ACCOUNTING FOR INCOME TAXES

Income tax expense consisted of the following for the years ended December 31 (dollars in thousands):



	2014			2013		2012
Current income tax expense (benefit)	$	(67,059	)	$	37,743	$	18,710
Deferred income tax expense	139,299			20,271		21,054
Total income tax expense	$	72,240		$	58,014	$	39,764

A reconciliation of federal income taxes derived from statutory federal tax rates (35 percent in 2014, 2013 and 2012) applied to income before income taxes as set forth in the accompanying Consolidated Statements of Income is as follows for the years ended December 31 (dollars in thousands):



	2014			2013			2012
Federal income taxes at statutory rates	$	67,237		$	56,821		$	40,798
Increase (decrease) in tax resulting from:
Tax effect of regulatory treatment of utility plant differences	4,008			3,532			2,432
State income tax expense	506			1,553			863
Settlement of prior year tax returns and adjustment of tax reserves	1,104			(1,104		)	(2,198		)
Manufacturing deduction	(169		)	(2,033		)	(1,100		)
Other	(446		)	(755		)	(1,031		)
Total income tax expense	$	72,240		$	58,014		$	39,764

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and tax credit carryforwards. The total net deferred income tax liability consisted of the following as of December 31 (dollars in thousands):



	2014		2013
Deferred income tax assets:
Allowance for doubtful accounts	$	1,714	$	12,202
Reserves not currently deductible	2,889		6,322
Net operating loss from subsidiary acquisition	538		9,258
Deferred compensation	3,117		3,676
Unfunded benefit obligation	72,108		42,230
Utility energy commodity derivatives	19,493		13,303
Power and natural gas deferrals	3,811		9,226
Tax credits	16,662		11,365
Interest rate swaps	8,934		—
Other	1,776		29,133
Total deferred income tax assets	131,042		136,715
Deferred income tax liabilities:
Intangible assets from subsidiary acquisition	—		4,271
Differences between book and tax basis of utility plant	690,597		521,238
Regulatory asset for pensions and other postretirement benefits	82,515		54,945
Power exchange contract	—		5,484
Utility energy commodity derivatives	19,495		13,305
Loss on reacquired debt	5,128		5,732
Interest rate swaps	—		15,097
Settlement with Coeur d’Alene Tribe	12,751		13,190
Other	16,104		14,008
Total deferred income tax liabilities	826,590		647,270
Net deferred income tax liability	$	695,548	$	510,555
Consolidated balance sheet classification of net deferred income taxes:
Current deferred income tax asset	$	14,794	$	24,788
Long-term deferred income tax liability	710,342		535,343
Net deferred income tax liability	$	695,548	$	510,555

As of December 31, 2014, the Company had $11.3 million of state tax credit carryforwards. State tax credits expire from 2019 to 2028. The Company recognizes the effect of state tax credits generated from utility plant as they are utilized.

The realization of deferred income tax assets is dependent upon the ability to generate taxable income in future periods. The Company evaluated available evidence supporting the realization of its deferred income tax assets and determined it is more likely than not that deferred income tax assets will be realized.

The Company and its eligible subsidiaries file consolidated federal income tax returns. The Company also files state income tax returns in certain jurisdictions, including Idaho, Oregon and Montana. Subsidiaries are charged or credited with the tax effects of their operations on a stand-alone basis. The Internal Revenue Service (IRS) has completed its examination of all tax years through 2011 and all issues were resolved related to these years. The IRS has not completed an examination of the Company’s 2012 and 2013 federal income tax returns. The Company believes that any open tax years for federal or state income taxes will not result in adjustments that would be significant to the consolidated financial statements.

The Company did not incur any penalties on income tax positions in 2014, 2013 or 2012. The Company would recognize interest accrued related to income tax positions as interest expense and any penalties incurred as other operating expense.

The Company had net regulatory assets related to the probable recovery of certain deferred income tax liabilities from customers through future rates as of December 31 (dollars in thousands):



	2014		2013
Regulatory assets for deferred income taxes	$	100,412	$	71,421
Regulatory liabilities for deferred income taxes	14,534		9,203