6. Income Taxes

Income before taxes is summarized as follows:



	Year Ended December 31,
(in thousands)	2015		2014		2013
United States Operations	$	69,822	$	170,517	$	127,682
Foreign Operations	$	4,017	$	16,921	$	11,933
Total	$	73,839	$	187,438	$	139,615

The provision for income taxes is as follows:



	Year Ended December 31,
(in thousands)	2015		2014		2013
Current expense:
Federal	$	5,465	$	45,074	$	29,034
State		(362)		11,174		9,018
Foreign		1,126		3,203		4,256
Total current		6,229		59,451		42,308

Deferred (benefit) expense:
Federal		19,583		9,992		9,547
State		2,735		10,059		577
Foreign		—		—		(113)
Total deferred		22,318		20,051		10,011
Total provision	$	28,547	$	79,502	$	52,319

The following table is a reconciliation of the Company’s provision for income taxes at the statutory rates to the provision for income taxes at the Company’s effective rate.



	2015				2014				2013
(dollars in thousands)	Amount		Rate		Amount		Rate		Amount		Rate
Federal income expense at statutory tax rate	$	25,844	35.0	%	$	65,603	35.0	%	$	48,865	35.0	%
State income taxes, net of federal tax benefit		1,250	1.7			10,367	5.5			6,236	4.5
Officers' compensation		2,900	3.9			3,657	2.0			1,732	1.2
Domestic Production Activities Deduction		(1,499)	(2.0)			(5,170)	(2.8)			(3,641)	(2.6)
Impact of state tax rate changes on deferreds		2,435	3.3			3,245	1.7			—	—
Other		(2,383)	(3.2)			1,800	1.0			(873)	(0.6)
Provision for income taxes	$	28,547	38.7	%	$	79,502	42.4	%	$	52,319	37.5	%

The Company’s provision for income taxes and effective tax rate for the year ended December 31, 2015 were significantly impacted by a favorable discrete item related to the reversal of FIN 48 reserves due to the resolution of certain state tax matters. The Company’s provision for income taxes and effective tax rate for the year ended December 31, 2014 were significantly impacted by a shift in revenue to projects in higher state tax jurisdictions, causing an increase in the state tax rate. The increase in state tax rate was applied to deferred tax balances, which further increased the effective rate. Higher non‑deductible compensation expense also contributed to this increase.

The following is a summary of the significant components of the deferred tax assets and liabilities:



	December 31,
(in thousands)	2015		2014
Deferred Tax Assets
Timing of expense recognition	$	58,048	$	47,017
Net operating losses		3,564		2,188
Other, net		114,225		6,980
Deferred tax assets		175,837		56,185
Valuation allowance		(460)		(1,369)
Net deferred tax assets		175,377		54,816
Deferred Tax Liabilities
Intangible assets, due primarily to purchase accounting		(99,549)		(26,094)
Fixed assets, due primarily to purchase accounting		(101,022)		(90,886)
Construction contract accounting		(7,530)		(6,854)
Joint ventures - construction		(27,604)		(30,654)
Other		(62,494)		(10,012)
Deferred tax liabilities		(298,199)		(164,500)

Net deferred tax liability	$	(122,822)	$	(109,684)

The net deferred tax liability is classified in the Consolidated Balance Sheets based on when the future tax benefit or expense is expected to be realized as follows:



	December 31,
(in thousands)	2015		2014
Current deferred tax asset	$	26,306	$	17,962
Long-term deferred tax asset		149,071		36,854
Current deferred tax liability		(24,889)		(14,129)
Long-term deferred tax liability		(273,310)		(150,371)
Net deferred tax liability	$	(122,822)	$	(109,684)

The Company had a valuation allowance of $0.5 million and $1.4 million as of December 31, 2015 and 2014, respectively, for federal and state capital loss carryforwards as the ultimate utilization of this item was not likely.

The Company has not provided for deferred income taxes or foreign withholding tax on basis differences in its non-U.S. subsidiaries that result from undistributed earnings aggregating $12.1 million which the Company has the intent and the ability to reinvest in its foreign operations. Generally, the U.S. income taxes imposed upon repatriation of undistributed earnings would be reduced by foreign tax credits from foreign income taxes paid on the earnings. Determination of the deferred income tax liability on these basis differences is not reasonably estimable because such liability, if any, is dependent on circumstances existing if and when remittance occurs.

The Company’s policy is to record interest and penalties on unrecognized tax benefits as an element of income tax expense. The cumulative amounts related to interest and penalties are added to the total unrecognized tax liabilities on the balance sheet. The total amount of gross unrecognized tax benefits as of December 31, 2015 that, if recognized, would affect the effective tax rate is $3.6 million. During 2014, the Company recognized a net increase of $2.2 million in liabilities. The amount of gross unrecognized tax benefits as of December 31, 2014 was $7.6 million. During 2013, the Company recognized a net increase of $1.4 million in liabilities. The amount of gross unrecognized tax benefits as of December 31, 2013 was $5.5 million in liabilities. The Company does not expect any significant release of unrecognized tax benefits within the next twelve months.

The Company accounts for its uncertain tax positions in accordance with GAAP. A reconciliation of the beginning and ending amounts of these tax benefits for the two years ended December 31, 2015 is as follows:



	As of December 31,
(in thousands)	2015		2014		2013
Beginning balance	$	7,636	$	5,459	$	4,023
Change in tax positions of prior years		(3,073)		426		182
Change in tax positions of current year		169		2,929		1,254
Reduction in tax positions for statute expirations		(1,120)		(1,178)		—
Ending Balance	$	3,612	$	7,636	$	5,459

We conduct business internationally and, as a result, one or more of our subsidiaries files income tax returns in U.S. federal, U.S. state and certain foreign jurisdictions. Accordingly, in the normal course of business, we are subject to examination by taxing authorities principally throughout the United States, Guam and Canada. We are no longer under examination by the taxing authority regarding any U.S. federal income tax returns for years before 2011 while the years open for examination under various state and local jurisdictions vary.