Income Taxes

The components of income (loss) from continuing operations before income tax provision (benefit) and the income tax provision (benefit) for the years ended December 31 are as follows:



	2014			2013			2012
Income (loss) from continuing operations before income tax provision (benefit)
Domestic	$	(74,402	)	$	54,630		$	53,167
Foreign	(2,171		)	1,090			4,861
	$	(76,573	)	$	55,720		$	58,028
Income tax provision (benefit)
Current income tax provision (benefit):
Federal	$	2,778		$	15,392		$	(1,811	)
State	(472		)	1,965			1,474
Foreign	586			1,559			1,556
Total current	2,892			18,916			1,219
Deferred income tax provision (benefit):
Federal	(38,829		)	(5,490		)	14,107
State	(1,817		)	(1,141		)	668
Foreign	(701		)	(1,015		)	(129		)
Total deferred	(41,347		)	(7,646		)	14,646
	$	(38,455	)	$	11,270		$	15,865

The Company made income tax payments of $10.2 million, $10.8 million and $20.3 million during 2014, 2013 and 2012, respectively. During the same periods, income tax refunds totaled $0.9 million, $1.2 million and $0.8 million, respectively.

A reconciliation of the federal statutory and effective income tax rate for the years ended December 31 is as follows:



	2014			2013			2012
Income (loss) from continuing operations before income tax provision (benefit)	$	(76,573	)	$	55,720		$	58,028
Statutory taxes (benefit) at 35.0%	$	(26,801	)	$	19,502		$	20,310
State and local income taxes	(7,112		)	136			1,568
NACoal valuation allowance	5,742			(12		)	—
Non-deductible expenses	632			1,081			1,112
Percentage depletion	(8,572		)	(8,057		)	(4,963		)
R&D and other federal credits	(1,397		)	(1,173		)	(132		)
Other, net	322			520			(1,629		)
Tax settlements	(1,269		)	(727		)	(401		)
Income tax provision	$	(38,455	)	$	11,270		$	15,865
Effective income tax rate	50.2		%	20.2		%	27.3		%

As of December 31, 2014, the cumulative unremitted earnings of the Company's foreign subsidiaries are approximately $8.0 million. The Company has provided a cumulative deferred tax liability in the amount of $0.2 million with respect to the cumulative unremitted earnings of the Company as of December 31, 2014 which are expected to be repatriated. The Company has continued to conclude predominately all remaining foreign earnings in excess of this amount will be indefinitely reinvested in its foreign operations and, therefore, the recording of deferred tax liabilities for such unremitted earnings is not required. It is impracticable to determine the amount of unrecognized deferred taxes with respect to these permanently reinvested earnings; however, foreign tax credits would be available to reduce, in part, U.S. income taxes in the event of a distribution.

A detailed summary of the total deferred tax assets and liabilities in the Company's Consolidated Balance Sheets resulting from differences in the book and tax basis of assets and liabilities follows:



	December 31
	2014		2013
Deferred tax assets
Tax carryforwards	$	8,531	$	5,029
Inventories	7,027		4,709
Accrued expenses and reserves	28,842		26,019
Other employee benefits	13,264		11,432
Asset impairment⁽¹⁾	39,757		841
Other	9,199		6,534
Total deferred tax assets	106,620		54,564
Less: Valuation allowance	8,521		2,280
	98,099		52,284
Deferred tax liabilities
Depreciation and depletion	43,111		39,906
Partnership investment - development costs	19,535		20,215
Accrued pension benefits	858		1,037
Unremitted foreign earnings	223		168
Total deferred tax liabilities	63,727		61,326
Net deferred asset (liability)	$	34,372	$	(9,042	)

⁽¹⁾During the fourth quarter of 2014, NACoal's long-lived asset evaluation resulted in the Company recording a non-cash asset impairment charge of $105.1 million for the Reed Minerals' long-lived asset group. See Note 5, Note 6 and Note 10 for further discussion of the Company's long-lived asset impairment.

The following table summarizes the tax carryforwards and associated carryforward periods and related valuation allowances where the Company has determined that realization is uncertain:



	December 31, 2014
	Net deferred tax asset		Valuation allowance		Carryforwards expire during:
Non-U.S. net operating loss	$	772	$	772	2020 - Indefinite
State losses	9,791		5,687		2015 - 2033
Alternative minimum tax credit	1,396		—		Indefinite
Total	$	11,959	$	6,459



	December 31, 2013
	Net deferred tax asset		Valuation allowance		Carryforwards expire during:
Non-U.S. net operating loss	$	430	$	351	2020 - Indefinite
State losses	6,967		2,845		2014 - 2033
Alternative minimum tax credit	70		—		Indefinite
Total	$	7,467	$	3,196

The Company continually evaluates its deferred tax assets to determine if a valuation allowance is required. A valuation allowance is required where realization is determined to no longer meet the “more likely than not” standard. The establishment of a valuation allowance does not have an impact on cash, nor does such an allowance preclude the Company from using its loss carryforwards or other deferred tax assets in future periods.

Based upon the review of historical earnings and the relevant expiration of carryforwards, including utilization limitations in the various state taxing jurisdictions, the Company believes the valuation allowances are appropriate and does not expect to release valuation allowances within the next twelve months that would have a significant effect on the Company's financial position or results of operations.

The tax returns of the Company and certain of its subsidiaries are under routine examination by various taxing authorities. The Company has not been informed of any material assessment for which an accrual has not been previously provided and the Company would vigorously contest any material assessment. Management believes any potential adjustment would not materially affect the Company's financial condition or results of operations.

The following is a reconciliation of the Company's total gross unrecognized tax benefits, defined as the aggregate tax effect of differences between tax return positions and the benefits recognized in the financial statements for the years ended December 31, 2014 and 2013. Approximately $3.0 million and $4.2 million of these gross amounts as of December 31, 2014 and 2013, respectively, relate to permanent items that, if recognized, would impact the effective income tax rate. This amount differs from the gross unrecognized tax benefits presented in the table below due to the decrease in U.S. federal income taxes which would occur upon the recognition of the state tax benefits included herein.



	2014			2013
Balance at January 1	$	7,848		$	2,691
Additions based on tax positions related to prior years	453			5,615
Additions based on tax positions related to the current year	921			78
Reductions due to settlements with taxing authorities	(4,701		)	(191		)
Reductions due to lapse of the applicable statute of limitations	(1,055		)	(345		)
Balance at December 31	$	3,466		$	7,848

The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The Company recognized net (benefit)/expense of $(0.9) million and $0.4 million in interest and penalties related to uncertain tax positions during 2014 and 2013, respectively. The total amount of interest and penalties accrued was $0.5 million and $1.4 million as of December 31, 2014 and 2013, respectively.

The Company expects the amount of unrecognized tax benefits will change within the next 12 months; however, the change in unrecognized tax benefits, which is reasonably possible within the next 12 months, is not expected to have a significant effect on the Company's financial position or results of operations.

In general, the Company operates in taxing jurisdictions that provide a statute of limitations period ranging from three to five years for the taxing authorities to review the applicable tax filings. The examination of the 2011 and 2012 U.S. federal tax returns concluded in the second quarter of 2014. The Company does not have any additional material taxing jurisdictions in which the statute of limitations has been extended beyond the applicable time frame allowed by law.