13. Income Taxes

The provision for income taxes consisted of the following (in thousands):


	Years Ended December 31,
	2013			2012			2011
Currently Payable
Federal	$	70,234		$	65,835		$	40,268
State		8,027			6,683			2,698

Total currently payable		78,261			72,518			42,966
Deferred, net—
Federal		(3,891	)		(5,790	)		18,950
State		(30	)		(923	)		1,964

Total deferred, net		(3,921	)		(6,713	)		20,914

Provision for income taxes	$	74,340		$	65,805		$	63,880

The Company’s effective income tax rates for the years ended December 31, 2013, 2012 and 2011 varied from the statutory federal income tax rate as set forth in the following table (in thousands):


	Years Ended December 31,
	2013						2012						2011
	Amount			% of Pre-tax Income			Amount			% of Pre-tax Income			Amount			% of Pre-tax Income
Tax provision based on the federal statutory rate	$	69,128			35.0	%	$	62,172			35.0	%	$	60,507			35.0	%
State and local income taxes—net of federal income tax benefit		5,292			2.6	%		3,464			2.0	%		3,935			2.3	%
Change in tax reserves and accrual adjustments		(69	)		(0.0	)%		(521	)		(0.4	)%		(924	)		(0.5	)%
Non-deductible and other		(11	)		(0.0	)%		690			0.4	%		362			0.2	%

Provision for income taxes	$	74,340			37.6	%	$	65,805			37.0	%	$	63,880			37.0	%

The deferred tax assets and liabilities resulted from temporary differences in the recognition of certain items for financial and tax accounting purposes. The sources of these differences and the related tax effects were as follows (in thousands):


	As of December 31,
	2013					2012
	Assets			Liabilities		Assets⁽¹⁾			Liabilities
Accrued expenses	$	14,615		$	—	$	13,790		$	—
Allowance for doubtful accounts		7,815			—		9,202			—
Depreciation and amortization		—			28,282		—			28,707
Intangibles arising from acquisitions		—			23,689		—			23,264
Inventory reserves and adjustments		—			28,783		—			28,366
Pension and post-retirement		7,319			—		15,485			—
Interest rate swap		—			591		406			—
Share-based compensation		5,750			—		7,148			—
State income tax credits and net operating losses		5,539			—		5,007
Restructuring costs		1,930			—		698			—
Other		376			—		340			—

Total Deferred		43,344			81,345		52,076			80,337

Valuation Allowance		(2,791	)		—		(2,136	)		—

Net Deferred	$	40,553		$	81,345	$	49,940		$	80,337

(1)	Certain prior period amounts have been reclassified to conform to the current presentation. These changes did not impact the Consolidated Statements of Income.

In the Consolidated Balance Sheets, these deferred assets and liabilities were classified on a net basis as current and non-current, based on the classification of the related asset or liability or the expected reversal date of the temporary difference.

Valuation allowances principally relate to state tax credits and net operating losses which may be carried forward to future tax years until their expiration in the years ending December 31, 2018 and December 31, 2033, respectively.

Accounting for Uncertainty in Income Taxes

At December 31, 2013, the gross unrecognized tax benefits were unchanged at $3.1 million. At December 31, 2012 and 2011, the Company had $3.1 million and $3.4 million, respectively, in gross unrecognized tax benefits. The following table shows the changes in gross unrecognized tax benefits, for the years ended December 31, 2013, 2012 and 2011 (in thousands):


	2013			2012			2011
Beginning Balance, January 1	$	3,134		$	3,374		$	4,500
Additions based on tax positions taken during a prior period		169			308			61
Reductions based on tax positions taken during a prior period		(5	)		(11	)		(23	)
Additions based on tax positions taken during the current period		389			451			291
Reductions related to settlement of tax matters		(184	)		(490	)		(894	)
Reductions related to lapses of applicable statutes of limitation		(395	)		(498	)		(561	)

Ending Balance, December 31	$	3,108		$	3,134		$	3,374

At December 31, 2013, 2012 and 2011, $3.1 million, $3.1 million and $3.4 million, respectively, of these gross unrecognized tax benefits would, if recognized, decrease the Company’s effective tax rate.

The Company recognizes net interest and penalties related to unrecognized tax benefits in income tax expense. The gross amount of interest and penalties reflected in the Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011 were zero, and income of $0.1 million and $0.3 million, respectively. The Consolidated Balance Sheets at December 31, 2013 and 2012 include $0.6 and $0.6 million, respectively, accrued for the potential payment of interest and penalties.

As of December 31, 2013, the Company’s U.S. Federal income tax returns for 2010 and subsequent years remain subject to examination by tax authorities. In addition, the Company’s state income tax returns for the 2006 and subsequent tax years remain subject to examinations by state and local income tax authorities. Although the Company is not currently under examination by the IRS, a number of state and local examinations are currently ongoing. Due to the potential for resolution of ongoing examinations and the expiration of various statutes of limitation, it is reasonably possible that the Company’s gross unrecognized tax benefits balance may change within the next twelve months by a range of zero to $1.2 million.