INCOME TAXES

Income before income tax expense consists of the following (in thousands):



	2015		2014		2013
U.S. operations	$	77,996	$	61,353	$	32,328
Foreign operations	25,423		14,397		6,574
Total	$	103,419	$	75,750	$	38,902

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



	2015			2014			2013
Current:
Federal	$	24,988		$	20,154		$	6,665
State	6,101			4,472			1,903
Foreign	6,224			4,808			3,621
Total current	37,313			29,434			12,189
Deferred:
Federal	(1,098		)	(1,315		)	4,135
State	505			753			607
Foreign	751			293			(1,213		)
Total deferred	158			(269		)	3,529
Income tax expense	$	37,471		$	29,165		$	15,718

The following table sets forth the tax effects of temporary differences that give rise to the deferred tax assets and liabilities (in thousands):



	December 31, 2015			December 31, 2014
Deferred tax assets
Accounts receivable, principally due to allowance for doubtful accounts	$	2,949		$	2,750
Inventories	4,707			3,883
Net operating loss carryforwards	7,260			8,626
Accrued pension	25,939			27,598
Stock-based compensation	5,813			5,794
Compensation-related accruals	5,131			4,218
Warranty	3,245			2,893
Obligation for postretirement benefits other than pension	2,131			3,706
Accrued liabilities and other items	8,195			9,247
Gross deferred tax assets	65,370			68,715
Valuation allowance	(6,317		)	(7,901		)
Net deferred tax assets	59,053			60,814
Deferred tax liabilities:
Intangibles	84,931			86,464
Plant and equipment	29,596			22,685
Gross deferred tax liabilities	114,527			109,149
Net deferred tax liabilities	$	(55,474	)	$	(48,335	)

Income taxes paid, net of refunds received, by the Company during 2015, 2014, and 2013, totaled $40.8 million, $18.6 million, and $18.3 million, respectively.

As of December 31, 2015, the Company had net operating loss carryforwards totaling approximately $29.4 million in Brazil, the United Kingdom, and Germany. The net operating loss carryforwards may be carried forward indefinitely. The Company provides a valuation allowance against certain net foreign deferred tax assets (principally the net operating loss carryforwards) due to the uncertainty that they can be realized.

The following table sets forth a reconciliation of the statutory federal income tax rate to the effective income tax rate:



	2015		2014		2013
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
Increase (decrease) in the tax rate resulting from:
State taxes, net of federal effect	4.4	%	3.5	%	3.7	%
Effect of tax rates of other countries	(2.4	)%	(0.4	)%	0.2	%
Section 199 deduction	(0.9	)%	(1.2	)%	(1.7	)%
Change in Contingency Reserve	(0.2	)%	0.7	%	2.0	%
Limitation on deduction of officer’s compensation	0.5	%	1.5	%	2.6	%
Other	(0.2	)%	(0.6	)%	(1.4	)%
Effective tax rate	36.2	%	38.5	%	40.4	%

As of December 31, 2015, there is $104.2 million of cumulative earnings overseas. Approximately $12.4 million has been subject to tax under the U.S. Subpart F of Section 954 provisions. Accordingly, $91.8 million of earnings have not been subject to U.S. tax and are reinvested indefinitely. It is not practical to estimate the amount of U.S. tax that would result upon the eventual repatriation of such earnings.

As of December 31, 2015 and 2014, the Company had unrecognized tax benefits of approximately $4.4 million and $4.9 million, respectively. The entire amount of the unrecognized tax benefits would reduce the effective tax rate if recognized.

The following table summarizes the activity related to the Company's unrecognized tax benefits during 2015, 2014, and 2013 (in thousands):



	2015			2014			2013
Balance, beginning of the year	$	4,922		$	4,611		$	4,039
Additions for tax position related to the current year	125			125			691
Additions for tax position related to the prior year	134			350			—
Decreases for tax position related to the prior year	(774		)	—			—
Prior year reductions:
Lapse of statute of limitations	—			(164		)	(119		)
Balance, end of the year	$	4,407		$	4,922		$	4,611

Included in the unrecognized tax benefits at December 31, 2015 is $3.0 million associated with errors on previously reported income tax returns. It is anticipated that amended returns will be filed to report the incremental taxable income within the next three months.

During 2015, 2014, and 2013, respectively, the Company recognized approximately $0.1 million, $0.2 million and $0.2 million of interest and penalties. The Company has accrued approximately $0.5 million and $0.5 million for the payment of interest and penalties as of December 31, 2015 and 2014, respectively.

As of December 31, 2015, the Company is subject to U.S. Federal Income Tax examination for the tax years 2012 through 2015, and to non-U.S. income tax examination for the tax years 2006 to 2015. In addition, the Company is subject to state and local income tax examinations for the tax years 2006 through 2015.