8. Income Taxes

The provision for income taxes from continuing operations for the years ended December 31, 2016, 2015 and 2014 consists of the following:


	2016		2015	2014
	(in thousands)
Current taxes:
Federal	$	72,711	142,576	161,863
State		7,174	12,800	14,206
Foreign		17	38	35
		79,902	155,414	176,104
Deferred taxes		(3,715)	(1,410)	728
Provision for income taxes	$	76,187	154,004	176,832

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, 2016, 2015 and 2014:


	2016		2015		2014
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefits	2.2		2.0		2.1
State tax incentives	(0.3)		(0.1)		(0.2)
Valuation allowance on losses capital in nature	(3.4)		0.9		(1.0)
Other items	0.4		0.7		0.2
Effective income tax rate	33.9	%	38.5	%	36.1	%

The tax effect of temporary differences that give rise to significant portions of deferred tax liabilities and deferred tax assets at December 31, 2016 and 2015 are as follows:


	2016		2015
	(in thousands)
Deferred tax liabilities:
Deferred sales commissions	$	(484)	(2,337)
Property and equipment		(13,906)	(9,775)
Benefit plans		(12,137)	(14,058)
Identifiable intangible assets		(11,118)	(13,705)
Prepaid expenses		(1,968)	(2,231)
Total gross deferred liabilities		(39,613)	(42,106)
Deferred tax assets:
Accrued compensation		10,678	11,015
Additional pension and postretirement liability		27,204	32,183
Other accrued expenses		7,058	5,851
Unrealized losses on investment securities and partnerships		1,834	7,426
Capital loss carryforwards		3,920	5,919
Nonvested stock		20,516	20,608
Unused state tax credits		2,115	1,470
State net operating loss carryforwards		5,716	5,666
Other		3,430	3,463
Total gross deferred assets		82,471	93,601
Valuation allowance		(11,428)	(18,803)
Net deferred tax asset	$	31,430	32,692

The Company has a deferred tax asset for a capital loss carryforward that is available to offset current and future capital gains. As of December 31, 2016 and 2015, the deferred tax asset, net of federal tax effect, related to this capital loss carryforward is $3.9 million and $5.9 million, respectively. The capital loss carryforward, if not utilized, will expire in 2018. Other deferred tax assets that could generate potential future capital losses if realized include unrealized losses on investment securities and partnerships of $1.8 million and $7.4 million as of December 31, 2016 and 2015, respectively. Due to the character of the losses and the limited carryforward period permitted by law upon realization, the Company may not realize the full tax benefit of the capital losses. 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 $5.8 million and $13.3 million has been recorded at December 31, 2016 and 2015, respectively.

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 these carryforwards as of December 31, 2016 and 2015 is approximately $5.7 million. The carryforwards, if not utilized, will expire between 2017 and 2036. 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 $5.5 million has been recorded at December 31, 2016 and 2015, respectively.

The Company has state tax credit carryforwards of $2.1 million and $1.5 million as of December 31, 2016 and 2015, respectively. Of these state tax credit carryforwards, $1.9 million will expire between 2024 and 2032 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, 2016, the Company had unrecognized tax benefits, including penalties and interest, of $11.9 million ($8.7 million net of federal benefit) that, if recognized, would impact the Company’s effective tax rate. As of December 31, 2016, the Company had unrecognized tax benefits, including penalties and interest, of $11.5 million ($8.4 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; and unrecognized tax benefits that reduce a net operating loss, similar tax loss, or tax credit carryforward are presented as a reduction to noncurrent deferred income taxes.

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, 2016, the total amount of accrued interest and penalties related to uncertain tax positions recognized in the consolidated balance sheet was $3.4 million ($2.8 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, 2016 was $0.2 million. As of December 31, 2016, the Company had total accrued penalties and interest related to uncertain tax positions of $3.8 million ($3.1 million net of federal benefit) in the consolidated balance sheet, which 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, 2016, 2015 and 2014:


	2016		2015	2014
	(in thousands)
Balance at January 1	$	8,448	8,105	9,013
Increases during the year:
Gross increases - tax positions in prior period		465	1,401	433
Gross increases - current-period tax positions		494	700	656
Decreases during the year:
Gross decreases - tax positions in prior period		(167)	(308)	(192)
Decreases due to settlements with taxing authorities		(21)	(486)	(877)
Decreases due to lapse of statute of limitations		(1,485)	(964)	(928)
Balance at December 31	$	7,734	8,448	8,105

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 2016, the Company settled two open tax years that were undergoing audit by a state jurisdiction in which the Company operates. During 2015, the Company settled three open tax years that were undergoing audit by a state jurisdiction in which the Company operates. During 2014, the Company settled six open tax years that were undergoing audit by state jurisdictions in which the Company operates. The Company is currently under federal audit for the 2014 tax year. The 2013, 2015, and 2016 federal income tax returns are open tax years that remain subject to potential future audit. State income tax returns for all years after 2012 and, in certain states, income tax returns for 2012, are subject to potential future audit by tax authorities in the Company’s major state tax jurisdictions.