Income Taxes

The components of income (loss) before income taxes consist of the following:



Year ended December 31,	2013			2012			2011
Income (loss) before income taxes:
U.S.	$	192,239		$	192,978		$	189,833
Foreign	(7,254		)	(9,622		)	—
Income before income taxes	$	184,985		$	183,356		$	189,833

The income tax provision consists of the following:



Year ended December 31,	2013			2012			2011
Current tax provision (benefit):
Federal	$	58,487		$	62,859		$	50,780
State	10,455			10,537			9,335
Foreign	1,448			(103		)	—
Total current tax provision	70,390			73,293			60,115
Deferred tax provision (benefit):
Federal	5,455			2,529			12,983
State	394			438			1,537
Foreign	(2,136		)	(1,907		)	—
Total deferred tax provision	3,713			1,060			14,520
Total income tax provision	$	74,103		$	74,353		$	74,635

A reconciliation of the federal statutory rate to our effective income tax rate is shown below:



Year ended December 31,	2013		2012		2011
Federal statutory rate	35.0	%	35.0	%	35.0	%
Increases in the rate resulting from:
State income taxes, net of federal income tax impact	3.9	%	3.9	%	3.7	%
Foreign income taxes	0.4	%	0.7	%	—	%
Other	0.8	%	1.0	%	0.6	%
Effective income tax rate	40.1	%	40.6	%	39.3	%

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



December 31,	2013			2012
Deferred tax assets:
Employee benefit plans	$	28,995		$	30,138
Accrued liabilities not currently deductible	13,591			17,610
Finance charges	6,316			7,042
Intangible assets	2,171			2,749
Property and equipment	1,507			1,593
Allowance for losses on accounts and notes receivable	3,922			3,885
Net operating loss carryforwards	8,643			5,540
Other	2,083			1,901
Total deferred tax assets	67,228			70,458
Less: valuation allowances	(5,250		)	(3,683		)
Net deferred tax assets	61,978			66,775
Deferred tax liabilities:
Merchandise inventories	69,994			70,916
Goodwill	33,455			31,020
Property and equipment	18,026			18,110
Computer software	11,400			10,576
Insurance	1,070			1,030
Intangible assets	4,523			5,266
Employee benefit plans	103			188
Other	585			1,309
Total deferred tax liabilities	139,156			138,415
Net deferred tax liability	$	(77,178	)	$	(71,640	)

The valuation allowances relate to deferred tax assets in various state and non-U.S. jurisdictions. Based on management’s judgments using available evidence about historical and expected future taxable earnings, management believes it is more likely than not that we will realize the benefit of the existing deferred tax assets, net of valuation allowances, at December 31, 2013. The valuation allowances primarily relate to net operating loss carryforwards in non-U.S. jurisdictions which have various expiration dates ranging from five years to an unlimited carryforward period. There were no significant decreases in valuation allowances during 2013.

It is our intention to permanently reinvest the earnings of our non-U.S. subsidiaries in those operations. As of December 31, 2013, we have not made a provision for U.S. or additional foreign withholding taxes on investments in foreign subsidiaries that are permanently reinvested, and there are no deferred tax liabilities that have not been provided.

Cash payments for income taxes, including interest, for 2013, 2012, and 2011 were $65.4 million, $78.5 million, and $61.8 million.

At December 31, 2013 and 2012, the liability for unrecognized tax benefits was $4.6 million and $12.3 million. A reconciliation of the changes in unrecognized tax benefits from the beginning to the end of the reporting period is as follows:



	2013			2012
Unrecognized tax benefits at January 1,	$	12,303		$	13,152
Increases for positions taken during current period	758			574
Increases for positions taken during prior periods	333			191
Decreases for positions taken during prior periods	(4,939		)	(432		)
Lapse of statute of limitations	(3,580		)	(1,182		)
Settlements with taxing authorities	(227		)	—
Unrecognized tax benefits at December 31,	$	4,648		$	12,303

Included in the liability for unrecognized tax benefits at December 31, 2013 and 2012, were $3.4 million and $10.7 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. These tax positions are temporary differences which do not impact the annual effective tax rate under deferred tax accounting. Any change in the deductibility period of these tax positions would impact the timing of cash payments to taxing jurisdictions. Unrecognized tax benefits of $1.0 million and $1.7 million at December 31, 2013 and 2012, would impact our effective tax rate if recognized.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. Accrued interest at December 31, 2013 and 2012 was $0.1 million and $0.6 million. Interest income recognized during 2013 and 2012 was $0.4 million and $0.1 million. Interest expense recognized in 2011 was $0.2 million. There were no penalties accrued at December 31, 2013 or 2012 or recognized in 2013, 2012 and 2011.

We file income tax returns in the U.S. federal and various state and foreign jurisdictions. Our U.S. federal income tax returns for the years 2011 and 2012 are subject to examination. In 2013 we concluded examinations of the 2009 and 2010 Federal returns and certain state income tax returns. Our income tax returns for U.S. state and local jurisdictions are generally open for the years 2010 through 2012; however, certain returns may be subject to examination for differing periods. The seller is contractually obligated to indemnify us for all income tax liabilities incurred by the Movianto business prior to our acquisition on August 31, 2012.