Note 9 — TAXES

The components of deferred tax assets and liabilities are as follows (in thousands):



	March 31,
	2014			2013
Deferred tax assets:
Foreign tax credits	$	17,628		$	10,483
Net operating losses	15,627			—
Accrued pension liability	18,531			29,951
Maintenance and repair	12,674			10,291
Accrued equity compensation	11,627			11,607
Deferred revenue	2,124			2,212
Employee award programs	6,289			4,237
Employee payroll accruals	4,845			4,494
Other	3,188			6,348
Valuation allowance	(6,896		)	—
Total deferred tax assets	$	85,637		$	79,623
Deferred tax liabilities:
Property and equipment	$	(205,104	)	$	(189,482	)
Inventories	(6,956		)	(11,068		)
Investment in unconsolidated affiliates	(8,985		)	(11,681		)
Employee programs	(1,895		)	—
Other	(9,195		)	(6,912		)
Total deferred tax liabilities	$	(232,135	)	$	(219,143	)
Net deferred tax liabilities	$	(146,498	)	$	(139,520	)

Companies may use foreign tax credits to offset the U.S. income taxes due on income earned from foreign sources. However, the credit that may be claimed for a particular taxable year is limited by the total income tax on the U.S. income tax return as well as by the ratio of foreign source net income in each statutory category to total net income. The amount of creditable foreign taxes available for the taxable year that exceeds the limitation (i.e.; “excess foreign tax credits”) may be carried back one year and forward ten years. We have $17.6 million of excess foreign tax credits as of March 31, 2014, of which $6.6 million will expire in fiscal year 2021, $3.9 million will expire in fiscal year 2022, $0.2 million will expire in fiscal year 2023 and $6.9 million will expire in fiscal year 2024.

We record a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability to generate sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. As of March 31, 2014, valuation allowances totaled $6.9 million for operating loss carryforwards. The increase in the valuation allowance of $6.9 million in fiscal year 2014 resulted primarily from foreign losses.

The components of income before provision for income taxes for fiscal years 2014, 2013 and 2012 are as follows (in thousands):



	Fiscal Year Ended March 31,
	2014			2013		2012
Domestic	$	(14,357	)	$	2,472	$	(1,100	)
Foreign	259,348			164,205		80,542
Total	$	244,991		$	166,677	$	79,442

The provision for income taxes for fiscal years 2014, 2013 and 2012 consisted of the following (in thousands):



	Fiscal Year Ended March 31,
	2014			2013		2012
Current:
Domestic	$	36,872		$	1,638	$	27
Foreign	33,939			26,275		23,059
	$	70,811		$	27,913	$	23,086
Deferred:
Domestic	$	(6,646	)	$	1,619	$	1,658
Foreign	(6,953		)	5,470		(10,543		)
	$	(13,599	)	$	7,089	$	(8,885	)
Total	$	57,212		$	35,002	$	14,201

The reconciliation of the U.S. Federal statutory tax rate to the effective income tax rate for the provision for income taxes is shown below:



	Fiscal Year Ended March 31,
	2014		2013		2012
Statutory rate	35.0	%	35.0	%	35.0	%
Net foreign tax on non-U.S. earnings	11.8	%	14.4	%	20.4	%
Foreign earnings indefinitely reinvested abroad	(18.9	)%	(28.4	)%	(26.3	)%
Change in valuation allowance	1.8	%	—	%	—	%
Foreign earnings that are currently taxed in the U.S.	4.1	%	4.6	%	5.9	%
Effect of reduction in U.K. corporate income tax rate	(1.2	)%	(1.7	)%	(2.3	)%
Dividend inclusion as a result of internal realignment	1.1	%	—	%	16.6	%
Benefit of prior year foreign tax credits	—	%	—	%	(5.3	)%
Benefit of current year foreign tax credits	(5.2	)%	(5.5	)%	(9.8	)%
Tax reserve release	(0.7	)%	—	%	(7.7	)%
Other, net	(4.4	)%	2.6	%	(8.6	)%
Effective tax rate	23.4	%	21.0	%	17.9	%

Effective March 31, 2012, we completed an internal restructuring to provide more flexibility with internal cash requirements. As a result of this restructuring, we recognized tax expense of $13.2 million related to a dividend. This tax cost was partially offset by a change from a deduction of foreign taxes paid to credit for fiscal years 2012 and 2011 of $11.5 million. During February 2012, a foreign tax jurisdiction issued a favorable response to a ruling request that permitted release of a $12.6 million tax reserve.

Fiscal years 2014, 2013 and 2012 include a benefit due to the revaluation of our deferred taxes as a result of the enactment of tax rate reductions in the U.K. of $2.9 million, $2.9 million and $1.8 million, respectively, effective April 1 of each year.

In August 2008, certain of our existing and newly created subsidiaries completed intercompany leasing transactions involving eleven aircraft. The tax benefit of this transaction is being recognized over the remaining useful life of the assets, which is approximately 13 years. During each of the fiscal years 2014, 2013 and 2012, this transaction resulted in a $2.9 million reduction in our consolidated provision for income taxes.

Our operations are subject to the jurisdiction of multiple tax authorities, which impose various types of taxes on us, including income, value added, sales and payroll taxes. Determination of taxes owed in any jurisdiction requires the interpretation of related tax laws, regulations, judicial decisions and administrative interpretations of the local tax authority. As a result, we are subject to tax assessments in such jurisdictions including the re-determination of taxable amounts by tax authorities that may not agree with our interpretations and positions taken. The following table summarizes the years open by jurisdiction as of March 31, 2014:



Jurisdiction	Years Open
U.S.	Fiscal year 2012 to present
U.K.	Fiscal year 2012 to present
Nigeria	Fiscal year 2005 to present
Trinidad	Fiscal year 2005 to present

The effects of a tax position are recognized in the period in which we determine that it is more-likely-than-not (defined as a more than 50% likelihood) that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. A tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount of tax benefit that is greater than 50% likely of being recognized upon ultimate settlement.

We have analyzed filing positions in the federal, state and foreign jurisdictions where we are required to file income tax returns for all open tax years. We believe that the settlement of any tax contingencies would not have a significant impact on our consolidated financial position, results of operations and/or liquidity. In fiscal years 2014, 2013 and 2012, we had a net (benefit) provision of $(1.5) million, $0.1 million and $(10.4) million, respectively, of reserves for tax contingencies primarily related to non-U.S. income tax on foreign leasing operations. Our policy is to accrue interest and penalties associated with uncertain tax positions in our provision for income taxes. In fiscal years 2014, 2013 and 2012, $0.1 million, $0.1 million and $0.2 million, respectively, in interest and penalties were accrued in connection with uncertain tax positions.

As of March 31, 2014 and 2013, we had $0.2 million and $1.7 million, respectively, of unrecognized tax benefits, all of which would have an impact on our effective tax rate, if recognized.

The activity associated with our unrecognized tax benefit during fiscal years 2013 and 2012 is as follows (in thousands):



	Fiscal Year Ended March 31,
	2014			2013
Unrecognized tax benefits – beginning of fiscal year	$	1,710		$	1,523
Increases for tax positions taken in prior years	129			348
Decreases for tax positions taken in prior years	(1,434		)	(161		)
Decrease related to settlements with authorities	(218		)	—
Unrecognized tax benefits – end of fiscal year	$	187		$	1,710

Unremitted foreign earnings reinvested abroad upon which U.S. income taxes have not been provided aggregated approximately $679.3 million and $553.8 million as of March 31, 2014 and 2013, respectively. No accrual of income tax has been made for fiscal years 2014 and 2013 related to these indefinitely reinvested earnings as there was no plan in place to repatriate any of these foreign earnings to the U.S. as of the end of the fiscal year. Withholding taxes, if any, upon repatriation would not be significant.

We receive a tax benefit that is generated by certain employee stock benefit plan transactions. This benefit is recorded directly to additional paid-in-capital on our consolidated balance sheets and does not reduce our effective income tax rate. The tax benefit for fiscal years 2014, 2013 and 2012 totaled approximately $5.7 million, $0.5 million and $0.4 million, respectively.

As of March 31, 2012, we fully utilized our U.S. federal net operating losses that were generated in previous years. In fiscal year 2014, we added a $6.9 million valuation allowance against a loss carryforward related to foreign losses. During fiscal years 2014 through 2012, we recorded deferred tax assets related to direct and indirect foreign tax credits. As of March 31, 2014, we had $17.6 million of deferred tax assets relating to foreign tax credits that will expire in fiscal year 2024.

Income taxes paid during fiscal years 2014, 2013 and 2012 were $59.1 million, $24.1 million and $19.0 million, respectively.