Income Taxes

The Company’s income tax expense consists of the following:



	Year Ended December 31,
	2014		2013		2012
	(In thousands)
Current:
Federal	$	134	$	475	$	—
State	—		—		7
	134		475		7
Deferred:
Federal	273,576		122,853		82,841
State	33,881		11,730		9,638
	307,457		134,583		92,479
Total income tax expense	$	307,591	$	135,058	$	92,486

For the years ended December 31, 2014, 2013 and 2012, the Company’s effective tax rate differs from the federal statutory rate of 35% primarily due to state income taxes. The reconciliation of income taxes calculated at the U.S. federal tax statutory rate to the Company’s effective tax rate for the years ended December 31, 2014, 2013 and 2012, is set forth below:



	Year Ended December 31,
	2014					2013				2012
	(%)		(In thousands)			(%)		(In thousands)		(%)		(In thousands)
U.S. federal tax statutory rate	35.00	%	$	285,064		35.00	%	$	127,056	35.00	%	$	86,056
State income taxes, net of federal income tax benefit	2.81	%	22,901			2.06	%	7,469		2.47	%	6,068
Other	(0.05	)%	(374		)	0.14	%	533		0.15	%	362
Annual effective tax expense	37.76	%	$	307,591		37.20	%	$	135,058	37.62	%	$	92,486

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2014 and 2013, were as follows:



	Year Ended December 31,
	2014		2013
	(In thousands)
Deferred tax assets
Net operating loss carryforward	$	35,650	$	17,215
Bonus and stock-based compensation	11,025		8,060
Derivative instruments	—		1,664
Other tax attribute carryovers	1,349		—
Total deferred tax assets	48,024		26,939
Deferred tax liabilities
Oil and natural gas properties	566,382		343,751
Derivative instruments	105,911		—
Total deferred tax liabilities	672,293		343,751
Total net deferred tax liability	$	624,269	$	316,812

The Company generated a federal net operating tax loss of $30.2 million and accrued $0.1 million of current income tax expense for the year ended December 31, 2014. The net operating loss carryforwards consist of $104.6 million of federal net operating loss carryforwards, which expire between 2030 and 2034, and $77.6 million of state net operating loss carryforwards, which expire between 2017 and 2034. The tax benefits of carryforwards are recorded as an asset to the extent that management assesses the utilization of such carryforwards to be more likely than not. When the future utilization of some portion of the carryforwards is determined not to be more likely than not, a valuation allowance is provided to reduce the recorded tax benefits from such assets. Management believes that the Company’s taxable temporary differences and future taxable income will more likely than not be sufficient to utilize substantially all its tax carryforwards prior to their expiration.

Pursuant to authoritative guidance, the Company’s $35.7 million deferred tax asset related to net operating loss carryforwards is net of $3.5 million of unrealized excess tax benefits related to excess stock-based compensation on federal and state net operating losses of $9.5 million and $7.4 million, respectively.

Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement methodology for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of December 31, 2014, the Company had no unrecognized tax benefits. With respect to income taxes, the Company’s policy is to account for interest charges as interest expense and any penalties as tax expense in its Consolidated Statement of Operations. The Company files income tax returns in the U.S. federal jurisdiction and in North Dakota, Montana and Texas. The Company’s income tax returns have not been audited by the IRS or any state jurisdiction. Its statute of limitation for the year ended December 31, 2014 will expire in 2018. The Company’s earliest open year in its key jurisdictions is 2011 for both the U.S. federal jurisdiction and various U.S. states, however, net operating losses originating in prior years are subject to examination when utilized.

The current portion of the Company’s net deferred income taxes was a liability of $97.5 million at December 31, 2014 and an asset of $6.3 million at December 31, 2013, and is primarily related to derivative instruments.