(7)	INCOME TAX

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

	Years ended December 31,
	2014			2013			2012
Current:
Federal	$	34,504		$	25,625		$	19,113
State		4,827			2,590			1,976
		39,331			28,215			21,089
Deferred		(3,804	)		(1,497	)		(215	)
	$	35,527		$	26,718		$	20,874

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

	Years ended December 31,
	2014			2013		2012
Federal income tax expense at statutory rate	$	33,064		$	23,037	$	18,854
State income tax, net of federal income tax benefit		2,867			2,371		1,365
Non-deductible business expenses		1,485			1,110		1,087
Qualified manufacturing activities		(1,720	)		—		(717	)
Other, net		(169	)		200		285
	$	35,527		$	26,718	$	20,874

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

	2014			2013
Deferred income tax assets:
Operating expenses not currently deductible	$	9,093		$	7,360
Stock option and other employee benefit plans		9,815			7,089
Capital loss and credit carryforward		177			185
Property and equipment		46			149
Total deferred income tax assets		19,131			14,783
Deferred income tax liabilities:
Intangible assets		(13,424	)		(12,910	)
Other		(203	)		(173	)
Total deferred income tax liabilities		(13,627	)		(13,083	)
Net deferred income tax asset	$	5,504		$	1,700

In 2014, we utilized approximately $650,000 of net operating loss carryforwards for federal income tax reporting purposes. The full amount of the net operating loss utilized was attributable to excess tax benefits related to share-based arrangements for which authoritative guidance prohibited the recognition of a deferred tax asset in 2013. In 2014, this tax benefit was accounted for as an increase to shareholders’ equity and a reduction in income tax payable. In total, we recognized approximately $19.4 million and $28.2 million of excess tax benefits related to share-based arrangements in 2014 and 2013, respectively, 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, 2014 and 2013 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 2012. As of February 18, 2015, no significant adjustments have been proposed by the IRS. We are unable to make a reasonable estimate as to when cash settlements, 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 2011. We are no longer subject to state and local income tax examinations by tax authorities for the years before 2010.

We paid income taxes, net of refunds received, of $10.2 million in 2014, $9.3 million in 2013, and $13.1 million in 2012.