INCOME TAXES

We determine our deferred tax assets and liabilities based upon the difference between the financial statement and tax bases of our assets and liabilities calculated using enacted applicable tax rates. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance. Changes in the valuation allowance, when recorded, are included in the provision for income taxes in the consolidated financial statements.

Our unrecognized tax benefits of $2,247, $3,104, and $3,419 as of December 31, 2015, 2014, and 2013, respectively, are uncertain tax positions that would impact our effective tax rate if recognized. We are periodically engaged in tax return examinations, reviews of statute of limitations periods, and settlements surrounding income taxes. We do not anticipate a material change in unrecognized tax benefits during the next twelve months.

Our uncertain tax benefits, and changes thereto, during 2015, 2014, and 2013 were as follows:



	2015			2014			2013
Balance at January 1,	$	3,104		$	3,419		$	3,530
Additions based on tax positions related to current year	464			490			516
Additions based on tax positions of prior years	—			—			—
Reductions for tax positions of prior years	(252		)	(477		)	(567		)
Settlements	(1,069		)	(328		)	(60		)
Balance at December 31,	$	2,247		$	3,104		$	3,419

We classify interest expense and penalties as part of our provision for income taxes based upon applicable federal and state interest/underpayment percentages. We have accrued $907 and $1,065 in interest and penalties at December 31, 2015 and 2014, respectively. Interest was computed on the difference between the provision for income taxes recognized in accordance with GAAP and the amount of benefit previously taken or expected to be taken in our federal, state, and local income tax returns.

Our federal income tax returns for the tax years 2012 and forward are available for examination by the United States Internal Revenue Service (“IRS”). The statute of limitation for the 2012 federal return will expire on September 15, 2016, unless extended by consent. Our state income tax returns for 2011 through 2015 remain subject to examination by various state authorities with the latest period closing on December 31, 2020. We have not extended the statutes of limitations in any state jurisdictions with respect to years prior to 2011.

The IRS concluded examinations of the Company's 2008-2011 federal income tax returns. In May 2014, we formalized settlement of the IRS audit for each of these four years. Collectively, including interest, we settled the assessments for $907. This closure has been recorded in our federal income tax expense for 2014.

A reconciliation between the “statutory” federal income tax rate and the effective tax rate in the consolidated statements of income is as follows:



	For the Years Ended December 31,
	2015		2014		2013
“Statutory” federal tax rate	35.0	%	35.0	%	35.0	%
State and local income taxes, net of federal benefit	3.8		3.5		3.6
Other, net	1.2		1.8		1.2
Effective tax rate	40.0	%	40.3	%	39.8	%

The components of income before taxes and the provision for income taxes recorded in the consolidated statements of income are as follows:



	For the Years Ended
Components of Income before Taxes	2015		2014		2013
Domestic	$	143,144	$	136,656	$	127,858
Foreign	9,197		10,155		7,093
Income before taxes	$	152,341	$	146,811	$	134,951



	For the Years Ended
Components of Income Tax Provision	2015			2014			2013
Current expense
U.S. Federal	$	46,174		$	44,713		$	47,790
State	7,996			7,266			7,066
Foreign	2,666			3,058			2,217
Total current expense	$	56,836		$	55,037		$	57,073
Deferred expense (benefit)
U.S. Federal	$	3,224		4,049			(2,983		)
State	958			47			(458		)
Foreign	(9		)	(8		)	45
Total deferred expense (benefit)	$	4,173		$	4,088		$	(3,396	)
Total income tax provision	$	61,009		$	59,125		$	53,677

Deferred income taxes are provided based upon differences between the financial statement and tax bases of assets and liabilities. The following deferred tax assets (liabilities) were recorded at December 31:



Assets (Liabilities)	2015			2014
Postretirement benefits	$	29,184		$	29,736
Payroll accruals	2,995			2,912
Bad debt reserves	1,653			2,106
Other deferred tax assets	9,438			8,623
Pension	60,645			42,836
Inventory	7,173			3,351
Subtotal	111,088			89,564
Less: valuation allowances	(402		)	(393		)
Deferred tax assets	110,686			89,171
Fixed assets	(40,086		)	(33,857		)
Computer software	(6,412		)	(3,904		)
Other deferred tax liabilities	(2,438		)	(1,974		)
Deferred tax liabilities	(48,936		)	(39,735		)
Net deferred tax assets	$	61,750		$	49,436

Deferred income taxes included in non-current assets (liabilities) at December 31 were:



	2015			2014
Deferred tax assets included in other non-current assets	$	62,047		$	49,801
Deferred tax liabilities included in other non-current liabilities	(297		)	(365		)

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as non-current. Public business entities must implement the new guidance for annual reporting periods beginning after December 15, 2016. Earlier adoption is permitted and may be applied prospectively or retrospectively for all periods presented. Required netting of deferred tax assets and liabilities by tax jurisdiction is not affected by this Update.

We adopted ASU 2015-17 retrospectively for the annual period beginning January 1, 2015 resulting in a change in presentation of prior periods. Deferred tax assets included in other current assets decreased by $2,777 as of December 31, 2014 with a corresponding increase to deferred tax assets included in other non-current assets. Deferred tax liabilities included in other current liabilities of $365 as of December 31, 2014, were reclassified to deferred tax liabilities included in other non-current liabilities.

Operating loss carryforwards included in net deferred tax assets at December 31 were:



	2015		2014
Foreign net operating losses⁽¹⁾	$	349	$	363
State net operating losses⁽²⁾	563		759

⁽¹⁾Expires in 2024

⁽²⁾Expire between 2016 and 2031

Due to uncertainties regarding the utilization of our foreign and state net operating losses, a partial valuation allowance has been applied against the deferred tax benefit at December 31, 2015.

We have undistributed earnings of non-U.S. subsidiaries of $72,488 and $66,297 as of December 31, 2015 and 2014, respectively. We have not made a provision for U.S. federal and state income taxes on these accumulated but undistributed earnings, as such earnings are considered to be indefinitely reinvested outside the U.S.