10.	Income Taxes

The provision for income taxes consists of the following:


	Years Ended December 31,
	2014			2013
Current:
Federal	$	415		$	262
State		142			66

		557			328
Deferred:
Federal		(46	)		139
State (including the impact due to the change in income tax rate of $99 in 2013)		(15	)		80

		(61	)		219

	$	496		$	547

The Company increased its net state deferred income tax liability as a result of legislation enacted by the Commonwealth of Massachusetts increasing the income tax rate applicable to the Company from 6.5% to 8.0%. This change is effective for years beginning January 1, 2014 and had no impact on the current provision for state income taxes in 2013.

The following summarizes the estimated tax effect of temporary differences that are included in the net deferred income tax provision:


	Years Ended December 31,
	2014			2013
Depreciation	$	213		$	212
Deferred grant income		(339	)		(551	)
Track maintenance credit		1,123			821
Accrued casualty and other claims		19			(25	)
Accrued compensated time off and related payroll taxes		(17	)		(19	)
Share based compensation		(41	)		(27	)
Other (including the impact due to the change in the state income tax of $99 in 2013)		(167	)		65
Change in valuation allowance		(852	)		(257	)

	($	61	)	$	219

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effect of significant items comprising the Company’s net deferred income tax liability as of December 31, 2014 and 2013 are as follows:


	December 31,
	2014			2013
Deferred income tax liabilities - Differences between book and tax basis of property and equipment	$	18,802		$	18,647

Deferred income tax assets:
Deferred grant income		4,714			4,267
Track maintenance credit carry forwards		1,456			2,579
Alternative minimum tax carry forwards		75			75
Accrued casualty and other claims		146			164
Accrued compensated time off and related payroll taxes		261			244
Share based compensation		281			240
Allowance for doubtful accounts and other		101			101

		7,034			7,670
Valuation allowance		(1,456	)		(2,308	)

Net deferred income tax liability	$	13,224		$	13,285

During 2005 through 2008, the Company generated Railroad Track Maintenance Credits in the cumulative amount of $4,491. These credits may be utilized, subject to certain limitations, to offset the Company’s current federal income tax liability. Any credits not utilized in the year earned may be carried forward to offset future income tax liabilities for a period of 20 years. The Company maintains a valuation allowance on its deferred tax assets when, based upon available evidence such as the reversal of taxable temporary differences and projected future taxable income, it is more likely than not that a portion of its deferred tax assets will not be realized. Based on the Company’s earnings history, projected future taxable income and the expectation of reversing deferred tax liabilities, the Company decreased its valuation allowance. The remaining deferred tax assets are considered realizable; however, they could be reduced in the near term if estimates of future taxable income are reduced or reversing taxable temporary differences are increased.

A reconciliation of the U.S. federal statutory rate to the effective tax rate is as follows:


	Years Ended December 31,
	2014			2013
Federal statutory rate		34	%		34	%
Nondeductible expenses, state income taxes, and other (including 5% in relation to the change in net deferred state income tax liability in 2013)		3			7
Change in valuation allowance		(23	)		(13	)


Effective tax rate		14	%		28	%

The Company’s year-end rate of 14% is a significant decrease from the September 2014 rate of 54%. The significant decrease in tax rate in the fourth quarter is due to changes in our reversal pattern analysis based upon fourth quarter activity and a result of the minimal amount of pre-tax income reported as of September 30, 2014. The Company’s current income tax provision does not reflect the expected tax rate due to the utilization of carry forward 45G credits.

The Company is subject to U.S. federal income tax as well as income tax in the Commonwealth of Massachusetts. All U.S. federal income and Massachusetts income tax matters have been concluded through 2011.