INCOME TAXES

The fiscal year income taxes consist of the following (in thousands):



	2013			2012			2011
Current:
Federal	$	51,367		$	35,205		$	50,255
State	7,583			5,248			11,042
	58,950			40,453			61,297
Deferred:
Federal	(16,897		)	(5,553		)	(8,077		)
State	(1,707		)	(1,062		)	(4,755		)
	(18,604		)	(6,615		)	(12,832		)
Income tax expense from continuing operations	$	40,346		$	33,838		$	48,465

Income tax benefit from discontinued operations	$	(19,566	)	$	(6,651	)	$	(3,287	)

A reconciliation of the federal statutory income tax rate to our effective tax rate for continuing operations is as follows:



	2013		2012		2011
Computed at federal statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	3.4		3.3		3.4
Benefit of jobs tax credits	(1.9	)	(1.0	)	(1.4	)
Expense (benefit) related to COLIs	(2.9	)	(4.6	)	0.3
Other, net	(0.8	)	0.5		(1.2	)
	32.8	%	33.2	%	36.1	%

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at each year-end are presented below (in thousands):



	2013			2012
Deferred tax assets:
Accrued pension and postretirement benefits	$	66,698		$	109,443
Accrued insurance	13,115			12,096
Accrued vacation pay expense	3,259			4,611
Deferred income	1,441			1,969
Impairment	27,944			22,763
Divestment	11,361			6,252
Other reserves and allowances	3,964			3,489
Tax loss and tax credit carryforwards	4,619			5,093
Leasing transactions	7,471			10,893
Share-based compensation	13,128			18,722
Other, net	4,280			3,297
Total gross deferred tax assets	157,280			198,628
Valuation allowance	(4,619		)	(5,093		)
Total net deferred tax assets	152,661			193,535
Deferred tax liabilities:
Property and equipment, principally due to differences in depreciation	(9,753		)	(27,230		)
Intangible assets	(27,350		)	(23,837		)
Other	(40		)	—
Total gross deferred tax liabilities	(37,143		)	(51,067		)
Net deferred tax assets	$	115,518		$	142,468

Deferred tax assets at September 29, 2013 include state net operating loss carryforwards of approximately $78.1 million expiring at various times between 2017 and 2034. At September 29, 2013 and September 30, 2012, we recorded a valuation allowance related to state net operating losses of $4.6 million and $5.1 million, respectively. The current year change in the valuation allowance of $0.5 million relates to net operating losses. We believe that it is more likely than not that these loss carryforwards will not be realized and that the remaining deferred tax assets will be realized through future taxable income or alternative tax strategies.

Our gross unrecognized tax benefits associated with uncertain income tax positions decreased during fiscal 2013 based on a preliminary assessment of a state income tax audit. A reconciliation of the beginning and ending amount of unrecognized tax benefits follows (in thousands):



	2013			2012
Balance beginning of year	$	905		$	629
Change related to tax positions	(136		)	276
Balance at end of year	$	769		$	905

From time to time, we may take positions for filing our tax returns which may differ from the treatment of the same item for financial reporting purposes. The ultimate outcome of these items will not be known until the IRS has completed its examination or until the statute of limitations has expired.

It is reasonably possible that changes of approximately $0.8 million to the gross unrecognized tax benefits will be required within the next twelve months. These changes relate to the possible settlement of state tax audits.

The major jurisdictions in which the Company files income tax returns include the United States and states in which we operate that impose an income tax. The federal statutes of limitations have not expired for fiscal years 2008 and forward. The statutes of limitations for California and Texas, which constitute the Company’s major state tax jurisdictions, have not expired for fiscal years 2001 and 2007, respectively, and forward. Generally, the statutes of limitations for the other state jurisdictions have not expired for fiscal years 2009 and forward.