New Jersey, we have four, four, four, and five tax years, respectively, that are subject to examination. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, based on our assessment of many factors including past experience and interpretation of tax law, we believe that our provision for income taxes reflect the most probable outcome. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events.