Note 7, Income Taxes:

Income tax expense (benefit) consists of the following:

(In thousands)	2016			2015			2014
Current
Federal	$	16,259		$	17,598		$	10,257
State		2,326			2,907			1,611
		18,585			20,505			11,868

Deferred
Federal		(690	)		(2,476	)		4,323
State		(430	)		(543	)		477
		(1,120	)		(3,019	)		4,800
	$	17,465		$	17,486		$	16,668

The differences between income tax expense in the accompanying Consolidated Financial Statements and the amount computed by applying the statutory Federal income tax rate are as follows:

(In thousands)	2016			2015			2014
Statutory rates applied to income before income taxes	$	16,037		$	15,846		$	8,840
State income taxes, net of Federal tax benefit		1,494			1,487			788
Net permanent differences		99			(11	)		42
Release of debit balance in accumulated other comprehensive income related to settled pension obligations		—			—			6,866
Change in state credits		—			—			110
Other		(165	)		164			22
	$	17,465		$	17,486		$	16,668

The change in state credits in 2014 is the unused amounts which expired.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The amounts in the following table are grouped based on broad categories of items that generate the deferred tax assets and liabilities.

(In thousands)	2016		2015
Deferred tax assets:
Accounts receivable	$	808	$	772
Property and equipment		10,276		9,250
Leases		5,913		5,880
Accrued liabilities		12,217		10,916
Retirement benefits		513		579
Other		69		31
Total deferred tax assets		29,796		27,428

Deferred tax liabilities:
Inventory		10,082		9,285
Other		1,338		898
Total deferred tax liabilities		11,420		10,183
Net deferred tax assets	$	18,376	$	17,245

As discussed in Note 1, we adopted ASU 2015-17 for the quarter ended December 31, 2015, and all deferred tax assets and liabilities are now classified as noncurrent.

We review our deferred tax assets to determine the need for a valuation allowance. Based on evidence we conclude that it is more-likely-than-not that our deferred tax assets will be realized and therefore a valuation allowance is not required.

We established a valuation allowance in 2008 against virtually all of our deferred tax assets due to our operating loss in that year and projected loss in 2009. A portion of the allowance was charged to AOCI and was increased in 2009. Our profitability in 2011 was sufficient for us to release the valuation allowance. The “backward-tracing” prohibition in ASC 740, Income Taxes required us to record the total amount of the release as a tax benefit in net income including the portion originally charged to AOCI. This resulted in a debit of $6,866,000 remaining in AOCI until the settlement of the Plan’s pension obligations in 2014 when this amount was reversed and included in total tax expense.

We file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. With respect to U.S. federal, state and local jurisdictions, with limited exceptions, we are no longer subject to income tax audits for years before 2014.

Uncertain Tax Positions

No uncertain tax positions were identified for the years currently open under statute of limitations, including 2014, 2015 and 2016. Interest and penalties associated with uncertain tax positions, if any, are recognized as components of income tax expense.