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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2015

Components of Income Tax Expense

The components of income tax expense from our wholly-owned operations and investments and our controlling interest in joint ventures with Carrier are as follows:

Years Ended December 31,		2015				2014				2013
U.S. Federal		$	85,585			$	74,561			$	62,616
State			9,431				10,325				9,234
Foreign			9,661				6,953				5,810
		$	104,677			$	91,839			$	77,660
Current		$	99,990			$	91,550			$	69,071
Deferred			4,687				289				8,589
		$	104,677			$	91,839			$	77,660

Reconciliation of Effective Income Tax Rate

Following is a reconciliation of the effective income tax rate:

Years Ended December 31,		2015				2014				2013
U.S. federal statutory rate			35.0	%			35.0	%			35.0	%
State income taxes, net of federal benefit and other			2.3				3.0				3.3
Tax effects on foreign income			(0.3	)			(1.0	)			(1.3	)
Effective income tax rate attributable to Watsco, Inc.			37.0				37.0				37.0
Taxes attributable to non-controlling interest			(5.4	)			(6.4	)			(7.7	)
Effective income tax rate			31.6	%			30.6	%			29.3	%

Significant Components of Current and Long-Term Deferred Tax Assets and Liabilities

The following is a summary of the significant components of our current and long-term deferred tax assets and liabilities:

December 31,		2015				2014
Current deferred tax assets:
Capitalized inventory costs and inventory reserves		$	1,794			$	3,262
Self-insurance reserves			519				759
Allowance for doubtful accounts			1,053				992
Other current deferred tax assets			1,921				1,588
Total current deferred tax assets (1)			5,287				6,601
Long-term deferred tax assets:
Share-based compensation			23,603				20,108
Other long-term deferred tax assets			352				746
Net operating loss carryforwards			207				221
			24,162				21,075
Valuation allowance			—				—
Total long-term deferred tax assets (2)			24,162				21,075
Current deferred tax liabilities:
Other current deferred tax liabilities			(686	)			(536	)
Total current deferred tax liabilities (1)			(686	)			(536	)
Long-term deferred tax liabilities:
Deductible goodwill			(83,868	)			(80,404	)
Depreciation			(3,774	)			(2,992	)
Other long-term deferred tax liabilities			(1,533	)			(1,320	)
Total long-term deferred tax liabilities (2)			(89,175	)			(84,716	)
Net deferred tax liabilities		$	(60,412	)		$	(57,576	)

(1) Current deferred tax assets and liabilities have been included in the consolidated balance sheets in other current assets.

(2) Long-term deferred tax assets and liabilities have been included in the consolidated balance sheets in deferred income taxes and other liabilities.

Changes in Gross Unrecognized Tax Benefits

The changes in gross unrecognized tax benefits are as follows:

Balance at December 31, 2012		$	2,474
Additions based on tax positions related to the current year			673
Reductions due to lapse of applicable statute of limitations			(12	)
Balance at December 31, 2013			3,135
Additions based on tax positions related to the current year			751
Reductions due to lapse of applicable statute of limitations			(167	)
Balance at December 31, 2014			3,719
Additions based on tax positions related to the current year			871
Reductions due to lapse of applicable statute of limitations and tax assessments			(1,077	)
Balance at December 31, 2015		$	3,513

X

- Definition

Tabular disclosure of the components of income tax expense attributable to continuing operations for each year presented including, but not limited to: current tax expense (benefit), deferred tax expense (benefit), investment tax credits, government grants, the benefits of operating loss carryforwards, tax expense that results from allocating certain tax benefits either directly to contributed capital or to reduce goodwill or other noncurrent intangible assets of an acquired entity, adjustments of a deferred tax liability or asset for enacted changes in tax laws or rates or a change in the tax status of the entity, and adjustments of the beginning-of-the-year balances of a valuation allowance because of a change in circumstances that causes a change in judgment about the realizability of the related deferred tax asset in future years.

+ References

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 9
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+ References

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-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
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+ References

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
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