FEDERAL AND STATE INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the provision for income taxes for the years ended November 30, are as follows (in thousands):



	2012			2013			2014
Current tax expense (benefit):
Federal	$	18,466		$	(8,008	)	$	42,243
State	1,003			(220		)	3,336
Deferred tax expense (benefit):
Federal	8,608			33,235			(13,450		)
State	3,881			2,777			1,104
Foreign	(305		)	—			—
Provision for income taxes	$	31,653		$	27,784		$	33,233

The reconciliation of income tax expense computed at the federal statutory tax rates to income tax expense from continuing operations for the years ended November 30, is as follows (percent of pre-tax income):



	2012		2013		2014
Income tax computed at federal statutory rates	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	4.5		4.2		3.8
MA abandonment benefit	—		—		(5.9	)
Valuation allowance	(2.7	)	—		—
State tax credits, net of federal tax benefit	(0.6	)	—		—
Other, net	0.5		(1.2	)	0.1
	36.7	%	38.0	%	33.0	%

The components of the net deferred tax assets (liabilities) at November 30, are as follows (in thousands):



	2013			2014
Loss carryforwards	$	9,919		$	13,518
Deferred revenues	3,684			3,313
Accruals	3,754			4,649
Compensation related	3,075			3,556
Interest	4,749			4,077
Other	901			895
Deferred tax assets	26,082			30,008
Valuation allowance	(1,363		)	(7,832		)
Deferred tax assets, net of valuation allowance	24,719			22,176
Amortization and depreciation	(381,144		)	(369,033		)
Equity investment	(6,620		)	(4,285		)
Other	(364		)	(345		)
Deferred tax liabilities	(388,128		)	(373,663		)
Net deferred tax liabilities	$	(363,409	)	$	(351,487	)

Deferred tax assets — current	$	3,122		$	2,789
Deferred tax liabilities — noncurrent	(366,531		)	(354,276		)
Net deferred tax liabilities	$	(363,409	)	$	(351,487	)

The increase in the valuation allowance at November 30, 2014 is primarily a result of the consolidation of MA and related various state loss carryforwards for which they carried a full valuation allowance. At November 30, 2014 the Company has deferred tax assets related to these and other various state loss carryforwards totaling approximately $13.5 million that expire in varying amounts beginning in fiscal 2019. The valuation allowance has been provided due to the uncertainty regarding the realization of state deferred tax assets associated with these loss carryforwards. In evaluating the Company’s ability to recover its deferred income tax assets it considers all available positive and negative evidence, including operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction by jurisdiction basis.

Federal returns for fiscal years 2010 through 2013 remain open and subject to examination by the Internal Revenue Service. The Company files and remits state income taxes in various states where the Company has determined it is required to file state income taxes. The Company’s filings with those states remain open for audit for the fiscal years 2009 through 2013.

A reconciliation of the beginning and ending amount of unrecognized tax liability is as follows (in thousands):



Balance at December 1, 2013	$	430
Additions based on tax positions related to the current year	—
Additions for tax positions of prior years	—
Reductions for tax positions of prior years	(31		)
Balance at November 30, 2014	$	399

The reduction in the valuation allowance associated with the wind-up of certain Canadian business operations is the principal cause of the decreased effective income tax rate as compared to the statutory income tax rate, for the fiscal year ended November 30, 2012. Certain state settlements are the principal cause of the decreased effective income tax rate as compared to the statutory income tax rate, for the fiscal year ended November 30, 2013. The principal causes of the decreased income tax rate for the fiscal year ended November 30, 2014 are the tax treatment related to the other income recognized as a result of SMI's abandonment of their interest in SMISC, LLC on January 31, 2014, including the related tax benefits associated with various operating loss and other carryforwards of MA and certain tax filing positions of SMISC, LLC totaling approximately $4.0 million along with certain state income tax adjustments.

As a result of the above items, the Company’s effective income tax rate decreased from the statutory income rate to approximately 36.7 percent, 38.0 percent and 33.0 percent for the fiscal years ended November 30, 2012, 2013 and 2014, respectively.

Also of note, while not impacting the combined current and deferred income tax expense and related income tax rate during the fiscal year ended November 30, 2014, as compared to the prior fiscal year, the tax benefit realized in fiscal 2013 attributable to the aforementioned sale of the Company's Staten Island property, as well as the effect of the December 2013 expiration of certain tax legislation impacting depreciation deductions contributed substantially to increased current income taxes paid during the fiscal year ended November 30, 2014 totaling approximately $51.3 million as compared to approximately $18.1 million during fiscal 2013. In addition this overall impact to the current fiscal year tax depreciation deduction substantially contributed to the overall reduction of approximately $12.3 million in our long-term deferred income tax liabilities at November 30, 2014 as compared to November 30, 2013.

In December 2014, Congress passed the Tax Increase Prevention Act which included a retroactive renewal back to January 1, 2014, of the previously expired tax legislation. The impact of this retroactive tax legislation will not affect the Company's fiscal 2015 effective tax rate, but will reduce related income tax payments.