13) Income Taxes

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


	Years Ended September 30,
	2015			2014		2013
Current:
Federal	$	28,793		$	19,747	$	14,486
State		8,143			4,909		3,759
Deferred		(4,101	)		659		1,676

	$	32,835		$	25,315	$	19,921

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,
	2015			2014			2013
Income from continuing operations before taxes	$	70,391		$	61,399		$	49,827


Provision for income taxes:
Tax at Federal statutory rate	$	24,637		$	21,490		$	17,440
Impact of Partnership loss not subject to federal income taxes		3,228			628			97
State taxes net of federal benefit		4,922			3,310			3,192
Permanent differences		78			57			37
Deferred tax benefit		(3,179	)		—			—
Change in valuation allowance		3,027			—			(658	)
Change in unrecognized tax benefit		81			(113	)		55
Other		41			(57	)		(242	)

	$	32,835		$	25,315		$	19,921

The components of the net deferred taxes for the years ended September 30, 2015 and September 30, 2014 using current tax rates are as follows (in thousands):


	September 30,
	2015			2014
Deferred tax assets:
Net operating loss carryforwards	$	7,367		$	5,490
Vacation accrual		3,295			2,970
Pension accrual		9,244			2,964
Allowance for bad debts		2,654			3,661
Fair value of derivative instruments		6,773			5,000
Insurance accrual		24,682			22,823
Inventory capitalization		1,038			865
Alternative minimum tax credit carryforward		266			261
Other, net		1,630			2,060

Total deferred tax assets		56,949			46,094
Valuation allowance		(3,027	)		—

Net deferred tax assets	$	53,922		$	46,094


Deferred tax liabilities:
Property and equipment	$	2,831		$	2,383
Inventory costing method		497			256
Intangibles		34,286			30,495

Total deferred tax liabilities	$	37,614		$	33,134

Net deferred taxes	$	16,308		$	12,960

In order to fully realize the net deferred tax assets, the Partnership’s corporate subsidiaries will need to generate future taxable income. A valuation allowance is recognized if, based on the weight of available evidence including historical tax losses, it is more likely than not that some or all of deferred tax assets will not be realized. The net change in the total valuation allowance for the fiscal year ended September 30, 2015 was an increase of $3.0 million. The valuation allowance did not change in the fiscal year ended September 30, 2014. 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, management concludes for the year ended September 30, 2015, it is more likely than not that the Partnership will realize the full benefit of its deferred tax assets, net of existing valuation allowance at September 30, 2015.

As of January 1, 2015, Star Acquisitions, a wholly-owned subsidiary of the Partnership, had a Federal net operating loss carry forward (“NOLs”) of approximately $6.1 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, 2015, we did not have unrecognized income tax benefits.


Tax Uncertainties (in thousands)

Balance at September 30, 2014	$	900
Additions for tax positions of prior years		124
Reductions due to final settlement of uncertain tax matter		(1,024	)

Balance at 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.