INCOME TAXES

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

INCOME TAXES

10. INCOME TAXES

The Company’s income tax provision consisted of the following:

For the years ended December 31,	2015		2014		2013
(in thousands)
Current:
Federal	$	68,667	$	59,053	$	54,778
State		11,335		9,936		9,259
Foreign		7,534		4,391		3,883
Total current tax		87,536		73,380		67,920
Deferred:
Federal		1,286		6,123		(468	)
State		2,078		2,159		730
Foreign		129		158		94
Total deferred tax		3,493		8,440		356
Total income tax provision	$	91,029	$	81,820	$	68,276

The primary factors causing income tax expense to be different than the federal statutory rate for 2015, 2014, and 2013 are as follows:

For the years ended December 31,	2015			2014			2013
(in thousands)
Income tax at statutory rate	$	85,112		$	76,820		$	67,063
State income tax expense (net of federal benefit)		8,377			7,429			6,498
Foreign tax benefit		(1,729	)		(1,760	)		(2,661	)
Other		(731	)		(669	)		(2,624	)
Total income tax provision	$	91,029		$	81,820		$	68,276

Other includes the release of deferred tax liabilities, tax credits, valuation allowance, and other immaterial adjustments.

The Provision for Income Taxes resulted in an effective tax rate of 37.4% on Income Before Income Taxes for the year ended December 31, 2015. The effective rate differs from the annual federal statutory rate primarily because of state and foreign income taxes.

For 2014 and 2013 the effective tax rate was 37.3% and 35.6%, respectively. The effective income tax rate differs from the annual federal statutory tax rate primarily because of state and foreign income taxes and the release of certain deferred tax liabilities.

During 2015, 2014, and 2013, the Company paid income taxes of $82.7 million, $74.5 million and $69.4 million, respectively, net of refunds.

Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2015 and 2014 are as follow:

December 31,	2015			2014
(in thousands)
Deferred tax assets:
Termite accrual	$	1,968		$	1,887
Insurance and contingencies		24,991			26,316
Unearned revenues		15,026			15,086
Compensation and benefits		15,288			15,641
State and foreign operating loss carryforwards		10,629			10,454
Bad debt reserve		4,779			4,520
Other		4,133			1,217
Pension		3,768			11,439
Valuation allowance		(3,969	)		(3,415	)
Total deferred tax assets		76,613			83,145
Deferred tax liabilities:
Depreciation and amortization		(10,985	)		(9,035	)
Intangibles and other		(24,963	)		(23,465	)
Total deferred tax liabilities		(35,948	)		(32,500	)
Net deferred tax assets	$	40,665		$	50,645

Analysis of the valuation allowance:

December 31,	2015		2014
(in thousands)
Valuation allowance at beginning of year	$	3,415	$	2,245
Increase in valuation allowance		554		1,170
Valuation allowance at end of year	$	3,969	$	3,415

As of December 31, 2015, the Company has net operating loss carryforwards for foreign and state income tax purposes of approximately $188.4 million, which will be available to offset future taxable income. If not used, these carryforwards will expire between 2016 and 2029. Management believes that it is unlikely to be able to utilize approximately $18.0 million of foreign net operating losses before they expire and has included a valuation allowance for the effect of these unrealizable operating loss carryforwards. The valuation allowance increased by $0.6 million due to the foreign net operating losses.

Earnings from continuing operations before income tax includes foreign income of $17.0 million, $16.2 million, and $17.0 million in 2015, 2014, and 2013, respectively. The Company’s international business is expanding and we intend to continue to grow the business in foreign markets in the future through reinvestment of foreign deposits and future earnings as well as acquisition of unrelated companies. Repatriation of cash from the Company’s foreign subsidiaries is not part of the Company’s current business plan.

The total amount of unrecognized tax benefits at December 31, 2015 that, if recognized, would affect the effective tax rate is $0.0 million. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

December 31,	2015		2014
(in thousands)
Balance at Beginning of Year	$	—	$	—
Additions for tax positions of prior years		2,554		—
Settlements		—		—
Balance at End of Year	$	2,554	$	—

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. In addition, the Company has subsidiaries in various state and international jurisdictions that are currently under audit for years ranging from 2007 through 2013. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S., income tax examinations for years prior to 2011.

It is reasonably possible that the amount of unrecognized tax benefits will increase in the next 12 months.

The Company’s policy is to record interest and penalties related to income tax matters in income tax expense. Accrued interest and penalties were $0.9 million and $0.5 million as of December 31, 2015 and December 31, 2014, respectively. The Company recognized interest and penalties of $0.2 million, $0.1 million, and $0.9 million in 2015, 2014, and 2013, respectively.