INCOME TAXES

Income tax expense (benefit) consisted of the following:



	Federal			State			Total
2015
Current	$	9,591		$	1,706		$	11,297
Deferred	15,374			(1,382		)	13,992
Total	$	24,965		$	324		$	25,289
2014
Current	$	(16,509	)	$	(1,852	)	$	(18,361	)
Deferred	44,730			1,603			46,333
Total	$	28,221		$	(249	)	$	27,972
2013
Current	$	7,974		$	(2,867	)	$	5,107
Deferred	15,667			(305		)	15,362
Total	$	23,641		$	(3,172	)	$	20,469

During 2012 and 2013, the Company filed applications for a tax accounting method change with the Internal Revenue Service (IRS) to implement final tangible property regulations specifically in regards to repairs and maintenance deductions. These tax regulations allowed the Company to take deductions of linear asset costs previously capitalized for book and tax purposes for the repair and maintenance within the guidance of the final tangible property regulations.

The Company's 2015, 2014 and 2013 federal qualified repairs and maintenance deductions totaled $60.0 million, $45.2 million, and $94.8 million.

The total federal NOL carry-forward was $43.9 million and the state NOL carry-forward was $58.2 million as of December 31, 2015 net of any unrecognized tax benefit. Management has concluded that the NOL carry-forward amounts are more likely than not to be recovered and therefore require no valuation allowance. The NOL carry-forward will begin to expire in 2032.

As of December 31, 2015, the California Enterprise Zone (EZ) credit was $3.1 million net of federal tax benefit for qualified property purchased before January 1, 2014, and placed in service before January 1, 2015. The Company filed amended state income tax returns for tax years 2008, 2009, 2010, and 2011 to claim the benefit of the EZ credits. The Company has carry-forward California EZ credits of $2.3 million net of any unrecognized tax benefit. Unused State of California EZ credits can carry-forward until 2024.

On December 19, 2014, President Obama signed into law Tax Increase Prevention Act of 2014, which, among other provisions, extended the 50-percent special allowance for depreciation ("bonus depreciation") for qualified property through the end of 2014. On December 18, 2015, Congress passed a tax extenders package, Protecting Americans from Tax Hikes (PATH) Act of 2015, which extends bonus depreciation. The provision extends bonus depreciation for property acquired and placed in service during 2015 through 2019. The federal income tax deduction was estimated at $6.0 million in 2015 and $21.4 million in 2014. As of December 31, 2015 and 2014 the deferred tax liability for bonus depreciation was $2.1 million and $7.5 million, respectively.

The difference between the total income tax expense and computed tax expense was reconciled in the table below:



	2015			2014			2013
Computed "expected" tax expense	$	24,607		$	29,649		$	23,708
Increase (reduction) in taxes due to:
State income taxes net of federal tax benefit	4,043			4,871			3,895
Effect of regulatory treatment of fixed asset differences	(3,450		)	(5,541		)	(4,112		)
State tax credits	—			—			(2,465		)
Investment tax credits	(74		)	(74		)	(74		)
Other	163			(933		)	(483		)
Total income tax	$	25,289		$	27,972		$	20,469

The effect of regulatory treatment of fixed asset differences includes 2015 estimated repair and maintenance deduction and asset related flow through items.

The tax effects of differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2015 and 2014 are presented in the following table:



	2015		2014
Deferred tax assets:
Developer deposits for extension agreements and contributions in aid of construction	$	45,670	$	44,775
Net operating loss carryforward and tax credits	15,042		19,866
Other	11,263		8,904
Total deferred tax assets	71,975		73,545
Deferred tax liabilities:
Property related basis and depreciation differences	309,088		272,958
WRAM/MCBA and interim rates balancing accounts	23,894		30,871
Other	3,890		4,308
Total deferred tax liabilities	336,872		308,137
Net deferred tax liabilities	$	264,897	$	234,592

In 2015, the Company implemented ASU 2015-17 as of the year ended December 31, 2015 on a prospective basis and the prior periods have not been retrospectively adjusted.

A valuation allowance was not required at December 31, 2015 and 2014. Based on historical taxable income and future taxable income projections over the period in which the deferred assets are deductible, management believes it is more likely than not that the Company will realize the benefits of the deductible differences.

The following table reconciles the changes in unrecognized tax benefits:



	December 31, 2015		December 31, 2014		December 31, 2013
Balance at beginning of year	$	7,916	$	612	$	—
Additions for tax positions taken during prior year	—		—		—
Additions for tax positions taken during current year	2,382		7,304		612
Reductions for tax positions taken during a prior year	—		—		—
Lapse of statute of limitations	—		—		—
Balance at end of year	$	10,298	$	7,916	$	612

The Company does not expect a material change in its unrecognized tax benefits within the next 12 months. The component of unrecognized tax benefits that, if recognized, would affect the effective tax rate at December 31, 2015, 2014, and 2013 for the Company was $2.1 million, $1.6 million, and $0.4 million with the remaining balance representing the potential deferral of taxes to later years.

The Company federal income tax years subject to an examination are 2014, 2013 and 2012 and the state income tax years subject to an examination are 2014, 2013, 2012 and 2011. The State of California Franchise Tax Board is presently auditing the Company's 2008 through 2011 EZ credit filings which were amended by the Company in 2013. It is uncertain when the State audits will be completed.