Income Taxes

Income Tax Provision

Income before income taxes includes the following components:



	Year Ended December 31
	2016		2015		2014
	(thousands)
Domestic	$	41,703	$	79,414	$	122,727
Foreign	1,598		1,268		578
Income before income taxes	$	43,301	$	80,682	$	123,305

The income tax provision shown in the Consolidated Statements of Operations includes the following:



	Year Ended December 31
	2016			2015			2014
	(thousands)
Current income tax provision (benefit)
Federal	$	10,664		$	(2,938	)	$	27,568
State	2,201			555			5,023
Foreign	5			—			—
Total current	12,870			(2,383		)	32,591

Deferred income tax provision (benefit)
Federal	2,549			27,011			9,740
State	(1,536		)	3,872			965
Foreign	(8,836		)	—			—
Total deferred	(7,823		)	30,883			10,705
Income tax provision	$	5,047		$	28,500		$	43,296

The effective tax rate varies from the U.S. Federal statutory income tax rate principally due to the following:



	Year Ended December 31
	2016			2015			2014
	(thousands, except percentages)
Income before income taxes	$	43,301		$	80,682		$	123,305
Statutory U.S. income tax rate	35.0		%	35.0		%	35.0		%

Statutory tax provision	$	15,155		$	28,239		$	43,157
State taxes	1,370			3,006			4,097
Domestic production activities deduction	(165		)	(299		)	(2,031		)
Unrecognized tax benefits	1,717			433			313
Change in valuation allowance	(9,884		)	—			—
Tax credits	(2,904		)	(2,043		)	(2,581		)
Other	(242		)	(836		)	341
Total	$	5,047		$	28,500		$	43,296

Effective income tax rate	11.7		%	35.3		%	35.1		%

During the years ended December 31, 2016, 2015, and 2014, cash paid for taxes, net of refunds received, was $6.7 million, $0.7 million, and $40.3 million, respectively.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. The components of our net deferred tax assets and liabilities at December 31, 2016 and 2015, are summarized as follows:



	December 31, 2016		December 31, 2015
	(thousands)
Deferred tax assets
Employee benefits	$	54,895	$	52,840
Inventories	5,237		6,618
Foreign net operating loss carryforward	5,383		5,440
Other	7,628		8,070
Gross deferred tax assets	73,143		72,968
Valuation allowance (a)	—		(9,884		)
Net deferred tax assets	$	73,143	$	63,084

Deferred tax liabilities
Property and equipment	$	62,948	$	56,061
Intangible assets and other	5,039		5,264
Other	2,655		851
Deferred tax liabilities	$	70,642	$	62,176

Total deferred tax assets, net	$	2,501	$	908

______________________________________

(a)

As of December 31, 2016 and 2015, the deferred tax assets in our foreign subsidiaries were primarily the result of net operating losses. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. During fourth quarter 2016, because we achieved three years of cumulative pretax income in the Canadian tax jurisdiction and due to the implementation of a tax-planning strategy, management determined that there is sufficient positive evidence to conclude that it is more likely than not that the deferred tax assets are realizable and therefore released the valuation allowance in the amount of $9.9 million.

As of December 31, 2016, we have foreign net operating loss carryforwards of $24.0 million, which if unused, will expire in years 2026 through 2036. The foreign net operating loss carryforwards in the income tax returns filed included unrecognized tax benefits. The deferred tax assets recognized for those net operating losses are presented net of these unrecognized tax benefits. We have state income tax credits totaling $1.4 million as of December 31, 2016, which if unused will expire in years 2020-2026.

Income Tax Uncertainties

The following table summarizes the changes related to our gross unrecognized tax benefits excluding interest and penalties:



	2016			2015			2014
	(thousands)
Balance as of January 1	$	878		$	309		$	—
Increases related to prior years' tax positions	1,657			431			172
Increases related to current year tax positions	104			145			137
Decreases related to prior years' tax positions	—			(7		)	—
Settlements	(415		)	—			—
Balance as of December 31	$	2,224		$	878		$	309

As of December 31, 2016, 2015 and 2014, we had $2.2 million, $0.9 million, and $0.3 million respectively, of unrecognized tax benefits recorded on our Consolidated Balance Sheets, excluding interest and penalties. Of the total unrecognized tax benefits recorded, $2.1 million, $0.7 million, and $0.3 million (net of the federal benefit for state taxes), respectively, would impact the effective tax rate if recognized.

We recognize interest and penalties related to uncertain tax positions as income tax expense in our Consolidated Statements of Operations. For the years ended December 31, 2016, 2015, and 2014, we recognized an insignificant amount of interest and penalties related to taxes. We recognize tax liabilities and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available or as new uncertainties occur. We do not expect the unrecognized tax benefits to change significantly over the next twelve months.

We file federal income tax returns in the U.S. and various state and foreign jurisdictions. Tax years 2013 to present remain open to examination in the U.S. and tax years 2012 to present remain open to examination in Canada and various states. We recorded net operating losses in Canada beginning in 2006 that are subject to examinations and adjustments up to four years following the year in which they are utilized.