INCOME TAXES

Income Tax Expense

Income taxes consisted of the following:



	Fiscal Year Ended March 31,
	2014			2013			2012
Current
United States	$	1,433		$	(3,465	)	$	2,871
State and local	507			682			(2,064		)
Foreign	75,770			57,355			53,582
	77,710			54,572			54,389
Deferred
United States	1,686			1,746			4,796
State and local	275			279			444
Foreign	(4,136		)	9,769			1,530
	(2,175		)	11,794			6,770
Total	$	75,535		$	66,366		$	61,159

Foreign taxes include U.S. tax expense on earnings of foreign subsidiaries. The Company has no undistributed earnings of consolidated foreign subsidiaries that are classified as permanently reinvested.

Consolidated Effective Income Tax Rate

A reconciliation of the statutory U.S. federal rate to the Company’s effective income tax rate is as follows:



	Fiscal Year Ended March 31,
	2014		2013		2012
Statutory tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	0.2		0.3		(0.7	)
Nondeductible European Commission fine	—		—		8.6
Dividends received from deconsolidated operations	(0.9	)	(1.5	)	(1.8	)
Other, including changes in liabilities recorded for uncertain tax positions	(1.6	)	(1.8	)	(3.3	)
Effective income tax rate	32.7	%	32.0	%	37.8	%

The Company amended certain prior year state income tax returns during fiscal year 2012. The related income tax refunds reduced income tax expense and the consolidated effective tax rate for the year.

Components of Income Before Income Taxes and Other Items

The U.S. and foreign components of income before income taxes and other items were as follows:



	Fiscal Year Ended March 31,
	2014		2013			2012
United States	$	9,156	$	(4,161	)	$	21,773
Foreign	221,534		211,446			140,205
Total	$	230,690	$	207,285		$	161,978

Deferred Income Tax Liabilities and Assets

Significant components of deferred tax liabilities and assets were as follows:



	March 31,
	2014			2013
Liabilities
Foreign withholding taxes	$	30,147		$	25,074
Undistributed earnings	23,865			32,346
Goodwill	30,851			30,851
All other	12,471			14,099
Total deferred tax liabilities	$	97,334		$	102,370

Assets
Employee benefit plans	$	40,816		$	60,397
Reserves and accruals	32,248			32,795
Deferred income	4,013			4,732
Deferred compensation	1,035			3,616
All other	7,784			12,292
Total deferred tax assets	85,896			113,832
Valuation allowance	(1,252		)	(1,252		)
Net deferred tax assets	$	84,644		$	112,580

At March 31, 2014, the Company had no material net operating loss carryforwards in either its domestic or foreign operations.

Combined Income Tax Expense (Benefit)

The combined income tax expense (benefit) allocable to continuing operations, other comprehensive income, and direct adjustments to shareholders' equity was as follows:



	Fiscal Year Ended March 31,
	2014			2013			2012
Continuing operations	$	75,535		$	66,366		$	61,159
Other comprehensive income	22,190			2,600			(18,296		)
Direct adjustments to shareholders' equity	(972		)	(1,052		)	(285		)
Total	$	96,753		$	67,914		$	42,578

Uncertain Tax Positions

A reconciliation of the beginning and ending balance of the gross liability for uncertain tax positions for the fiscal years ended March 31, 2014, 2013 and 2012, is as follows:



	Fiscal Year Ended March 31,
	2014			2013			2012
Liability for uncertain tax positions, beginning of year	$	5,385		$	7,913		$	9,223
Additions:
Related to tax positions for the current year	194			191			262
Related to tax positions for prior years	168			—			1,072
Reductions:
Due to settlements with tax jurisdictions	—			(66		)	(698		)
Due to lapses of statutes of limitations	(1,776		)	(2,339		)	(1,213		)
Effect of currency rate movement	(162		)	(314		)	(733		)
Liability for uncertain tax positions, end of year	$	3,809		$	5,385		$	7,913

Of the total liability for uncertain tax positions at March 31, 2014, approximately $2.8 million could have an effect on the consolidated effective tax rate if the tax benefits are recognized. The liability for uncertain tax positions includes $0.5 million related to tax positions for which it is reasonably possible that the amounts could change significantly before March 31, 2015. This amount reflects a possible decrease in the liability for uncertain tax positions that could result from the completion and resolution of tax audits and the expiration of open tax years in various tax jurisdictions.

The Company recognizes accrued interest related to uncertain tax positions as interest expense, and it recognizes penalties as a component of income tax expense. Amounts accrued or reversed for interest and penalties were not material for any of the fiscal years 2012 through 2014, and liabilities recorded for interest and penalties at March 31, 2014 and 2013 also were not material.

Universal and its subsidiaries file a U.S. federal consolidated income tax return, as well as returns in several U.S. states and a number of foreign jurisdictions. As of March 31, 2014, the Company's earliest open tax year for U.S. federal income tax purposes was its fiscal year ended 2011. Open tax years in state and foreign jurisdictions generally range from 3 to 6 years.