Income Taxes

We file a consolidated Federal income tax return. Taxes based on income from continuing operations for the years ended June 30 have been provided as follows:



	2015		2014			2013
Currently payable:
Federal	$	47,601	$	48,718		$	45,350
State and local	5,229		4,526			3,475
Total current provision	52,830		53,244			48,825
Deferred Federal, state and local provision (benefit)	36		(951		)	1,133
Total taxes based on income	$	52,866	$	52,293		$	49,958

Certain tax benefits recorded directly to common stock for each of the years ended June 30 were as follows:



	2015		2014		2013
Tax benefits recorded directly to common stock	$	563	$	1,020	$	794

For the years ended June 30, our effective tax rate varied from the statutory Federal income tax rate as a result of the following factors:



	2015		2014		2013
Statutory rate	35.0	%	35.0	%	35.0	%
State and local income taxes	2.2		2.0		1.5
ESOP dividend deduction	(0.2	)	(0.2	)	(0.8	)
Domestic manufacturing deduction for qualified income	(3.0	)	(3.0	)	(3.1	)
Other	0.2		0.3		(0.1	)
Effective rate	34.2	%	34.1	%	32.5	%

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at June 30 were comprised of:



	2015			2014
Deferred tax assets:
Inventories	$	1,179		$	720
Employee medical and other benefits	11,135			10,149
Receivable and other allowances	5,652			4,410
Intangible assets	—			482
Other accrued liabilities	2,229			2,413
Total deferred tax assets	20,195			18,174
Deferred tax liabilities:
Property, plant and equipment	(22,968		)	(21,307		)
Intangible assets	(15,223		)	—
Goodwill	(4,869		)	(4,212		)
Other	(75		)	(79		)
Total deferred tax liabilities	(43,135		)	(25,598		)
Net deferred tax liability	$	(22,940	)	$	(7,424	)

Net current deferred tax assets and prepaid Federal, state and local income taxes were included in Deferred Income Taxes and Other Current Assets on the Consolidated Balance Sheets. The related balances at June 30 were as follows:



	2015		2014
Net current deferred tax assets	$	12,788	$	11,329
Prepaid Federal, state and local income taxes	$	4,402	$	9,688

Cash payments for income taxes for each of the years ended June 30 were as follows:



	2015		2014		2013
Cash payments for income taxes	$	43,027	$	37,277	$	56,992

The gross tax contingency reserve at June 30, 2015 was $1.5 million and consisted of tax liabilities of $1.0 million and interest and penalties of $0.5 million. The unrecognized tax benefits recorded as the gross tax contingency reserve noted in the following table for June 30, 2015 and 2014 would affect our effective tax rate, if recognized.

The following table sets forth changes in our total gross tax contingency reserve (including interest and penalties):



	2015			2014
Balance, beginning of year	$	963		$	912
Tax positions related to the current year:
Additions	54			66
Reductions	—			—
Tax positions related to prior years:
Additions	516			39
Reductions	(46		)	(54		)
Settlements	—			—
Balance, end of year	$	1,487		$	963

We have not classified any of the gross tax contingency reserve at June 30, 2015 as a current liability as none of these amounts are expected to be resolved within the next 12 months. Consequently, the entire liability of $1.5 million was included in other noncurrent liabilities. We expect that the amount of these liabilities will change within the next 12 months; however, we do not expect the change to have a significant effect on our financial position or results of operations.

We recognize interest and penalties related to these tax liabilities in income tax expense. For each of the years ended June 30, we recognized the change in the accrual for net tax-related interest and penalties as follows:



	2015		2014
Expense recognized for net tax-related interest and penalties	$	87	$	9

We had accrued interest and penalties at June 30 as follows:



	2015		2014
Accrued interest and penalties included in the gross tax contingency reserve	$	479	$	392

We file income tax returns in the U.S. and various state and local jurisdictions. With limited exceptions, we are no longer subject to examination of U.S. Federal or state and local income taxes for years prior to 2012.

The American Jobs Creation Act provided a tax deduction calculated as a percentage of qualified income from manufacturing in the United States. The deduction percentage for 2015 was 9%. In accordance with FASB guidance, this deduction is treated as a special deduction, as opposed to a tax rate reduction and is properly reflected in the effective tax rate table.