9. INCOME TAXES

Income tax expense components for the years ended December 31 are as follows (in thousands):

	2014			2013			2012
Current income taxes:
Federal	$	(2,350	)	$	6,726		$	1,552
State		(123	)		2,495			708

TOTAL		(2,473	)		9,221			2,260
Deferred income taxes:
Federal		36,620			24,954			28,210
State		5,216			3,554			4,018

TOTAL		41,836			28,508			32,228
Investment tax credit amortization		(143	)		(237	)		(329	)

TOTAL INCOME TAX EXPENSE	$	39,220		$	37,492		$	34,159

Deferred Income Taxes

Deferred tax assets and liabilities are reflected on our consolidated balance sheets as follows (in thousands):

	December 31,
Deferred Income Taxes	2014		2013
Current deferred tax assets, net(1)	$	19,200	$	7,222
Non-current deferred tax liabilities, net		377,452		324,266

NET DEFERRED TAX LIABILITIES	$	358,252	$	317,044

(1)	Current deferred tax assets are included in prepaid expenses and other on the balance sheets.

Temporary differences related to deferred tax assets and deferred tax liabilities are summarized as follows (in thousands):

	December 31,
Temporary Differences	2014		2013
Deferred tax assets:
Plant related basis differences	$	25,349	$	23,344
Net operating loss (NOL)		22,000		—
Regulated liabilities related to income taxes		13,350		13,576
Disallowed plant costs		1,754		1,841
Gains on hedging transactions		1,260		1,324
Pensions and other post-retirement benefits		1,175		544
Carry forward of income tax credit		6,367		6,374
Other		1,633		1,633

Total deferred tax assets	$	72,888	$	48,636

Deferred tax liabilities:
Depreciation, amortization and other plant related differences	$	363,337	$	297,175
Regulated assets related to income		37,180		37,806
Loss on reacquired debt		3,828		4,085
Amortization of intangibles		9,168		8,089
Deferred construction accounting costs		6,082		6,977
Other		11,545		11,548

Total deferred tax liabilities		431,140		365,680

NET DEFERRED TAX LIABILITIES	$	358,252	$	317,044

Effective Income Tax Rates

The difference between income taxes and amounts calculated by applying the federal legal rate to income tax expense for continuing operations were as follows:

Effective Income Tax Rates	2014			2013			2012
Federal statutory income tax rate		35.0	%		35.0	%		35.0	%
Increase (decrease) in income tax rate resulting from:
State income tax (net of federal benefit)		3.1			3.1			3.1
Investment tax credit amortization		(0.1	)		(0.2	)		(0.4	)
Effect of ratemaking on property related differences		(1.7	)		(1.1	)		(0.2	)
Other		0.6			0.3			0.5

EFFECTIVE INCOME TAX RATE		36.9	%		37.1	%		38.0	%

We do not have any unrecognized tax benefits as of December 31, 2014. We did not recognize any significant interest or penalties in any of the periods presented. We do not expect any significant changes to our unrecognized tax benefits over the next twelve months.

The Tax Increase Prevention Act (the "Act") was signed into law on December 19, 2014. The Act restored several expired business tax provisions, including bonus depreciation for 2014. Our 2015 tax payments are expected to be higher than 2014 due to the expiration of bonus depreciation. However, we expect to utilize investment tax credits and net operating losses (NOLs) discussed below to partially offset the 2015 payments.

We generated $22.0 million of tax NOLs during 2014, mainly due to bonus depreciation. These losses may be carried back two years and are also available to offset future taxable income until 2034.

In 2010, we received $17.7 million of investment tax credits based on our investment in Iatan 2. We utilized $0.7 million and $9.0 million of these credits on our 2012 and 2013 tax returns, respectively. Due to the passage of the Act, we were unable to use these credits on our 2014 tax return. We expect to use the remaining credits on our 2015 tax return. The tax credits will have no significant income statement impact because they will flow to our customers as we amortize the tax credits over the life of the plant.

On September 13, 2013, the IRS and the Treasury Department released final regulations under Sections 162(a) and 263(a) on the deduction and capitalization of expenditures related to tangible property. These regulations apply to tax years beginning on or after January 1, 2014, and we plan to file a Form 3115 with the IRS with our 2014 income tax return to change our tax accounting method to comply with the regulations. It is anticipated that we will deduct approximately $33 million on our 2014 income tax return under IRS Code Section 481(a) as an adjustment required by the change in method of accounting. We plan to utilize the book capitalization method as allowable under the final regulations which we expect will have an immaterial impact on the effective tax rate.