Income Taxes

12 Months Ended

Dec. 31, 2014

Income Taxes

Income Taxes

Note 5: Income Taxes

The following table lists the components of the provision for income taxes:

Years ended December 31,	2014		2013			2012
(in thousands)
Current provision:
Federal	$	119,074	$	104,890		$	147,580
State		19,858		15,627			14,673
Foreign		2,907		1,918			1,109
Deferred provision (benefit):
Federal		11,514		(12,025	)		5,027
State		840		(1,035	)		(206	)
Total income tax provision	$	154,193	$	109,375		$	168,183

Reconciliation between the federal statutory rate and RPC’s effective tax rate is as follows:

Years ended December 31,	2014			2013			2012
Federal statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		3.3			3.8			3.2
Tax credits		(0.7	)		(0.3	)		(0.3	)
Non-deductible expenses		0.4			0.5			0.5
Other		0.6			0.6			(0.4	)
Effective tax rate		38.6	%		39.6	%		38.0	%

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

December 31,	2014			2013
(in thousands)
Deferred tax assets:
Self-insurance	$	7,675		$	7,247
Pension		12,555			8,018
State net operating loss carryforwards		451			484
Bad debts		5,755			4,748
Accrued payroll		2,833			2,019
Stock-based compensation		5,583			5,183
Tangible property regulations 481(a)		—			7,665
All others		2,121			1,541
Valuation allowance		(2	)		(83	)
Gross deferred tax assets		36,971			36,822
Deferred tax liabilities:
Depreciation		(172,813	)		(165,960	)
Goodwill amortization		(7,974	)		(7,094	)
All Others		(3,739	)		(2,759	)
Gross deferred tax liabilities		(184,526	)		(175,813	)
Net deferred tax liabilities	$	(147,555	)	$	(138,991	)

As of December 31, 2014, undistributed earnings of the Company’s foreign subsidiaries totaled $12.9 million. Those earnings are considered to be indefinitely reinvested and, accordingly, no U.S. federal and state income taxes have been provided thereon. Upon distribution of these earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes and withholding taxes payable to the foreign countries. The Company’s current intention is to permanently reinvest funds held in our foreign subsidiaries outside of the U.S., with the possible exception of repatriation of funds that have been previously subject to U.S. federal and state taxation or when it would be tax effective through the utilization of foreign tax credits, or would otherwise create no additional U.S. tax cost.

As of December 31, 2014, the Company has net operating loss carry forwards related to state income taxes of approximately $11.3 million that will expire between 2015 and 2034.  As of December 31, 2014, the Company has a negligible valuation allowance against the corresponding deferred tax asset.

Total net income tax payments were $152.2 million in 2014, $122.9 million in 2013, and $158.7 million in 2012.

The Company and its subsidiaries are subject to U.S. federal and state income taxes in multiple jurisdictions.  In many cases our uncertain tax positions are related to tax years that remain open and subject to examination by the relevant taxing authorities.  The Company’s 2011 through 2014 tax years remain open to examination.  Additional years may be open to the extent attributes are being carried forward to an open year.  The Internal Revenue Service (IRS) commenced an examination of the Company’s US federal income tax return for the 2011 tax year during the fourth quarter of 2013 that is anticipated to be completed by the middle of 2015.  As of December 31, 2014, the IRS has not proposed any adjustments in connection with the examination.

During 2014 and 2013, the Company recognized an increase in its liability for unrecognized tax benefits in the current year related primarily to refund claims filed for state income taxes.  If recognized, the liability would affect our effective rate.  A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2014		2013
Balance at January 1	$	16,345,000	$	38,000
Additions based on tax positions related to the current year		5,193,000		3,430,000
Additions for tax positions of prior years		1,729,000		12,877,000
Balance at December 31	$	23,267,000	$	16,345,000

The Company’s policy is to record interest and penalties related to income tax matters as income tax expense.  Accrued interest and penalties were immaterial as of December 31, 2014 and 2013.

It is reasonably possible that the amount of the unrecognized tax benefits with respect to our unrecognized tax positions will significantly decrease in the next 12 months.  These changes may result from, among other things, state tax settlements under or conclusions of ongoing examinations or reviews, however, quantification of an estimated range cannot be made at this time.

The Tax Increase Prevention Act of 2014 was signed into law on December 19, 2014 and included an extension for one year of the 50 percent bonus depreciation allowance. The provision specifically applied to qualifying property placed in service before January 1, 2015.  The acceleration of deductions on 2014 qualifying capital expenditures resulting from the bonus depreciation provision had no impact on our 2014 effective tax rate.

In September 2013, the U.S. Department of the Treasury issued final regulations under Internal Revenue Code Sections 162(a), 263(a), and 168 that provide guidance on the deduction and capitalization of expenditures related to tangible property.  Adoption of these regulations requires certain mandatory and elective accounting methods with respect to property and equipment, inventory and supplies.  RPC adopted these regulations as of January 1, 2014 and estimated favorable IRC Section 481(a) adjustments of approximately $21.7 million (gross).  Additionally, for assets placed in service after December 31, 2013, estimated accelerated deductions total approximately $16.9 million (gross).  This amount is subject to change as the analysis is finalized and method changes are filed under the new regulations during 2015.