INCOME TAXES

Earnings before income taxes were derived from the following sources:



	Years Ended March 31,
(In thousands)	2014		2013		2012
United States	$	539,063	$	519,833	$	482,832
Foreign	12,842		23,584		9,334
	$	551,905	$	543,417	$	492,166

Income tax expense consists of:



	Years Ended March 31,
(In thousands)	2014			2013			2012
Current:
Federal	$	184,308		$	145,603		$	94,665
Foreign	4,561			7,042			2,758
State	19,121			13,589			12,817
	207,990			166,234			110,240
Deferred:
Federal	(4,722		)	26,993			65,456
Foreign	(1,127		)	(975		)	474
State	(1,020		)	10,291			2,622
	(6,869		)	36,309			68,552
	$	201,121		$	202,543		$	178,792

Significant differences between taxes computed at the federal statutory rate and the provision for income taxes were:



	Years Ended March 31,
	2014		2013		2012
Taxes at U.S. federal statutory rate	35.0	%	35.0	%	35.0	%
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal benefit	2.1	%	2.9	%	2.5	%
Stock-based compensation expense	0.1	%	0.2	%	0.2	%
State tax effect of corporate reorganization	—	%	—	%	(0.7	)%
Domestic production activities deduction	(1.0	)%	(0.9	)%	(0.4	)%
Other, net	0.2	%	0.1	%	(0.3	)%
	36.4	%	37.3	%	36.3	%

The tax effects of cumulative temporary differences and carryforwards that gave rise to the significant portions of the deferred tax assets and liabilities were as follows:



	March 31,
(In thousands)	2014			2013
Deferred Tax Assets:
Inventories	$	25,874		$	24,202
Accounts receivable	1,274			—
Deferred rental income	18,256			16,519
Insurance reserves	12,627			13,622
Litigation settlement and other reserves	3,181			3,856
Asset retirement obligations	7,180			6,463
Stock-based compensation	30,934			25,826
Other	20,590			19,694
Net operating loss carryforwards	13,081			16,419
Valuation allowance	(308		)	(2,127		)
	132,689			124,474
Deferred Tax Liabilities:
Accounts receivable	—			(937		)
Plant and equipment	(702,080		)	(713,132		)
Intangible assets	(188,289		)	(170,310		)
Other	(10,256		)	(12,145		)
	(900,625		)	(896,524		)
Net deferred tax liability	$	(767,936	)	$	(772,050	)

Current deferred tax assets and current deferred tax liabilities have been netted for presentation purposes. Non-current deferred tax assets and non-current deferred tax liabilities have also been netted. Deferred tax assets and liabilities are reflected in the Company’s consolidated balance sheets as follows:



	March 31,
(In thousands)	2014			2013
Current deferred income tax asset, net	$	57,961		$	53,562
Non-current deferred income tax liability, net	(825,897		)	(825,612		)
Net deferred tax liability	$	(767,936	)	$	(772,050	)

The Company has recorded tax benefits amounting to $13.7 million, $36.2 million and $16.0 million in the years ended March 31, 2014, 2013 and 2012, respectively, resulting from the exercise of stock options. This benefit has been recorded in capital in excess of par value.

The Company has recorded deferred tax assets related to the expected future tax benefits of state net operating losses of $13.0 million and $16.4 million as of March 31, 2014 and 2013, respectively. State loss carryforwards expire at various times through 2034.

U.S. income taxes have not been provided on approximately $106 million of undistributed earnings of non-U.S. subsidiaries because it is the Company’s intention to continue to reinvest these earnings in those subsidiaries to support their growth. Due to the timing and circumstances of repatriation of such earnings, if any, it is not practicable to determine the unrecognized deferred tax liability relating to such amounts.

As of March 31, 2014, the Company has unrecognized state tax benefits of approximately $18.2 million, which were recorded in other non-current liabilities, and a related $7.7 million of federal tax assets associated with those state tax benefits recorded in non-current deferred tax assets. If recognized, all of the unrecognized tax benefits and related interest and penalties would reduce tax expense. The Company does not anticipate significant changes in the amount of unrecognized income tax benefits over the next year.

A reconciliation of the beginning and ending amount of unrecognized net income tax benefits, including penalties associated with uncertain tax positions, is as follows:



	March 31,
(In thousands)	2014			2013
Beginning unrecognized net income tax benefits	$	16,467		$	14,146
Additions for current year tax positions	3,054			2,419
Additions for tax positions of prior years	151			969
Reductions for tax positions of prior years	(1,448		)	(1,067		)
Reductions for settlements with taxing authorities	—			—
Reductions as a result of expiration of applicable statutes of limitations	—			—
Ending unrecognized net income tax benefits	$	18,224		$	16,467

Interest and penalties recognized for the years ended March 31, 2014, 2013 and 2012 were classified as income tax expense in the Company’s consolidated statements of earnings and were not material. Consistent with past practice, the Company will continue to record interest and penalties associated with uncertain tax positions in income tax expense. The Company had approximately $4.8 million and $4.6 million for the payment of interest and penalties accrued at March 31, 2014 and 2013, respectively.

The Company files income tax returns in the United States and foreign jurisdictions. The Company also files income tax returns in every state which imposes corporate income tax. The Company is not under examination by the IRS or in any significant foreign, state or local tax jurisdictions. With limited exceptions, the Company is no longer subject to U.S. federal, state and local, or foreign income tax examinations by tax authorities for years before fiscal 2010.