Income taxes. Income tax expense consists of the following:



	2016		2015		2014
	($000 omitted)
Current:
Federal	4,718		4,774		3,047
State	1,447		709		(224	)
Foreign	5,983		5,967		7,442
Deferred:
Federal	6,262		(3,986	)	3,916
State	(1,347	)	(1,375	)	(694	)
Foreign	2,542		(439	)	16
Income tax expense	19,605		5,650		13,503

The following reconciles income tax expense (benefit) computed at the federal statutory rate with income tax expense as reported:



	2016		2015		2014
	($000 omitted)
Expected income tax expense (benefit) at 35% ⁽¹⁾	26,279		(194	)	15,140
Return-to-provision and true-up adjustments	(4,127	)	(1,329	)	1,133
Previously unrecognized research and development credits	(3,434	)	—		—
Nondeductible expenses	2,772		2,768		4,060
Intercompany dividends, net of deduction for dividends received	(539	)	(541	)	(319	)
Tax-exempt interest	(458	)	(404	)	(324	)
State income tax benefit – net of Federal impact	(407	)	(914	)	(840	)
Noncontrolling interest	303		251		186
Valuation allowance	294		(668	)	(5,020	)
Foreign tax rate differential	(207	)	(329	)	(693	)
Impairment of goodwill	—		7,099		—
Other – net	(871	)	(89	)	180
Income tax expense	19,605		5,650		13,503
Effective income tax rates ⁽¹⁾	26.1	%	(1,019.4	)%	31.2	%

⁽¹⁾Calculated using income (loss) before taxes and after noncontrolling interests.

Deferred tax assets and liabilities resulting from the same tax jurisdiction are netted and presented as either an asset or liability on the consolidated balance sheets. Deferred tax assets and liabilities resulting from different tax jurisdictions are not netted. Deferred tax assets and liabilities as of December 31 are detailed below.



	2016		2015
	($000 omitted)
Deferred tax assets:
Accrued expenses	26,835		20,190
Net operating loss (NOL) carryforwards	6,275		6,428
Tax credit carryforwards	6,154		20,242
Federal offset to Canadian deferred tax liability ⁽¹⁾	4,335		1,657
Foreign currency translation adjustments	4,238		5,220
Allowance for uncollectible amounts	3,454		3,524
Fixed assets	2,067		2,094
Investments	978		3,369
Other	476		297
Deferred tax assets – gross	54,812		63,021
Valuation allowance	(2,457	)	(2,217	)
Deferred tax assets – net	52,355		60,804
Deferred tax liabilities:
Amortization – goodwill and other intangibles	(26,851	)	(27,991	)
Title loss provisions	(21,433	)	(18,523	)
Unrealized gains on investments	(3,873	)	(4,811	)
Deferred compensation on life insurance policies	(3,345	)	(3,558	)
Other	(849	)	(2,328	)
Deferred tax liabilities – gross	(56,351	)	(57,211	)
Net deferred income tax (liability) asset	(3,996	)	3,593

⁽¹⁾For U.S. income tax purposes, the Company’s Canada operation is a branch of Guaranty. As a result, the branch’s Canadian net deferred tax liability is offset in the U.S. as a deferred tax asset but not in an equal amount given differing tax rates in Canada and the U.S.

At December 31, 2016 and 2015, net deferred tax (liabilities) assets for U.S. federal tax paying components totaled approximately $(1.2) million and $3.8 million, respectively, and net deferred tax liabilities for foreign tax paying components totaled approximately $2.8 million and $0.3 million, respectively. The net increase (decrease) to the valuation allowance during 2016 and 2015 was $0.2 million and $(0.3) million, respectively.

During 2008, the Company recorded a valuation allowance against U.S. deferred tax assets, net of definite-lived deferred tax liabilities, for which realization could not be assured based on a more-likely-than-not standard. The Company retained that valuation allowance for all subsequent periods through December 31, 2011 principally due to the Company’s cumulative three-year operating loss history as of the end of each period. The Company routinely evaluates the extent to which the valuation allowance may be reversed. During 2014, the Company released the remaining $5.0 million valuation allowance on foreign tax credit carryforwards that it believed will, on a more-likely-than-not-basis, be utilized prior to expiration. During 2016 and 2015, there were no material releases of any valuation allowance. The Company believes it is more-likely-than-not it will be able to utilize its net deferred tax assets.

The Company’s $6.2 million of foreign tax credit carryforwards at December 31, 2016 expire in 2022 and 2023. The Company's $6.3 million of deferred tax assets relating to NOL carryforwards include certain state amounts which expire in varying amounts from 2019 through 2036 and foreign amounts which expire in varying amounts from 2020 through 2026 or have unlimited carryforward periods. The future utilization of all NOL and foreign tax credit carryforwards is subject to various limitations. The remaining valuation allowance at December 31, 2016 relates principally to certain state and foreign NOL carryforwards.

The Company’s income tax returns are routinely subject to examinations by U.S. federal, foreign, and state and local tax authorities. During 2014, the Internal Revenue Service (IRS) completed its examination of calendar years 2005 through 2008 and the Company received anticipated refunds from previously-filed carryback claims in the amount of $2.8 million. Also during 2014, the IRS completed its examination of the calendar year 2012 U.S. federal tax return without any IRS-initiated adjustments. The Company is also involved in routine examinations by state and local tax jurisdictions for calendar years 2010 through 2014. The Company expects no material adjustments from any tax return examinations.