9. Income Taxes

The provision for income taxes from continuing operations for the years ended December 31, 2014, 2013 and 2012 consists of the following:

	2014		2013		2012
	(in thousands)
Currently payable:
Federal	$	161,863		131,000		104,922
State		14,206		12,197		9,335
Foreign		35		37		—

		176,104		143,234		114,257
Deferred taxes		728		(3,001)		(5,782)

Provision for income taxes	$	176,832		140,233		108,475

The following table reconciles the statutory federal income tax rate with our effective income tax rate from continuing operations for the years ended December 31, 2014, 2013 and 2012:

	2014		2013		2012
Statutory federal income tax rate		35.0%		35.0%		35.0%
State income taxes, net of federal tax benefits		2.1		2.2		2.2
State tax incentives		(0.2)		(0.1)		(0.2)
Valuation allowance on losses capital in nature		(1.0)		(1.8)		(0.8)
Other items		0.2		0.4		(0.2)

Effective income tax rate		36.1%		35.7%		36.0%

The tax effect of temporary differences that give rise to significant portions of deferred tax liabilities and deferred tax assets at December 31, 2014 and 2013 are as follows:

	2014		2013
	(in thousands)
Deferred tax liabilities:
Deferred sales commissions	$	(4,285)		(6,928)
Property and equipment		(10,335)		(6,706)
Benefit plans		(11,452)		(10,620)
Identifiable intangible assets		(12,562)		(16,697)
Unrealized gains on investment securities		—		(1,853)
Prepaid expenses		(2,150)		(2,100)

Total gross deferred liabilities		(40,784)		(44,904)

Deferred tax assets:
Accrued compensation		9,098		10,893
Additional pension and postretirement liability		28,389		11,663
Other accrued expenses		5,789		5,151
Unrealized losses on investment securities		673		962
Unrealized losses on investment in partnerships		370		2,031
Capital loss carryforwards		6,849		9,474
Nonvested stock		20,300		21,860
Unused state tax credits		992		866
State net operating loss carryforwards		5,718		6,521
Other		3,572		3,962

Total gross deferred assets		81,750		73,383
Valuation allowance		(13,476)		(16,986)

Net deferred tax asset	$	27,490		11,493

In 2013, a capital loss was realized on the sale of Legend. By law, the portion of this capital loss in excess of capital gains was carried forward to offset potential capital gains recognized in future years. Due to the character of the loss and the limited carryforward period permitted by law, the Company may not realize the full tax benefit of the capital loss. The capital loss carryforward, if not utilized, will expire in 2018.

As of December 31, 2014, the Company had a deferred tax asset for a capital loss carryforward of $6.8 million. Other deferred tax assets that could generate potential future capital losses, if realized, include unrealized losses on investment securities of $0.7 million and unrealized losses on investments in partnerships of $0.4 million. As of December 31, 2013, the Company had a deferred tax asset for a capital loss carryforward of $9.5 million. Other deferred tax assets that could generate potential future capital losses, if realized, include unrealized losses on investment securities of $1.0 million and unrealized losses on investments in partnerships of $2.0 million. Deferred tax liabilities that could generate potential future capital gains include unrealized gains on investment securities of $1.9 million.

Management believes it is not more likely than not that the Company will generate sufficient future capital gains to realize the full benefit of these capital losses and accordingly, a valuation allowance in the amount of $7.9 million and $10.6 million has been recorded at December 31, 2014 and 2013, respectively. During 2014, realized capital gains on the sale of securities in the Company's available for sale securities portfolio, appreciation in the fair value of the Company's trading securities portfolio, and capital gain distributions from investments decreased the valuation allowance and income tax expense by $4.2 million. Additionally, the Company closed a transaction that reclassified tax losses on a limited partnership investment from capital to ordinary, thereby decreasing the valuation allowance and reducing income tax expense by $1.5 million. Unrealized gains from partnership investments also decreased the valuation allowance and income tax expense by $0.2 million. These decreases were partially offset by an increase in the tax loss on the sale of Legend, which resulted in an increase to the valuation allowance and income tax expense of $0.6 million. Additionally, unrealized losses on investment securities increased the valuation allowance and income tax expense by $0.3 million. The remaining $2.3 million increase in the valuation allowance resulted from depreciation in the fair value of the Company's available for sale securities portfolio, which was recorded as a decrease to accumulated other comprehensive income.

Certain subsidiaries of the Company have net operating loss carryforwards in certain states in which these companies file on a separate company basis. The deferred tax asset, net of federal tax effect, relating to the carryforwards as of December 31, 2014 and 2013 is approximately $5.7 million and $6.5 million, respectively. The carryforwards, if not utilized, will expire between 2015 and 2034. Management believes it is not more likely than not that these subsidiaries will generate sufficient future taxable income in these states to realize the benefit of the net operating loss carryforwards and, accordingly, a valuation allowance in the amount of $5.6 million and $6.4 million has been recorded at December 31, 2014 and 2013, respectively.

The Company has state tax credit carryforwards of $1.0 million and $0.9 million as of December 31, 2014 and 2013, respectively. Of these state tax credit carryforwards, $0.8 million will expire between 2024 and 2030 if not utilized and $0.2 million will expire in 2026 if not utilized. The Company anticipates these credits will be fully utilized prior to their expiration date.

As of January 1, 2014, the Company had unrecognized tax benefits, including penalties and interest, of $12.0 million ($8.4 million net of federal benefit) that, if recognized, would impact the Company's effective tax rate. As of December 31, 2014, the Company had unrecognized tax benefits, including penalties and interest, of $11.6 million ($8.3 million net of federal benefit) that, if recognized, would impact the Company's effective tax rate. The unrecognized tax benefits that are not expected to be settled within the next 12 months are included in other liabilities in the accompanying consolidated balance sheets; unrecognized tax benefits that are expected to be settled within the next 12 months are included in income taxes payable. In accordance with ASU 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists," beginning January 1, 2014, unrecognized tax benefits that reduce a net operating loss, similar tax loss, or tax credit carryforward are presented as a reduction to either current or noncurrent deferred income taxes, as applicable, on the accompanying consolidated balance sheet as of December 31, 2014.

The Company's accounting policy with respect to interest and penalties related to income tax uncertainties is to classify these amounts as income taxes. As of January 1, 2014, the total amount of accrued interest and penalties related to uncertain tax positions recognized in the consolidated balance sheet was $3.0 million ($2.5 million net of federal benefit). The total amount of penalties and interest, net of federal benefit, related to tax uncertainties recognized in the statement of income for the period ended December 31, 2014 was $0.4 million. The total amount of accrued penalties and interest related to uncertain tax positions at December 31, 2014 of $3.5 million ($2.9 million net of federal benefit) is included in the total unrecognized tax benefits described above.

The following table summarizes the Company's reconciliation of unrecognized tax benefits, excluding penalties and interest, for the years ended December 31, 2014, 2013 and 2012:

	2014		2013		2012
	(in thousands)
Balance at January 1	$	9,013		8,322		7,467
Increases during the year:
Gross increases—tax positions in prior period		433		644		275
Gross increases—current-period tax positions		656		1,355		2,215
Decreases during the year:
Gross decreases—tax positions in prior period		(192)		(71)		(429)
Decreases due to settlements with taxing authorities		(877)		(154)		—
Decreases due to lapse of statute of limitations		(928)		(1,083)		(1,206)

Balance at December 31	$	8,105		9,013		8,322

In the ordinary course of business, many transactions occur for which the ultimate tax outcome is uncertain. In addition, respective tax authorities periodically audit our income tax returns. These audits examine our significant tax filing positions, including the timing and amounts of deductions and the allocation of income among tax jurisdictions. During 2014, the Company settled six open tax years that were undergoing audit by state jurisdictions in which the Company operates. During 2013, the Company settled four open tax years that were undergoing audit by a state jurisdiction in which the Company operates. During 2012, the Company settled three open tax years that were undergoing audit by a state jurisdiction in which the Company operates. The 2011 through 2014 federal income tax returns are open tax years that remain subject to potential future audit. State income tax returns for all years after 2010 and, in certain states, income tax returns for 2010, are subject to potential future audit by tax authorities in the Company's major state tax jurisdictions.

The Company is currently being audited in various state jurisdictions. It is reasonably possible that the Company will settle the audits in these jurisdictions within the next 12-month period. The Company's liability for unrecognized tax benefits, including penalties and interest, will not decrease significantly upon settlement of these audits. Additionally, such settlements are not anticipated to have a significant impact on the results of operations.