INCOME TAXES

The components of income tax expense (benefit) associated with continuing operations are as follows:



	For the year ended December 31,
	2015			2014			2013
In thousands
Current:
Federal	$	25,170		$	26,296		$	21,916
State	349			(796		)	3,731
Foreign	931			905			1,768
	26,450			26,405			27,415
Deferred:
Federal	5,474			5,256			5,688
State	(2,682		)	(380		)	(270		)
Foreign	(1,691		)	(559		)	(1,245		)
	1,101			4,317			4,173
Total	$	27,551		$	30,722		$	31,588

The tax effects of temporary differences that give rise to deferred tax assets and liabilities are presented below:



	At December 31,
	2015			2014
In thousands
Deferred tax assets:
Deferred employee benefits	$	83,390		$	75,026
Inventories	9,410			10,332
Tax loss and credit carryforwards	19,529			9,895
Accrued liabilities and other items	12,491			15,104
Total deferred tax assets	124,820			110,357
Deferred tax liabilities:
Property, plant and equipment	(17,178		)	(15,666		)
Intangibles	(42,717		)	(29,693		)
Other items	(2,195		)	(3,096		)
Total deferred tax liabilities	(62,090		)	(48,455		)
Net deferred tax assets before valuation allowance	62,730			61,902
Valuation allowance	(11,122		)	(4,694		)
Net deferred tax assets after valuation allowance	$	51,608		$	57,208

The Company adopted FASB Accounting Standards Update 2015-17, Balance Sheet Classification of Deferred Taxes, during the fourth quarter of the year ended December 31, 2015. The update simplifies the presentation of deferred taxes on the balance sheet by requiring that all deferred taxes be classified as noncurrent. The amounts shown for 2014 have not been adjusted. The $6.4 million change in the valuation allowance from December 31, 2014, to December 31, 2015, primarily relates to tax attributes acquired with GRW, which the Company has determined cannot be said to be more likely than not to be realized, partially offset by the reversal of valuation allowances relating to certain state loss carryforwards, no longer deemed to be necessary due to changes in tax laws. Valuation allowances reduced the deferred tax asset attributable to state loss and credit carryforwards to an amount that, based upon all available information, is more likely than not to be realized. Reversal of the valuation allowance is contingent upon the recognition of future taxable income in the respective jurisdictions or changes in circumstances which cause the realization of the benefits of carryforwards to become more likely than not.

A portion of the net deferred tax assets, $2.7 million, is related to a capital loss recorded on the disposition of the Company's Distribution segment’s Mexico operations. The realization of these benefits is dependent in part on future taxable capital gains.

13. INCOME TAXES (CONTINUED)

Pre-tax income (loss) from foreign operations amounted to $(4.3) million, $(2.3) million and $(3.0) million in 2015, 2014 and 2013, respectively. U.S. income taxes have not been provided on $27.5 million of undistributed earnings of foreign subsidiaries since it is the Company’s intention to permanently reinvest such earnings or to distribute them only when it is tax efficient to do so. It is impracticable to estimate the total tax liability, if any, that would be created by the future distribution of these earnings.

The provision for income taxes associated with continuing operations differs from that computed at the federal statutory corporate tax rate as follows:



	For the year ended December 31,
	2015			2014			2013
In thousands
Federal tax at 35% statutory rate	$	30,796		$	33,776		$	31,729
State income taxes, net of federal benefit	(1,517		)	(765		)	2,250
Tax effect of:
Section 199 Manufacturing deduction	(2,275		)	(2,000		)	(2,200		)
Other, net	547			(289		)	(191		)
Income tax expense	$	27,551		$	30,722		$	31,588

The Company records a benefit for uncertain tax positions in the financial statements only when it determines it is more likely than not that such a position will be sustained upon examination by taxing authorities. Unrecognized tax benefits represent the difference between the position taken and the benefit reflected in the financial statements. On December 31, 2015, 2014 and 2013 the total liability for unrecognized tax benefits was $3.0 million, $2.4 million and $2.3 million, respectively (including interest and penalties of $0.5 million in 2015, $0.3 million in 2014 and $0.6 million in 2013). The change in the liability for 2015, 2014 and 2013 is explained as follows:



	2015			2014			2013
In thousands
Balance at January 1	$	2,441		$	2,302		$	3,886
Additions based on current year tax positions	117			512			364
Changes for tax positions of prior years	(160		)	33			(907		)
Settlements	19			(165		)	(264		)
Additions due to acquired business	954			—			414
Reductions due to lapses in statutes of limitation	(375		)	(241		)	(1,191		)
Balance at December 31	$	2,996		$	2,441		$	2,302

Included in unrecognized tax benefits at December 31, 2015, were items approximating $1.4 million that, if recognized, would favorably affect the Company’s effective tax rate in future periods. The Company files tax returns in numerous U.S. and foreign jurisdictions, with returns subject to examination for varying periods, but generally back to and including 2011. During 2015, 2014 and 2013, $0.1 million or less of interest and penalties was recognized each year as a component of income tax expense. It is the Company’s policy to record interest and penalties on unrecognized tax benefits as income taxes.

Cash payments for income taxes, net of refunds, were $35.7 million, $22.8 million, and $33.1 million in 2015, 2014 and 2013, respectively.