Income Taxes

Income Tax Provision

As a corporation, we are subject to typical corporate U.S. federal, state, and foreign income tax rates. The effective tax rate differed from the U.S. federal statutory income tax rate principally due to the following (dollars in thousands):



	Year Ended December 31
	2014			2013

Income before income taxes	$	123,305		$	78,148
Statutory U.S. income tax rate	35.0		%	35.0		%

Statutory tax provision	$	43,157		$	27,352
State taxes	4,097			2,545
Domestic production activities deduction	(2,031		)	(1,326		)
Other	(1,927		)	1,307
Total	$	43,296		$	29,878

Effective income tax rate excluding discrete item	35.1		%	38.2		%

Recognition of beginning deferred tax balances	$	—		$	(68,666	)

Income tax provision (benefit) with discrete item	$	43,296		$	(38,788	)

Effective income tax rate with discrete item	35.1		%	(49.6		)%

The income tax provision (benefit) shown in the Consolidated Statements of Operations includes the following (dollars in thousands):



	Year Ended December 31
	2014		2013

Current income tax provision (benefit)
Federal	$	27,568	$	17,618
State	5,023		3,172
Foreign	—		22
Total current	32,591		20,812

Deferred income tax provision (benefit)
Federal	9,740		(54,611		)
State	965		(4,989		)
Foreign	—		—
Total deferred	10,705		(59,600		)
Income tax provision (benefit)	$	43,296	$	(38,788	)

During the years ended December 31, 2014, 2013, and 2012, cash paid for taxes, net of refunds received, was $40.3 million, $22.7 million, and $0.2 million, respectively.

On February 4, 2013, we converted from a limited liability company to a corporation. In addition, we elected to be treated as a corporation for federal and state income tax purposes effective as of January 1, 2013. Therefore, we are subject to federal and state income tax expense beginning January 1, 2013. For tax purposes, our conversion from a limited liability company to a corporation was deemed a nontaxable transfer of Boise Cascade, L.L.C., assets and liabilities to Boise Cascade Company. As a result of our conversion to a corporation in February 2013, we recorded net deferred tax assets of $68.7 million, the effect of which was recorded as an income tax benefit in our Consolidated Statement of Operations for the year ended December 31, 2013.

As a limited liability company, we were treated as a disregarded entity for federal income tax purposes and, as such, were included in the income tax return for Boise Cascade Holdings, L.L.C. (BC Holdings), former parent of Boise Cascade. Our income tax provision generally consisted of income taxes payable to state jurisdictions that do not allow for the income tax liability to be passed through to our former sole member as well as income taxes payable by our separate subsidiaries that are taxed as corporations. As a limited liability company, we had an effective tax rate of less than 1%. For the year ended December 31, 2012, income tax expense was $0.3 million.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. The components of our net deferred tax assets and liabilities at December 31, 2014 and 2013, are as follows (dollars in thousands):



	December 31, 2014			December 31, 2013
Deferred tax assets
Employee benefits (a)	$	81,414		$	55,331
Deferred financing costs	455			540
Intangible assets and other	227			386
Inventories	6,733			4,657
Canadian net operating loss carryforward (b)	15,839			17,180
Other	3,587			3,803
Gross deferred tax assets	108,255			81,897
Valuation allowance (b)	(15,839		)	(17,180		)
Net deferred tax assets	$	92,416		$	64,717

Deferred tax liabilities
Property and equipment	$	50,199		$	40,976
Intangible assets and other	4,531			3,968
Other	691			862
Deferred tax liabilities	$	55,421		$	45,806

As reported on our Consolidated Balance Sheets
Current deferred tax assets, net	$	20,311		$	18,151
Noncurrent deferred tax assets, net	16,684			760
Total deferred tax assets, net	$	36,995		$	18,911

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(a)	As of December 31, 2014, the increase relates to the tax effect of changes in recorded pension liabilities. See Note 7, Retirement and Benefit Plans, for more information.


(b)	We have an investment in foreign subsidiaries, which at December 31, 2014 and 2013, had $15.8 million and $17.2 million, respectively, of deferred tax assets. The deferred tax assets resulted primarily from net operating losses and were fully offset by a valuation allowance. The net operating losses will expire beginning in 2015 and the proceeding 20 years.

Pretax income (loss) from domestic and foreign sources is as follows (dollars in thousands):



	Year Ended December 31
	2014		2013
Domestic	$	122,727	$	82,529
Foreign	578		(4,381		)
Income before income taxes	$	123,305	$	78,148

In September 2013, the Internal Revenue Service and Treasury Department released final 263(a) regulations regarding the deduction and capitalization of expenditures related to tangible property. The application of the new regulations to the 2014 taxable year did not materially affect our income tax provision.

Income Tax Uncertainties

We file federal income tax returns in the U.S. and Canada as well as various state and local income tax returns. Tax years 2011 to present remain open to examination in the U.S. and tax years 2010 to present remain open to examination in Canada and various states. As discussed above, prior to January 1, 2013, we were a limited liability company. Therefore, with limited exceptions, tax years prior to 2013 are the responsibility of the members of BC Holdings and not Boise Cascade.

We recognize tax liabilities and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available or as new uncertainties occur. As of December 31, 2014, we had $0.3 million of unrecognized tax benefits attributable to research and development tax credits recorded on our Consolidated Balance Sheets, and we do not expect a significant change over the next twelve months. If all uncertain tax benefits were recognized, $0.3 million would benefit the effective tax rate. We had no unrecognized tax benefits recorded as of December 31, 2013.

We recognize interest and penalties related to uncertain tax positions as income tax expense in our Consolidated Statements of Operations. For the years ended December 31, 2014, 2013, and 2012, we recognized an insignificant amount of interest and penalties related to taxes.