Income Taxes

The current and deferred components of the provision for income taxes consist of the following:



	June 30,
(In thousands)	2015			2014		2013
Current:
Federal	$	(30	)	$	293	$	(24	)
State	309			275		191
Total current income tax expense	279			568		167
Deferred:
Federal	106			99		(819		)
State	17			38		(173		)
Total deferred income tax expense (benefit)	123			137		(992		)
Income tax expense (benefit)	$	402		$	705	$	(825	)

Income tax expense or benefit from continuing operations is generally determined without regard to other categories of earnings, such as discontinued operations and OCI. An exception is provided in ASC 740, “Tax Provisions,” when there is aggregate income from categories other than continuing operations and a loss from continuing operations in the current year. In this case, the income tax benefit allocated to continuing operations is the amount by which the loss from continuing operations reduces the income tax expense recorded with respect to the other categories of earnings, even when a valuation allowance has been established against the deferred tax assets. In instances where a valuation allowance is established against current year losses, income from other sources, including gain from postretirement benefits recorded as a component of OCI, is considered when determining whether sufficient future taxable income exists to realize the deferred tax assets.

As a result, for the fiscal years ended June 30, 2015, 2014 and 2013, the Company recorded income tax expense of $0, $0 and $1.1 million, respectively, in OCI related to the gain on postretirement benefits, and recorded a corresponding income tax benefit of $0, $0 and $1.1 million, respectively, in continuing operations.

A reconciliation of income tax expense (benefit) to the federal statutory tax rate is as follows:



	June 30,
(In thousands)	2015			2014			2013
Statutory tax rate	34		%	34		%	34		%
Income tax expense (benefit) at statutory rate	$	358		$	4,365		$	(3,158	)
State income tax expense (benefit), net of federal tax benefit	260			749			(223		)
Dividend income exclusion	(54		)	—			—
Valuation allowance	(185		)	(4,292		)	3,074
Change in contingency reserve (net)	—			(39		)	(7		)
Other (net)	23			(78		)	(511		)
Income tax expense (benefit)	$	402		$	705		$	(825	)

The primary components of the temporary differences which give rise to the Company’s net deferred tax liabilities are as follows:



	June 30,
(In thousands)	2015			2014			2013
Deferred tax assets:
Postretirement benefits	$	31,100		$	19,800		$	26,014
Accrued liabilities	10,091			6,156			4,477
Net operating loss carryforwards	41,544			40,275			44,607
Intangible assets	594			1,126			694
Other	6,794			7,253			8,945
Total deferred tax assets	90,123			74,610			84,737
Deferred tax liabilities:
Unrealized gain on investments	(2,242		)	—			—
Fixed assets	(2,647		)	(1,902		)	(2,641		)
Other	(1,943		)	(1,538		)	(882		)
Total deferred tax liabilities	(6,832		)	(3,440		)	(3,523		)
Valuation allowance	(84,857		)	(72,613		)	(82,522		)
Net deferred tax liabilities	$	(1,566	)	$	(1,443	)	$	(1,308	)

The Company has approximately $107.6 million and $106.0 million of federal and state net operating loss carryforwards that will begin to expire in the years ending June 30, 2030 and June 30, 2025, respectively. Additionally, the Company has $0.8 million of federal business tax credits that begin to expire in June 30, 2025 and $2.1 million of charitable contribution carryforwards that begin to expire in June 30, 2016.

As of June 30, 2015, the Company has generated approximately $0.6 million of excess tax benefits related to stock compensation, the benefit of which will be recorded to additional paid in capital if and when realized.

At June 30, 2015, the Company had total deferred tax assets of $90.1 million and net deferred tax assets before valuation allowance of $83.3 million.

The Company evaluates its deferred tax assets quarterly to determine if a valuation allowance is required. The Company considers whether a valuation allowance should be recorded against deferred tax assets based on the likelihood that the benefits of the deferred tax assets will or will not ultimately be realized in future periods. In making such assessment, significant weight is given to evidence that can be objectively verified, such as recent operating results, and less consideration is given to less objective indicators such as future earnings projections.

After consideration of positive and negative evidence, including the recent history of losses, the Company cannot conclude that it is more likely than not that it will generate future earnings sufficient to realize the Company’s deferred tax assets as of June 30, 2015. Accordingly, a valuation allowance of $84.9 million has been recorded to offset this deferred tax asset. The valuation allowance increased by $12.3 million in the fiscal year ended June 30, 2015, decreased by $(9.9) million in the fiscal year ended June 30, 2014, and increased by $3.1 million in the fiscal year ended June 30, 2013.

A tabular reconciliation of the total amounts (in absolute values) of unrecognized tax benefits is as follows:



	Year Ended June 30,
(In thousands)	2015		2014			2013
Unrecognized tax benefits at beginning of year	$	—	$	3,211		$	3,211
Decreases in tax positions for prior years	—		(30		)	—
Settlements	—		(3,181		)	—
Unrecognized tax benefits at end of year	$	—	$	—		$	3,211

At June 30, 2015 and 2014, the Company has no unrecognized tax benefits.

The Company made a determination in the quarter ended June 30, 2014 that it would not, at that time, pursue certain refund claims requested on its amended tax returns for the fiscal years ended June 30, 2003 through June 30, 2008. The Internal Revenue Service previously denied these refund claims upon audit and maintained that decision upon appeal. The Company released its tax reserve related to these refunds in the fourth quarter of fiscal 2014.

The Company files income tax returns in the U.S. and in various state jurisdictions with varying statutes of limitations. The Company is no longer subject to U.S. income tax examinations for the fiscal years prior to June 30, 2010. The Internal Revenue Service is currently auditing the Company's tax year ended June 30, 2013.

The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. In each of the fiscal years ended June 30, 2015 and 2014, the Company recorded $0 in accrued interest and penalties associated with uncertain tax positions. Additionally, the Company recorded income of $0, $0, and $10,000, related to interest and penalties on uncertain tax positions in the fiscal years ended June 30, 2015, 2014 and 2013, respectively.