INCOME TAXES

The components of Energen’s income taxes consisted of the following:



Years ended December 31, (in thousands)	2015			2014			2013
Taxes estimated to be payable currently:
Federal	$	3,972		$	161,576		$	23,342
State	758			72,379			2,516
Total current	4,730			233,955			25,858
Taxes deferred:
Federal	(513,187		)	144,645			85,950
State	(26,548		)	(34,447		)	(2,300		)
Total deferred	(539,735		)	110,198			83,650
Total income tax expense (benefit)	$	(535,005	)	$	344,153		$	109,508

The components of Energen’s income taxes consisted of the following:



Years ended December 31, (in thousands)	2015			2014		2013
Income tax expense (benefit) from continuing operations	$	(535,005	)	$	40,728	$	74,323
Income tax expense from discontinued operations	—			17,928		33,174
Income tax expense from gain on disposal of discontinued operations	—			285,497		2,011
Total income tax expense (benefit)	$	(535,005	)	$	344,153	$	109,508

Energen elected early adoption of Accounting Standards Update (ASU) No. 2015-17, Balance Sheet Classification of Deferred Taxes, prospectively as of December 31, 2015. This update requires that deferred tax liabilities and assets be classified as noncurrent on the balance sheet. The current requirement that deferred tax liabilities and assets of each jurisdiction of an entity be offset and presented as a single amount is not affected by the amendments in this update. We reclassified $14.5 million from a current deferred income tax asset to a noncurrent deferred income tax liability at December 31, 2015.

Temporary differences and carryforwards which gave rise to Energen’s deferred tax assets and liabilities were as follows:



(in thousands)	December 31, 2015					December 31, 2014
	Current		Noncurrent			Current			Noncurrent
Deferred tax assets:
Minimum tax credit	$	—	$	44,862		$	—		$	46,338
Allowance for doubtful accounts	—		253			244			—
Insurance and other accruals	—		2,807			2,537			—
Compensation accruals	—		11,650			11,355			—
Pension and other costs	—		8,693			—			7,009
Other comprehensive income	—		—			10,732			1,581
State net operating losses and other carryforwards	—		12,577			—			15,392
Other	—		962			665			—
Total deferred tax assets	—		81,804			25,533			70,320
Valuation allowance	—		(4,235		)	(1,122		)	(2,467		)
Total deferred tax assets	—		77,569			24,411			67,853



Deferred tax liabilities:
Depreciation and basis differences	—		620,629			—			1,057,430
Derivative instruments	—		2,838			102,691			—
Other comprehensive income	—		141			—			—
Other	—		6,330			884			10,909
Total deferred tax liabilities	—		629,938			103,575			1,068,339
Net deferred tax liabilities	$	—	$	(552,369	)	$	(79,164	)	$	(1,000,486	)

Energen files a consolidated federal income tax return with all of its subsidiaries. As of December 31, 2015, the amount of minimum tax credit which can be carried forward indefinitely to reduce future regular tax liability is $44.9 million. Energen has a noncurrent deferred tax asset of $8.4 million relating to Energen Resources’ $191.3 million state net operating loss carryforward which will expire beginning in 2027. Energen Resources anticipates generating adequate future taxable income from the reversals of its existing taxable temporary differences to fully realize this benefit. Energen has a full valuation allowance recorded against a noncurrent deferred tax asset of $4.2 million arising from certain state net operating loss and charitable contribution carryforwards. Energen intends to fully reserve this asset until it is determined that it is more likely than not that the asset can be realized through future taxable income in the respective state taxing jurisdictions. No other valuation allowance with respect to deferred taxes is deemed necessary as Energen anticipates generating adequate future taxable income from the reversals of its existing taxable temporary differences to realize the benefits of all remaining deferred tax assets on the consolidated balance sheets.

Total income tax expense from continuing operations differed from the amount which would have been provided by applying the statutory federal income tax rate of 35 percent to earnings before taxes as illustrated below:



Years ended December 31, (in thousands)	2015			2014			2013
Income tax expense (benefit) at statutory federal income tax rate	$	(518,258	)	$	49,130		$	75,671
Increase (decrease) resulting from:
State income taxes, net of federal income tax benefit	(14,112		)	93			1,461
Impact of state law changes	(3,075		)	(121		)	(1,966		)
Impact of state deferred tax revaluation on San Juan properties	(1,241		)	(8,382		)	—
401(k) stock dividend deduction	—			(232		)	(449		)
Other, net	1,681			240			(394		)
Total income tax expense (benefit)	$	(535,005	)	$	40,728		$	74,323
Effective income tax rate (%)	36.13			29.01			34.38

In addition to other changes in state apportionment reflected in the state income taxes, net of federal income tax benefit above, Energen recognized a $1.2 million and an $8.4 million income tax benefit during the 4th quarter of 2015 and 2014, respectively, as a result of re-measuring its state deferred tax liabilities. This re-measurement reflected the state apportionment changes related to certain San Juan Basin properties designated as held for sale as of December 31, 2015, and 2014.

A reconciliation of Energen’s beginning and ending amount of unrecognized tax benefits is as follows:



(in thousands)
Balance as of December 31, 2012	$	12,555
Additions based on tax positions related to the current year	4,546
Additions for tax positions of prior years	366
Reductions for tax positions of prior years	(46		)
Lapse of statute of limitations	(1,435		)
Balance as of December 31, 2013	15,986
Additions based on tax positions related to the current year	3,873
Additions for tax positions of prior years	19
Reductions for tax positions of prior years	(954		)
Lapse of statute of limitations	(1,394		)
Balance as of December 31, 2014	17,530
Additions based on tax positions related to the current year	2,378
Reductions based on tax positions related to the current year	(6,589		)
Reductions for tax positions of prior years	(345		)
Lapse of statute of limitations	(1,785		)
Balance as of December 31, 2015	$	11,189

The amount of unrecognized tax benefits at December 31, 2015 that would favorably impact Energen’s effective tax rate, if recognized, is $3 million. Energen recognizes potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the years ended December 31, 2015, 2014, and 2013, Energen recognized approximately $2,000 of income, $27,000 of expense and $15,000 of expense for interest (net of tax benefit) and penalties, respectively. Energen had approximately $0.2 million and $0.2 million for the payment of interest (net of tax benefit) and penalties accrued at December 31, 2015 and 2014, respectively.

Energen’s tax returns for years 2012-2014 remain open and subject to examination by the IRS and major state taxing jurisdictions. Accordingly, it is reasonably possible that significant changes to the reserve for uncertain tax benefits may occur as a result of various audits and the expiration of the statute of limitations. Although the timing and outcome of tax examinations is highly uncertain, Energen does not expect that the change in the unrecognized tax benefit within the next 12 months would have a material impact to the financial statements.