11.	Income Taxes

The provision for income taxes consists of the following:

	Year Ended December 31,
		2015		2014			2013
Current:
Federal	$	180,895	$	148,221		$	137,675
State		36,142		28,881			30,352
Deferred:
Federal		2,681		(4,451	)		(13,402	)
State		567		(735	)		(2,406	)
	$	220,285	$	171,916		$	152,219

In addition to amounts applicable to income before taxes, the following income tax benefits were recorded in shareholders’ equity:

Year Ended December 31,

2015

2014

2013

Income tax benefits arising from compensation expense for

tax purposes in excess of amounts recognized for financial

statement purposes

23,311

9,437

20,636

Deferred income taxes on NVR’s consolidated balance sheets were comprised of the following:

	December 31,
	2015		2014
Deferred tax assets:
Other accrued expenses and contract land deposit reserve	$	77,781	$	84,817
Deferred compensation		7,280		7,500
Equity-based compensation expense		45,361		46,257
Inventory		12,722		11,153
Unrecognized tax benefit		24,740		24,485
Other		9,391		5,847
Total deferred tax assets		177,275		180,059
Less: deferred tax liabilities		6,489		7,371
Net deferred tax position	$	170,786	$	172,688

Deferred tax assets arise principally as a result of various accruals required for financial reporting purposes and equity-based compensation expense, which are not currently deductible for tax return purposes.

Management believes that the Company will have sufficient available carry-backs and future taxable income to make it more likely than not that the net deferred tax assets will be realized. Federal taxable income is estimated to be approximately $472,728 for the year ended December 31, 2015, and was $391,781 for the year ended December 31, 2014.

A reconciliation of income tax expense in the accompanying consolidated statements of income to the amount computed by applying the statutory federal income tax rate of 35% to income before taxes is as follows:

	Year Ended December 31,
	2015			2014			2013
Income taxes computed at the federal statutory rate	$	211,124		$	158,741		$	146,544
State income taxes, net of federal income tax benefit		23,919			18,800			18,210
Other, net		(14,758	)		(5,625	)		(12,535	)
	$	220,285		$	171,916		$	152,219

The Company’s effective tax rate in 2015, 2014 and 2013 was 36.52%, 37.90% and 36.36%, respectively. During 2014, the Company recognized income tax expense of approximately $7,000 due to the reversal of certain previously recognized tax deductions.

The Company files a consolidated U.S. federal income tax return, as well as state and local tax returns in all jurisdictions where the Company maintains operations. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years prior to 2012.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	Year Ended December 31,
	2015			2014
Balance at beginning of year	$	46,004		$	43,796
Additions based on tax positions related to the current year		3,897			6,008
Reductions for tax positions of prior years		(3,310	)		(3,800	)
Settlements		—			—
Balance at end of year	$	46,591		$	46,004

If recognized, the total amount of unrecognized tax benefits that would affect the effective tax rate (net of the federal tax benefit) is $30,284 as of December 31, 2015.

The Company recognizes interest related to unrecognized tax benefits as a component of income tax expense. For the year ended December 31, 2015, the Company recognized a net addition of accrued interest on unrecognized tax benefits in the amount of $125. For the year ended December 31, 2014, the Company had a net reversal to accrued interest on unrecognized tax benefits in the amount of $184. For the year ended December 31, 2013, the Company recognized a net addition of accrued interest on unrecognized tax benefits in the amount of $625. As of December 31, 2015 and 2014, the Company had a total of $21,221 and $21,096, respectively, of accrued interest on unrecognized tax benefits which are included in “Accrued expenses and other liabilities” on the accompanying consolidated balance sheets. Based on its historical experience in dealing with various taxing authorities, the Company has found that it is the administrative practice of these authorities to not seek penalties from the Company for the tax positions it has taken on its returns, related to its unrecognized tax benefits. Therefore, the Company does not accrue penalties for the positions in which it has an unrecognized tax benefit. However, if such penalties were to be accrued, they would be recorded as a component of income tax expense.

The Company believes that within the next 12 months, it is reasonably possible that the unrecognized tax benefits as of December 31, 2015 will be reduced by approximately $10,210 due to statute expiration and effectively settled positions in various state jurisdictions.