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Note 13 - Income Taxes

12 Months Ended

Dec. 31, 2014

(13) Income Taxes

Income Tax Provision

Income tax provision from continuing operations was as follows (in thousands):

Year Ended December 31,	2014		2013			2012
Current:
Federal	$	56,342	$	46,727		$	31,438
State		7,944		5,539			3,626
		64,286		52,266			35,064
Deferred:
Federal		10,433		9,010			10,888
State		236		(702	)		3,110
		10,669		8,308			13,998
Total	$	74,955	$	60,574		$	49,062

At December 31, 2014 and 2013, we had income taxes receivable of $5.6 million and $3.4 million, respectively, included as a component of other current assets in the Consolidated Balance Sheets.

The reconciliation between amounts computed using the federal income tax rate of 35% and our income tax provision from continuing operations for 2014, 2013 and 2012 is shown in the following tabulation (in thousands):

Year Ended December 31,	2014			2013			2012
Federal tax provision at statutory rate	$	73,673		$	58,026		$	44,723
State taxes, net of federal income tax benefit		6,526			3,141			4,772
Non-deductible expenses		3,188			1,010			618
Permanent differences related to the employee stock purchase program		68			55			52
Net change in valuation allowance		(4,121	)		(554	)		(1,200	)
General business credits		(4,002	)		(440	)		-
Other		(377	)		(664	)		97
Income tax provision	$	74,955		$	60,574		$	49,062

Deferred Taxes

Individually significant components of the deferred tax assets and (liabilities) are presented below (in thousands):

December 31,	2014			2013
Deferred tax assets:
Deferred revenue and cancellation reserves	$	31,539		$	22,356
Allowances and accruals, including state tax carryforward amounts		28,553			17,561
Interest on derivatives		678			1,113
Credits and other		-			1,937
Goodwill		2,668			10,331
Capital loss carryforward		10,711			10,893
Valuation allowance		(8,663	)		(11,087	)
Total deferred tax assets		65,486			53,104

Deferred tax liabilities:
Inventories		(19,356	)		(6,722	)
Goodwill		(21,320	)		-
Property and equipment, principally due to differences in depreciation		(67,271	)		(32,563	)
Prepaid expenses and other		(2,936	)		(2,015	)
Total deferred tax liabilities		(110,883	)		(41,300	)

Total	$	(45,397	)	$	11,804

We consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income and tax-planning strategies in making this assessment.

As of December 31, 2014, we had an $8.7 million valuation allowance recorded associated with our deferred tax assets. The majority of this allowance is associated with capital losses from the sale of corporate entities in prior years. The valuation allowance decreased $2.4 million in the current year. Of this decrease, $4.1 million was primarily a result of our equity investment in a partnership with U.S. Bancorp Community Development Corporation. See also Note 18. This decrease was offset by certain state net operating losses (“NOL”) acquired as part of the acquisition of DCH for which we determined it is more likely than not that the benefit from certain state NOL carryforwards will not be realized. In recognition of this risk, we recorded a valuation allowance of $1.7 million on the deferred tax assets relating to these state NOL carryforwards.

As of the end of 2014, we evaluated the availability of projected capital gains and determined that it continues to be unlikely the remaining capital loss carryforward would be fully utilized. We will continue to evaluate if it is more likely than not that we will realize the benefits of these deductible differences. However, additional valuation allowance amounts could be recorded in the future if estimates of taxable income during the carryforward period are reduced.

At December 31, 2014, we had a number of state tax carryforward amounts totaling approximately $2.0 million, tax affected, with expiration dates through 2034. We believe that it is more likely than not that the benefit from certain state NOL carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $1.6 million on the deferred tax assets relating to these state NOL carryforwards.

Unrecognized Tax Benefits

The following is a reconciliation of our unrecognized tax benefits (in thousands):

Balance, December 31, 2013	$	-
Acquired with acquisition		1,495
Balance, December 31, 2014	$	1,495

The unrecognized tax benefit recorded was acquired as part of the acquisition of DCH. We have recorded a tax indemnification asset related to the unrecognized tax benfit as we determined the amount would be recoverable from the seller. We do not expect a material change in the balance of unrecognized tax benefits in the next twelve months. Unrecognized tax benefit is included as a component of other long-term liabilities in our Consolidated Balance Sheets. We did not have any activity during 2013 or 2012 related to unrecognized tax benefits.

Open tax years at December 31, 2014 included the following:

Federal			2011-2014
14 states			2009-2014

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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