[6] Income Taxes

Income (Loss) before taxes is summarized as follows:

	U.S.			Foreign
Year ended December 31,	Operations			Operations		Total
	(in thousands)
2013	$	127,682		$	11,933	$	139,615
2012	$	(271,683	)	$	3,841	$	(267,842	)
2011	$	133,501		$	3,546	$	137,047

The (benefit) provision for income taxes is as follows:

	Year ended December 31,
	2013			2012			2011
	(in thousands)
Current expense:
Federal	$	29,034		$	19,573		$	30,848
State	9,018			3,508			6,303
Foreign	4,256			1,542			1,325
Total current	42,308			24,623			38,476

Deferred (benefit) expense:
Federal	9,547			(28,157		)	16,351
State	577			1,104			(3,718		)
Foreign	(113		)	(12		)	(210		)
Total deferred	10,011			(27,065		)	12,423
Total (benefit) provision	$	52,319		$	(2,442	)	$	50,899

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

	2013					2012					2011
	Amount			Rate		Amount			Rate		Amount			Rate
	(dollars in thousands)
Federal income expense (benefit) at statutory tax rate	$	48,865		35.0	%	$	(93,745	)	35.0	%	$	47,963		35.0	%
State income taxes, net of federal tax benefit	6,236			4.5		3,214			(1.2	)	2,529			1.8
Officers’ compensation	1,732			1.2		1,473			(0.6	)	224			0.2
Domestic Production Activities Deduction	(3,641		)	(2.6	)	(2,246		)	(2.4	)	(2,321		)	(4.8	)
Goodwill Impairment	—			—		89,191			(33.3	)	—			—
Other	(873		)	(0.6	)	(329		)	3.4		2,504			4.9
(Benefit) provision for income taxes	$	52,319		37.5	%	$	(2,442	)	0.9	%	$	50,899		37.1	%

The Company’s provision for income taxes and effective tax rate for the year ended December 31, 2012 were significantly impacted by the goodwill and intangible asset impairment charge discussed in Note 4 — Goodwill and Other Intangible Assets above. Of the total goodwill and intangible asset impairment charge of $376.6 million, approximately $255.0 million pertained to goodwill that had no corresponding tax basis. The tax effect of the impairment charge resulted in a reduction in the Company’s provision for income taxes of approximately $50.2 million in 2012.

The Internal Revenue Service has completed its audit of the Company’s 2010 U.S. Federal tax return and a refund of approximately $1.1 million was received during the third quarter of 2013.

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

	December 31,
	2013			2012
	(in thousands)
Deferred Tax Assets
Timing of expense recognition	$	24,170		$	28,448
Net operating losses	4,123			5,517
Other, net	5,641			8,763
Deferred tax assets	33,934			42,728
Valuation Allowance	(2,817		)	(2,817		)
Net deferred tax assets	31,117			39,911

Deferred Tax Liabilities
Intangible assets, due primarily to purchase accounting	(18,260		)	(26,768		)
Fixed assets, due primarily to purchase accounting	(79,243		)	(76,095		)
Construction contract accounting	(6,432		)	(5,613		)
Joint ventures - construction	(5,229		)	(7,038		)
Contested Legal Settlement	(12,012		)	—
Other	(3,408		)	(390		)
Deferred tax liabilities	(124,584		)	(115,904		)

Net deferred tax liability	$	(93,467	)	$	(75,993	)

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

	December 31,
	2013			2012
	(in thousands)
Current deferred tax asset	$	8,240		$	10,071
Long-term deferred tax asset	22,877			29,840
Current deferred tax liability	(10,251		)	(6,004		)
Long-term deferred tax liability	(114,333		)	(109,900		)
Net deferred tax liability	$	(93,467	)	$	(75,993	)

At December 31, 2012 and December 31, 2013, the Company had a valuation allowance of $2.8 million for federal and state capital loss carry-forwards as the ultimate utilization of this item was less than “more likely than not”. The valuation allowance increased in 2012 by $2.8 million due to the capital losses realized on the sale of auction rate securities.

In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. As of the years ended December 31, 2013 and December 31, 2012, unremitted earnings of foreign subsidiaries, which have been or are intended to be permanently invested, aggregated approximately $4.3 million and $14.3 million, respectively. It is not practicable to estimate the amount of deferred tax liability related to investments in these foreign subsidiaries.

The Company adopted the provisions of FASB ASC 740-10, Income Taxes, Accounting for Uncertainty in Income Taxes, in the first quarter of 2007. It is the Company’s policy to record any accrued interest and penalties as part of the income tax provision. During 2012, the Company recognized a net increase of $2.0 million in liabilities. The amount of gross unrecognized tax benefits as of December 31, 2012 is $4.0 million. Included in this liability is $0.3 million of related interest. 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 is $5.5 million. Included in this liability is $0.5 million of related interest. The Company does not expect any significant release of unrecognized tax benefits within the next twelve months.

A reconciliation of the beginning and ending amount of the gross unrecognized tax benefit is as follows (in thousands):

Gross unrecognized tax benefit balance at January 1, 2011:	$	1,150
Add:
Additions based on tax positions related to current year	875
Additions/reductions for tax positions of prior years	47
Less:
Reductions for tax positions of prior years (expiration of statute of limitations)	(29		)
Gross unrecognized tax benefit balance at December 31, 2011:	$	2,043

Gross unrecognized tax benefit balance at January 1, 2012:	$	2,043
Add:
Additions based on tax positions related to current year	1,281
Additions/reductions for tax positions of prior years	1,857
Less:
Reductions for tax positions of prior years (expiration of statute of limitations)	(1,158		)
Gross unrecognized tax benefit balance at December 31, 2012:	$	4,023

Gross unrecognized tax benefit balance at January 1, 2013:	$	4,023
Add:
Additions based on tax positions related to current year	1,254
Additions/reductions for tax positions of prior years	182
Less:
Reductions for tax positions of prior years (expiration of statute of limitations)	—
Gross unrecognized tax benefit balance at December 31, 2013:	$	5,459

The company records interest and penalties related to an unrecognized tax benefit in income tax expenses. Interest expense of $0.2 million was recorded during 2013.