13) Income Taxes

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


	Years Ended September 30,
	2014		2013		2012
Current:
Federal	$	19,747	$	14,486	$	2,168
State		4,909		3,759		1,495
Deferred		659		1,676		12,913

	$	25,315	$	19,921	$	16,576

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,
	2014			2013			2012
Income from continuing operations before taxes	$	61,399		$	49,827		$	42,565

Provision for income taxes:
Tax at Federal statutory rate	$	21,490		$	17,440		$	14,898
Impact of Partnership loss not subject to federal income taxes		628			97			697
State taxes net of federal benefit		3,310			3,192			2,801
Permanent differences		57			37			28
Change in valuation allowance		—			(658	)		(14	)
Change in unrecognized tax benefit		(113	)		55			(1,669	)
Other		(57	)		(242	)		(165	)

	$	25,315		$	19,921		$	16,576

The components of the net deferred taxes for the years ended September 30, 2014 and September 30, 2013 using current tax rates are as follows (in thousands):


	September 30,
	2014		2013
Deferred tax assets:
Net operating loss carryforwards	$	5,490	$	6,760
Vacation accrual		2,970		2,580
Pension accrual		2,964		2,672
Allowance for bad debts		3,661		3,158
Fair value of derivative instruments		5,000		2,314
Insurance accrual		22,823		21,073
Inventory capitalization		865		941
Alternative minimum tax credit carryforward		261		261
Other, net		2,060		1,906

Total deferred tax assets	$	46,094	$	41,665

Deferred tax liabilities:
Property and equipment	$	2,383	$	2,225
Inventory costing method		256		—
Intangibles		30,495		26,285

Total deferred tax liabilities	$	33,134	$	28,510

Net deferred taxes	$	12,960	$	13,155

Based upon a review of a number of factors and all available evidence, including recent historical operating performance, the expectation of sustainable earnings, and the confidence that sufficient positive taxable income would continue in all tax jurisdictions for the foreseeable future, the Partnership concludes for the years ended September 30, 2014, and September 30, 2013, that it is more likely than not that our deferred tax assets will be fully realized, and as such has not recorded a valuation allowance.

As of January 1, 2014, Star Acquisitions, a wholly-owned subsidiary of the Partnership, had a Federal net operating loss carry forward (“NOLs”) of approximately $8.3 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, 2014, 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, 2013	$	784
Additions based on tax positions related to the current year		—
Additions for tax positions of prior years		116
Reduction for tax positions of prior years		—
Reductions due to lapse in statue of limitations/settlements		—

Balance at September 30, 2014	$	900

We believe that the total liability for unrecognized tax benefits will not materially change during the next 12 months ending September 30, 2015. 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.