NOTE 7: INCOME TAXES

Following is a summary of the Company’s income tax expense for the years ended December 31:



(In Thousands)	2013			2012			2011
Current Income Tax Expense:
Federal	$	91,664		$	116,234		$	—
State	9,393			10,819			9,797
	101,057			127,053			9,797
Deferred Income Tax Expense (Benefit):
Federal	(35,941		)	(23,035		)	62,015
State	(822		)	(206		)	(2,202		)
	(36,763		)	(23,241		)	59,813
	$	64,294		$	103,812		$	69,610

At December 31, 2011, the Company had a federal net operating loss (“NOL”) carryforward of approximately $31.2 million available to offset future taxable income. The entire NOL carryforward was absorbed during 2012.

As a result of the bonus depreciation provisions in the Small Business Jobs Act of 2010 and the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, the Company paid more than anticipated for the 2010 federal tax liability. The 2010 acts provided an estimated tax deferral of approximately $127.0 million. The Company filed for a refund of overpaid federal tax of approximately $80.9 million in January 2011 and received that refund in February 2011.

Significant components of the Company’s deferred income tax liabilities and assets at December 31 are as follows:



(In Thousands)	2013			2012
Deferred Tax Liabilities:
Lease Merchandise and Property, Plant and Equipment	$	249,192		$	279,926
Goodwill & Other Intangibles	34,512			30,754
Other, Net	2,782			3,260
Total Deferred Tax Liabilities	286,486			313,940
Deferred Tax Assets:
Accrued Liabilities	36,778			25,365
Advance Payments	15,400			15,834
Other, Net	8,032			9,677
Total Deferred Tax Assets	60,210			50,876
Less Valuation Allowance	(682		)	(657		)
Net Deferred Tax Liabilities	$	226,958		$	263,721

The Company’s effective tax rate differs from the statutory United States Federal income tax rate for the years ended December 31 as follows:



	2013		2012		2011
Statutory Rate	35.0	%	35.0	%	35.0	%
Increases in United States Federal Taxes
Resulting From:
State Income Taxes, Net of Federal Income Tax Benefit	3.1		2.5		2.7
Federal Tax Credits	(1.7	)	(.1	)	(.3	)
Other, Net	(1.6	)	.1		.6
Effective Tax Rate	34.8	%	37.5	%	38.0	%

The Company files a federal consolidated income tax return in the United States and the separate legal entities file in various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to federal, state and local tax examinations by tax authorities for years before 2010.

The following table summarizes the activity related to the Company’s uncertain tax positions:



(In Thousands)	2013			2012			2011
Balance at January 1,	$	1,258		$	1,412		$	1,315
Additions based on tax positions related to the current year	454			178			178
Additions for tax positions of prior years	423			83			22
Prior year reductions	(5		)	(315		)	(13		)
Statute expirations	(85		)	(83		)	(90		)
Settlements	(85		)	(17		)	—
Balance at December 31,	$	1,960		$	1,258		$	1,412

As of December 31, 2013 and 2012, the amount of uncertain tax benefits that, if recognized, would affect the effective tax rate is $1.5 million and $1.0 million, respectively, including interest and penalties. During the years ended December 31, 2013 and December 31, 2011, the Company recognized interest and penalties of $76,000 and $41,000. During the year ended December 31, 2012, the Company recognized a net benefit of $126,000 related to interest and penalties. The Company had $278,000 and $234,000 of accrued interest and penalties at December 31, 2013 and 2012, respectively. The Company recognizes potential interest and penalties related to uncertain tax benefits as a component of income tax expense.