INCOME TAXES

Our 2014 income tax provision from continuing operations was $103.5 million compared to $82.3 million for 2013 and $97.9 million for 2012. The actual income tax rates on income from continuing operations before income taxes, less amounts attributable to noncontrolling interests, for the years ended December 31, 2014, 2013 and 2012, were 37.4%, 35.9% and 38.8%, respectively. The increase in the 2014 income tax provision compared to 2013 was primarily due to the effect of increased income before income taxes and the 2013 reversal of reserves for previously unrecognized income tax benefits. The decrease in the 2013 income tax provision compared to 2012 was primarily due to reduced income before income taxes, the effect of a change in the United Kingdom statutory tax rate, a change in the mix of earnings among various jurisdictions and the 2013 reversal of reserves for previously unrecognized income tax benefits.

As of December 31, 2014 and 2013, the amount of unrecognized income tax benefits was $5.2 million and $3.1 million (of which $3.0 million and $1.7 million, if recognized, would favorably affect our effective income tax rate), respectively.

As of December 31, 2014 and 2013, we had an accrual of $0.3 million and $0.2 million for the payment of interest related to unrecognized income tax benefits included on the Consolidated Balance Sheets, respectively. During the years ended December 31, 2014 and 2013, we recognized approximately $0.1 million and $0.2 million, respectively, in interest expense related to our unrecognized income tax benefits. In addition, we reversed $0.1 million and $2.6 million of accrued interest expense related to our unrecognized income tax benefits for the years ended December 31, 2014 and 2013, respectively. As of December 31, 2014 and 2013, we had total income tax reserves included in “Other long-term liabilities” of $5.5 million and $3.4 million, respectively.

A reconciliation of the beginning and end of year unrecognized income tax benefits is as follows (in thousands):



	2014			2013
Balance at beginning of year	$	3,116		$	11,281
Additions based on tax positions related to the current year	1,053			895
Additions based on tax positions related to prior years	2,816			251
Reductions for tax positions of prior years	(1,162		)	(6,273		)
Reductions for expired statute of limitations	(620		)	(3,038		)
Balance at end of year	$	5,203		$	3,116

It is reasonably possible that approximately $3.3 million of unrecognized income tax benefits at December 31, 2014, primarily relating to uncertain tax positions attributable to tax return filing positions, will significantly decrease in the next twelve months as a result of estimated settlements with taxing authorities and the expiration of applicable statutes of limitations.

We file income tax returns with the Internal Revenue Service and various state, local and foreign tax agencies. The Company is currently under examination by various taxing authorities for the years 2008 through 2013. During the first quarter of 2014, the Internal Revenue Service finalized its audit of our federal income tax returns for the years 2010 through 2011. We agreed to and paid an assessment, for an immaterial amount, proposed by the Internal Revenue Service pursuant to such audit.

The income tax provision in the accompanying Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012 consisted of the following (in thousands):



	2014		2013		2012
Current:
Federal provision	$	80,852	$	60,449	$	70,020
State and local provisions	14,532		2,897		18,174
Foreign provision	2,396		7,083		3,074
	97,780		70,429		91,268
Deferred	5,748		11,857		6,626
	$	103,528	$	82,286	$	97,894

Factors accounting for the variation from U.S. statutory income tax rates from continuing operations for the years ended December 31, 2014, 2013 and 2012 were as follows (in thousands):



	2014			2013			2012
Federal income taxes at the statutory rate	$	98,576		$	81,448		$	89,128
Noncontrolling interests	(1,667		)	(1,247		)	(806		)
State and local income taxes, net of federal tax benefits	9,944			9,446			8,512
State tax reserves	(38		)	(6,529		)	3,927
Permanent differences	2,961			3,226			2,605
Domestic manufacturing deduction	(5,008		)	(4,778		)	(5,559		)
Foreign income taxes (including UK statutory rate changes)	(1,237		)	1,183			(438		)
Federal tax reserves	62			263			(258		)
Other	(65		)	(726		)	783
	$	103,528		$	82,286		$	97,894

The components of the net deferred income tax liability are included in “Prepaid expenses and other” of $29.3 million, “Other assets” of $16.6 million, and “Other long-term obligations” of $173.7 million at December 31, 2014, and the components of net deferred income tax liability are included in “Prepaid expenses and other” of $32.5 million, “Other assets” of $15.0 million, and “Other long-term obligations” of $174.3 million at December 31, 2013 in the accompanying Consolidated Balance Sheets.

The amounts recorded for the years ended December 31, 2014 and 2013 were as follows (in thousands):



	2014			2013
Deferred income tax assets:
Excess of amounts expensed for financial statement purposes over amounts deducted for income tax purposes:
Insurance liabilities	$	54,351		$	57,310
Pension liability	10,142			7,813
Deferred compensation	17,886			16,358
Other (including liabilities and reserves)	31,828			35,625
Total deferred income tax assets	114,207			117,106
Valuation allowance for deferred tax assets	(2,024		)	(2,244		)
Net deferred income tax assets	112,183			114,862
Deferred income tax liabilities:
Costs capitalized for financial statement purposes and deducted for income tax purposes:
Goodwill and identifiable intangible assets	(216,126		)	(214,865		)
Other, primarily depreciation of property, plant and equipment	(23,884		)	(26,840		)
Total deferred income tax liabilities	(240,010		)	(241,705		)
Net deferred income tax liabilities	$	(127,827	)	$	(126,843	)

We file a consolidated federal income tax return including all of our U.S. subsidiaries. As of December 31, 2014 and 2013, the total valuation allowance on net deferred income tax assets was approximately $2.0 million and $2.2 million, respectively, primarily related to state and local net operating losses. The reason for the net decrease in the valuation allowance for 2014 was related to the utilization of state and local net operating loss carryforwards. Although realization is not assured, we believe it is more likely than not that the deferred income tax asset, net of the valuation allowance discussed above, will be realized. The amount of the deferred income tax asset considered realizable, however, could be reduced if estimates of future income are reduced.

At December 31, 2014, we had trading and capital losses for United Kingdom income tax purposes of approximately $30.2 million, which have no expiration date. Such losses are subject to review by the United Kingdom taxing authority. Realization of the deferred income tax assets is dependent on our generating sufficient taxable income. We believe that the deferred income tax assets will be realized through the future reversal of existing taxable temporary differences and projected future income.

Income before income taxes from continuing operations for the years ended December 31, 2014, 2013 and 2012 consisted of the following (in thousands):



	2014		2013		2012
United States	$	265,529	$	219,300	$	236,774
Foreign	16,116		13,409		17,810
	$	281,645	$	232,709	$	254,584

As of December 31, 2014, we had undistributed foreign earnings from our United Kingdom subsidiary of approximately $13.1 million for which we have not recorded a deferred tax liability, as we have provided taxes on such earnings in prior periods. As of December 31, 2014, the amount of cash held in the United Kingdom was approximately $45.5 million which, if repatriated, should not result in any federal or state income taxes. As of December 31, 2014, we had undistributed foreign earnings from our Puerto Rico subsidiary of approximately $1.4 million for which we have not recorded a deferred tax liability as such earnings are indefinitely reinvested. As of December 31, 2014, the amount of cash held in Puerto Rico was approximately $3.0 million which, if repatriated, may result in federal and state income taxes of approximately $0.5 million.