(8) INCOME TAX

The income tax provision (benefit) on income from operations consists of the following:


	Years ended December 31,
	2013			2012			2011
Current:
Federal	$	25,625		$	19,113		$	17,239
State		2,590			1,976			2,233

		28,215			21,089			19,472
Deferred		(1,497	)		(215	)		(2,916	)

	$	26,718		$	20,874		$	16,556

Reconciliation of the U.S. statutory income tax rate to our effective income tax expense rate for operations follows:


	Years ended December 31,
	2013		2012			2011
Federal income tax expense at statutory rate	$	23,037	$	18,854		$	15,440
State income tax, net of federal income tax benefit		2,371		1,365			1,238
Non-deductible business expenses		1,110		1,087			918
Qualified manufacturing activities		—		(717	)		(840	)
Research and development credit		—		—			(177	)
Other, net		200		285			(23	)

	$	26,718	$	20,874		$	16,556

The tax effects of the major items recorded as deferred tax assets and liabilities as of December 31 are:


	2013			2012
Deferred income tax assets:
Operating expenses not currently deductible	$	7,360		$	5,372
Stock option and other employee benefit plans		7,089			6,097
Capital loss and credit carryforward		185			275
Property and equipment		149			570

Total deferred income tax assets		14,783			12,314
Deferred income tax liabilities:
Intangible assets		(12,910	)		(11,838	)
Other		(173	)		(153	)

Total deferred income tax liabilities		(13,083	)		(11,991	)

Net deferred income tax asset	$	1,700		$	323

At December 31, 2013, we had approximately $650,000 of net operating loss carryforwards for Federal income tax reporting purposes available to offset future taxable income. The $650,000 was attributable to excess tax benefits related to share-based arrangements for which authoritative guidance prohibits the recognition of a deferred tax asset. The $650,000 tax benefit will be accounted for as an increase to shareholders’ equity and a reduction in income tax payable when realized. This carryforward expires in 2034. We recognized approximately $28.2 million excess tax benefits related to share-based arrangements in 2013 as a credit to shareholders’ equity and a reduction in income taxes payable.

Although realization is not assured, we believe it is more likely than not that all the deferred tax assets at December 31, 2013 and 2012 will be realized. Accordingly, we believe no valuation allowance is required for the deferred tax assets. However, the amount of the deferred tax asset considered realizable could be adjusted in the future if estimates of reversing taxable temporary differences are revised.

No reserves for uncertain income tax positions have been recorded pursuant to ASC 740-10, Income Taxes.

The Internal Revenue Service (“IRS”) is examining our U.S. income tax return for the year 2010. We are unable to make a reasonable estimate as to when cash settlements related to the examination, if any, will occur.

We are subject to U.S. federal tax as well as income tax of multiple state and local jurisdictions. We are no longer subject to United States federal income tax examinations for years before 2009. We are no longer subject to state and local income tax examinations by tax authorities for the years before 2008.

We paid income taxes, net of refunds received, of $9.3 million in 2013, $13.1 million in 2012, and $13.4 million in 2011.