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INCOME TAXES | 12 Months Ended
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Dec. 31, 2013
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income before income taxes, consisted of the following (amounts in thousands):
| 2013 |  | 2012 |  | 2011
Domestic | $ | 27,023 |  |  | $ | 178,686 |  |  | $ | 82,282 |
Foreign | 27,711 |  |  | 13,565 |  |  | 13,613 |
| $ | 54,734 |  |  | $ | 192,251 |  |  | $ | 95,895 |
The income tax provision was as follows (amounts in thousands):
| 2013 |  | 2012 |  | 2011
Current |  |  |  |  |
Federal | $ | 11,853 |  |  | $ | 47,616 |  |  | $ | 32,140 |
State | 5,398 |  |  | 13,537 |  |  | 3,271 |
Foreign | 11,800 |  |  | 8,290 |  |  | 2,797 |
| 29,051 |  |  | 69,443 |  |  | 38,208 |
Deferred |  |  |  |  |  |  |  |
Federal | (8,473 | ) |  | 14,179 |  |  | (1,904 | )
State | (316 | ) |  | 1,235 |  |  | (357 | )
Foreign | 4,785 |  |  | 1,756 |  |  | 1,812 |
| (4,004 | ) |  | 17,170 |  |  | (449 | )
Income tax provision | $ | 25,047 |  |  | $ | 86,613 |  |  | $ | 37,759 |
The income tax provision differs from the amount of income tax determined by applying the statutory U.S. federal income tax rate to pre-tax income as a result of the following:
| 2013 |  | 2012 |  | 2011
Statutory U.S. federal tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Unrecognized tax positions | 6.2 |  |  | 3.5 |  |  | — |
Impact of foreign income | 4.5 |  |  | 6.1 |  |  | (0.2 | )
Italian law change | (14.2 | ) |  | — |  |  | — |
Valuation allowance | 19.0 |  |  | — |  |  | — |
State taxes, net | 1.9 |  |  | 2.5 |  |  | 1.9 |
Domestic production exemption | (3.2 | ) |  | (3.1 | ) |  | (3.9 | )
Debt conversion (benefit) expense | (1.0 | ) |  | — |  |  | 6.9 |
Section 162m limitation | — |  |  | 2.5 |  |  | — |
Write off of Titan Europe deferred tax asset | — |  |  | 2.0 |  |  | — |
Bargain purchase gain | — |  |  | (2.0 | ) |  | — |
Other, net | (2.4 | ) |  | (1.4 | ) |  | (0.3 | )
Effective tax rate | 45.8 | % |  | 45.1 | % |  | 39.4 | %
The Company's 2013 income tax expense and rate differs from the amount of income tax determined by applying the U.S. Federal income tax rate to pre-tax income primarily as a result of a change in Italian law making the insurance proceeds from the earthquake non-taxable. In addition, as a result of the reassessment of the realizability of the deferred tax assets due to the Italian law change, a valuation allowance was established on the Italy net deferred tax assets. Other items contributing to the rate difference are state income tax expense, unrecognized tax benefits, foreign earnings, domestic production activities deduction, and tax deductible expenses related to the convertible bond repurchase. 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. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2013 and 2012, are as follows (amounts in thousands):
| 2013 |  | 2012
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 41,933 |  |  | $ | 37,519 |
Pension | 6,269 |  |  | 14,684 |
Inventory | 3,564 |  |  | 3,412 |
Warranty | 11,460 |  |  | 9,723 |
Employee benefits and related costs | 13,146 |  |  | 11,319 |
Allowance for bad debts | 3,773 |  |  | 3,335 |
Prepaid royalties | 8,464 |  |  | 7,053 |
Reserves, other | 1,920 |  |  | 3,988 |
Fixed assets | 7,070 |  |  | 8,418 |
Other | 13,009 |  |  | 14,370 |
Deferred tax assets | 110,608 |  |  | 113,821 |
Deferred tax liabilities: |  |  |  |  |
Fixed assets | (78,819 | ) |  | (82,400 | )
Intangible Assets | (8,454 | ) |  | (6,225 | )
Other | (5,957 | ) |  | (13,385 | )
Deferred tax liabilities | (93,230 | ) |  | (102,010 | )
Subtotal | 17,378 |  |  | 11,811 |
Valuation allowance | (37,185 | ) |  | (23,691 | )
Net deferred tax liability | $ | (19,807 | ) |  | $ | (11,880 | )
As of December 31, 2013 and 2012 certain tax loss carryforwards of $41.9 million and $37.5 million are available with $1.7 million expiring from 2014 through 2018 and $40.2 million expiring after 2018. At December 31, 2013, a valuation allowance of $37.2 million had been established, of which $31.4 million was established to offset the net operating loss carryforwards due to uncertainty of future income in the relevant taxing jurisdictions and $5.8 million was established to offset other international deferred tax assets. A valuation allowance of $23.7 million at December 31, 2012 was established to offset the net operating loss carryforwards due to uncertainty of future income in the relevant taxing jurisdictions. During 2012, the valuation allowance was set up as part of acquisition accounting. During 2012, income includes a $26.7 million gain formerly recorded to other comprehensive income related to the value of the investment in Titan Europe. A related income tax expense of $10.2 million was included in total tax expense. Beginning in 2012, since Titan Europe was wholly owned and consolidated, the remaining deferred tax asset of $3.7 million relating to the book versus tax basis difference in the stock was written off and included in income tax expense. At December 31, 2013, U.S. income taxes have not been provided on approximately $49.0 million of unremitted earnings of subsidiaries operating outside the U.S. These earnings, which are considered to be invested indefinitely, would become subject to income tax if they were remitted as dividends, were lent to the Company or a U.S. affiliate, or if the Company were to sell its stock in the subsidiaries. The amount of unrecognized deferred U.S. income tax liability on these unremitted earnings is insignificant. The Company has applied the provisions of ASC 740, “Income Taxes” related to unrecognized tax benefits. No adjustment was made to retained earnings in adopting these provisions in 2007. At December 31, 2013, 2012, and 2011, the unrecognized tax benefits were $17.8 million, $14.3 million, and $0.0 million respectively. As of December 31, 2013, $14.1 million of unrecognized tax benefits would affect income tax expense if the tax benefits were recognized. The majority of the increase in unrecognized tax benefits related to potential state tax exposures. Although management cannot predict with any degree of certainty the timing of ultimate resolution of matters under review by various taxing jurisdictions, it is unlikely that the Company’s gross unrecognized tax benefits balance will change significantly within the next twelve months. Titan has identified the United States, the State of Illinois, Italy, United Kingdom, and Brazil as “major” tax jurisdictions. The Company is subject to U.S. Federal tax examinations for years 2010 to 2013. Various state and foreign income tax returns are also subject to examination. Generally, tax years 2010 and forward remain open under state statutes of limitations and tax years 2008 and forward remain open under foreign statutes of limitations. A reconciliation of the total amounts of unrecognized tax benefits at December 31 were as follows (amounts in thousands):
| 2013 |  | 2012 |  | 2011
Balance at January 1 | 11,872 |  |  | — |  |  | — |
Increases to tax positions taken during the current year | 4,256 |  |  | 6,050 |  |  | — |
Increases to tax positions taken during the prior years | 433 |  |  | 5,822 |  |  | — |
Decreases to tax positions taken during prior years | (250 | ) |  | — |  |  | — |
Decreases due to lapse of statutes of limitations | (272 | ) |  | — |  |  | — |
Settlements | (721 | ) |  | — |  |  | — |
Foreign exchange | 45 |  |  | — |  |  | — |
Balance at December 31 | 15,363 |  |  | 11,872 |  |  | — |
The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense. The amount of interest and penalties related to unrecognized tax benefits recorded in income tax expense was $0.1 million, $2.4 million and $0.0 million at December 31, 2013, 2012 and 2011. The amount of accrued interest and penalties included in the unrecognized tax benefits at December 31, 2013, 2012 and 2011 was $2.5 million, $2.4 million, and $0.0 million, respectively.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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