Income Taxes

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



	June 30,
(In thousands)	2016			2015			2014
Current:
Federal	$	214		$	(30	)	$	293
State	103			309			275
Total current income tax expense	317			279			568
Deferred:
Federal	(66,648		)	106			99
State	(13,666		)	17			38
Total deferred income tax (benefit) expense	(80,314		)	123			137
Income tax (benefit) expense	$	(79,997	)	$	402		$	705

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, 2016, 2015 and 2014, the Company recorded income tax expense of$2.0 million, $0, and $0, respectively, in OCI related to the gain on postretirement benefits, and recorded a corresponding income tax benefit of $2.0 million, $0, and $0, respectively, in continuing operations.

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



	June 30,
(In thousands)	2016			2015			2014
Statutory tax rate	35		%	34		%	34		%
Income tax expense at statutory rate	$	3,472		$	358		$	4,365
State income tax expense, net of federal tax benefit	557			260			749
Dividend income exclusion	(140		)	(54		)	—
Valuation allowance	(83,230		)	(185		)	(4,292		)
Change in tax rate	(1,061		)	—			—
Retiree life insurance	135			—			—
Change in contingency reserve (net)	—			—			(39		)
Other (net)	270			23			(78		)
Income tax (benefit) expense	$	(79,997	)	$	402		$	705

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)	2016			2015			2014
Deferred tax assets:
Postretirement benefits	$	33,273		$	31,100		$	19,800
Accrued liabilities	11,760			10,091			6,156
Net operating loss carryforwards	38,196			41,544			40,275
Intangible assets	71			594			1,126
Other	6,881			6,794			7,253
Total deferred tax assets	90,181			90,123			74,610
Deferred tax liabilities:
Unrealized gain on investments	(609		)	(2,242		)	—
Fixed assets	(5,370		)	(2,647		)	(1,902		)
Other	(1,789		)	(1,943		)	(1,538		)
Total deferred tax liabilities	(7,768		)	(6,832		)	(3,440		)
Valuation allowance	(1,627		)	(84,857		)	(72,613		)
Net deferred tax assets (liabilities)	$	80,786		$	(1,566	)	$	(1,443	)

At June 30, 2016, the Company had approximately $99.7 million in federal and $88.6 million in state net operating loss carryforwards that will begin to expire in the years ending June 30, 2030 and June 30, 2017, respectively. Additionally, at June 30, 2016, the Company had $0.8 million of federal business tax credits that begin to expire in June 30, 2025.

As of June 30, 2016, the Company has generated approximately $1.2 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, 2016, the Company had total deferred tax assets of $90.2 million and net deferred tax assets before valuation allowance of $82.4 million.

The Company evaluated it deferred tax assets quarterly to determine if a valuation is required. In the fourth quarter of fiscal 2016, the Company considered whether a valuation allowance should be recorded against deferred tax assets based on the likelihood that the benefits of the deferred tax assets would or would not ultimately be realized in future periods. In making such assessment, significant weight was given to evidence that could be objectively verified such as recent operating results and less consideration was given to less objective indicators such as future income projections. After consideration of positive and negative evidence, including the recent history of income, the Company concluded that it is more likely than not that the Company will generate future income sufficient to realize the majority of the Company’s deferred tax assets as of June 30, 2016. Accordingly, the Company has recorded a reduction in its valuation allowance in fiscal 2016 in the amount of $83.2 million.

The Company cannot conclude that certain state net operating loss carry forwards and tax credit carryovers will be utilized before expiration. Accordingly, the Company will maintain a valuation allowance of $1.6 million to offset this deferred tax asset. The valuation allowance decreased $83.2 million and $12.3 million, respectively, in fiscal 2016 and 2015 and increased $9.9 million in fiscal 2014. The Company will continue to monitor all available evidence, both positive and negative, in determining whether it is more likely than not that the Company will realize its remaining deferred tax assets.

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



	Year Ended June 30,
(In thousands)	2016		2015		2014
Unrecognized tax benefits at beginning of year	$	—	$	—	$	3,211
Decreases in tax positions for prior years	—		—		(30		)
Settlements	—		—		(3,181		)
Unrecognized tax benefits at end of year	$	—	$	—	$	—

At June 30, 2016 and 2015, 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, 2012. The Internal Revenue Service is currently auditing the Company's tax years ended June 30, 2013 and 2014.

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, 2016 and 2015, the Company recorded $0 in accrued interest and penalties associated with uncertain tax positions. Additionally, the Company recorded income of $0 related to interest and penalties on uncertain tax positions in the fiscal years ended June 30, 2016, 2015 and 2014, respectively.