Income taxes. Income tax expense (benefit) consists of the following:



	2014		2013		2012
	($000 omitted)
Current:
Federal	3,047		2,589		(430	)
State	(224	)	2,757		1,674
Foreign	7,442		6,753		9,024
Deferred:
Federal	3,916		18,361		(35,989	)
State	(694	)	(206	)	(527	)
Foreign	16		(1,773	)	(3,391	)
Income tax expense (benefit)	13,503		28,481		(29,639	)

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



	2014		2013		2012
	($000 omitted)
Expected income tax expense at 35% ⁽¹⁾	15,140		32,027		27,842
Foreign tax rate differential	(693	)	(422	)	(2,688	)
State income tax (benefit) expense – net of Federal impact	(840	)	1,586		1,147
Non-deductible expenses	4,060		2,321		2,851
Non-deductible bond conversion costs	—		1,900		—
Loss carrybacks	—		—		(1,442	)
Adjustments to deferred tax liabilities	1,016		(2,408	)	12,381
Valuation allowance	(5,020	)	(6,555	)	(71,106	)
Other – net	(160	)	32		1,376
Income tax expense (benefit)	13,503		28,481		(29,639	)
Effective income tax rates (%) ⁽¹⁾	31.2	%	31.1	%	(37.3	)%

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

Deferred income taxes as of December 31 were as follows:



	2014		2013
	($000 omitted)
Deferred tax assets:
Accrued expenses	17,241		17,104
Allowance for uncollectible amounts	3,379		3,521
Investments	1,582		—
Fixed assets	5,860		6,577
Net operating loss carryforwards	4,260		3,261
Tax credit carryforwards	26,792		31,372
Foreign currency translation adjustments	411		—
Other	2,127		1,463
Deferred tax assets – gross	61,652		63,298
Valuation allowance	(2,564	)	(6,971	)
Deferred tax assets – net	59,088		56,327
Deferred tax liabilities:
Amortization – goodwill and other intangibles	(34,740	)	(30,089	)
Unrealized gains on investments	(7,953	)	(3,382	)
Deferred compensation on life insurance policies	(3,239	)	(3,147	)
Foreign currency translation adjustments	—		(2,726	)
Title loss provisions	(23,365	)	(19,449	)
Investments	—		(305	)
Other	(2,476	)	(259	)
Deferred tax liabilities – gross	(71,773	)	(59,357	)
Net deferred income tax liabilities	(12,685	)	(3,030	)

Net deferred tax liabilities for U.S. federal tax paying components totaled approximately $12.0 million and net deferred tax liabilities for foreign tax paying components totaled approximately $0.7 million at December 31, 2014. Net deferred tax liabilities for U.S. federal tax paying components totaled approximately $2.5 million and net deferred tax liabilities for foreign tax paying components totaled approximately $0.5 million at December 31, 2013. The net change to the valuation allowance during 2014 was $4.4 million.

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 2012, the Company utilized a significant portion of its U.S. federal net operating loss (NOL) carryforwards and released approximately $72.6 million of its valuation allowance, $36.6 million of which was included in the Company’s 2012 deferred tax benefit.

During 2013, the Company utilized the remaining portion of its U.S. federal NOL carry forwards and released a $6.6 million valuation allowance on foreign tax credit carry forwards that it believed will, on a more-likely-than-not-basis, be utilized prior to expiration. During 2014, the Company released the remaining $5.0 million valuation allowance on foreign tax credit carryforwards. The Company’s $26.8 million of foreign tax credit carryforwards as of December 31, 2014 expire in varying amounts through calendar year 2024. The remaining valuation allowance as of December 31, 2014 relates 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. During January 2014, the Company received notification from the IRS that its calendar year 2012 U.S. federal tax return was selected for examination. During December 2014, the IRS concluded its examination of the calendar year 2012 return without any IRS-initiated adjustments. The Company also is involved in routine examinations by state and local tax jurisdictions for calendar years 2008 through 2013. The Company expects no material adjustments from any tax return examinations.