The components of income tax expense for the years ended October 31, 2013, 2012 and 2011 are presented below.

	2013				2012				2011
In thousands	Federal		State		Federal		State		Federal		State

Charged (Credited) to operating income:
Current	$	(3,032)	$	919	$	(29,062)	$	1,857	$	(11,403)	$	4,209
Deferred		67,885		11,829		86,496		10,144		64,806		6,597
Tax Credits:
Utilization		-		-		-		-		184		-
Amortization		(267)		-		(334)		-		(325)		-
Total		64,586		12,748		57,100		12,001		53,262		10,806

Charged (Credited) to other income (expense):
Current		6,049		984		5,636		1,027		3,263		(36)
Deferred		2,225		(646)		2,214		239		4,167		824
Total		8,274		338		7,850		1,266		7,430		788
Total	$	72,860	$	13,086	$	64,950	$	13,267	$	60,692	$	11,594

A reconciliation of income tax expense at the federal statutory rate to recorded income tax expense for the years ended October 31, 2013, 2012 and 2011 is presented below.

In thousands	2013		2012		2011

Federal taxes at 35%	$	77,127	$	69,322	$	65,049
State income taxes, net of federal benefit		8,506		8,624		7,536
Amortization of investment tax credits		(267)		(334)		(325)
Other, net		580		605		26
Total	$	85,946	$	78,217	$	72,286

As of October 31, 2013 and 2012, deferred income taxes consisted of the following temporary differences.

In thousands		2013		2012

Deferred tax assets:
Benefit of loss carryforwards	$	66,087	$	3,092
Employee benefits and compensation		13,834		22,286
Revenue requirement		19,062		10,148
Utility plant		10,386		11,285
Other		12,796		9,173
Total deferred tax assets		122,165		55,984
Valuation allowance		(505)		(505)
Total deferred tax assets, net		121,660		55,479
Deferred tax liabilities:
Utility plant		652,822		523,232
Revenues and cost of gas		21,257		26,816
Equity method investments		38,710		34,092
Deferred costs		59,221		73,744
Other		18,324		8,348
Total deferred tax liabilities		790,334		666,232
Net deferred income tax liabilities	$	668,674	$	610,753

As of October 31, 2013 and 2012, total net deferred income tax assets were net of a valuation allowance to reduce amounts to the amounts that we believe will be more likely than not realized. We and our wholly owned subsidiaries file a consolidated federal income tax return and various state income tax returns. As of October 31, 2013, we have a federal NOL carryforward of $178.1 million, which expires in 2033. We also have $5.9 million of federal NOL carryforwards as of October 31, 2013 and 2012 that expire in 2021 through 2025 and are subject to an annual limitation of $.3 million.

As of October 31, 2013 and 2012, we have state NOL carryforwards of $6.4 million and $6.8 million, respectively, that expire from 2020 through 2028. We may use the carryforwards to offset taxable income.

We have federal charitable contribution carryforwards as of October 31, 2013 and 2012 of $4.2 million and $2.3 million, respectively, that expire from 2016 through 2018.

We are no longer subject to federal income tax examinations for tax years ending before and including October 31, 2009, and with few exceptions, state income tax examinations by tax authorities for years ended before and including October 31, 2009.

A reconciliation of changes in the deferred tax valuation allowance for the years ended October 31, 2013, 2012 and 2011 is presented below.

In thousands		2013		2012		2011

Balance at beginning of year	$	505	$	505	$	1,324
Credited to income tax expense		-		-		(819)
Balance at end of year	$	505	$	505	$	505

There were no unrecognized tax benefits for the years ended October 31, 2013 and 2012.

In July 2013, legislation was passed in North Carolina affecting corporate taxation. The legislation reduces the corporate income tax rate from 6.9% to 6% for tax years beginning after January 1, 2014 and to 5% for tax years beginning after January 1, 2015. It also provides for two additional 1% rate reductions if the state's tax collections exceed certain thresholds. We record deferred income taxes on temporary tax differences using the income tax rate in effect when the temporary difference is expected to reverse. As a result of the rate reductions, we adjusted our noncurrent deferred income tax balances at October 31, 2013 by approximately $25 million for temporary differences expected to reverse at a lower rate than under the prior law and recognized a tax benefit of approximately $1 million in net income, the majority of which relates to our non-utility activities segment, with the balance of approximately $24 million recorded in deferred income taxes in “Regulatory Liabilities” in Note 1 to the consolidated financial statements, reflecting a future benefit to our customers; our state commissions will determine the recovery period of this regulatory liability in future proceedings.