10. Income Taxes

The income tax provision consists of the following for the years ended October 31, (in thousands):


	2013			2012			2011
Current:
Federal	$	11,708		$	8,212		$	4,405
State		2,517			1,233			1,107
Foreign		549			2,428			(170	)

Total current		14,774			11,873			5,342

Deferred:
Federal		(5,214	)		(214	)		1,277
State		(1,666	)		(559	)		208
Foreign		(28	)		(45	)		422

Total deferred		(6,908	)		(818	)		1,907

Total income tax provision	$	7,866		$	11,055		$	7,249

At October 31, 2013 and 2012, gross deferred tax assets totaled approximately $12.4 million and $3.6 million, while gross deferred tax liabilities totaled approximately $16.6 million and $12.1 million. Deferred income taxes reflect the net of temporary differences between the carrying amount of assets and liabilities for financial reporting and income tax purposes.

Significant components of our deferred taxes assets (liabilities) as of October 31, are as follows (in thousands):


	2013			2012
Allowances for accounts receivable	$	634		$	714
Inventories		417			483
State taxes		269			350
Accrued liabilities		675			675

Current deferred income taxes	$	1,995		$	2,222


Property, plant, and equipment		(6,892	)		(5,604	)
Intangible assets		8,716			105
Unrealized gain, Limoneira investment		(8,674	)		(6,008	)
Stock-based compensation		369			286
State taxes		232			546
Other		55			10

Long-term deferred income taxes	$	(6,194	)	$	(10,665	)

The October 31, 2013 net increase in deferred intangible assets by $8.6 million is mostly attributable to the RFG contingent liability payout during the year. The payout of the contingent liability resulted in additional RFG tax basis goodwill equal to the fair market value of the stock issued, which increased the Company’s net intangibles deferred tax asset. Due to the fact that the payout was paid via stock issuance, the offset to this deferred tax asset was recorded through additional paid-in capital. See Note 16.

A reconciliation of the significant differences between the federal statutory income tax rate and the effective income tax rate on pretax income for the years ended October 31, is as follows:


	2013			2012			2011
Federal statutory tax rate		35.0	%		35.0	%		35.0	%
State taxes, net of federal effects		2.1			1.7			4.8
Foreign income taxes greater (less) than U.S.		(1.8	)		(2.7	)		(0.9	)
Hacienda assessment		—			6.3			—
Section 199 deduction		(2.5	)		(0.8	)		—
Other		(0.8	)		—			0.9

		32.0	%		39.5	%		39.8	%

We intend to reinvest our accumulated foreign earnings, which approximated $10.0 million at October 31, 2013, indefinitely. As a result, we have not provided any deferred income taxes on such unremitted earnings. For fiscal years 2013, 2012 and 2011, income before income taxes related to domestic operations was approximately $21.7 million, $24.2 million, and $17.1 million. For fiscal years 2013, 2012 and 2011, income before income taxes related to foreign operations was approximately $2.9 million, $3.8 million and $1.1 million.

As of October 31, 2013 and 2012, we did not have a liability for unrecognized tax benefits related to various federal and state income tax matters. The tax effected amount would reduce our effective income tax rate if recognized.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):


Balance at November 1, 2011	$	41
Reductions of tax positions from prior years		(41	)

Balance at October 31, 2012		—
Reductions of tax positions from prior years		—

Balance at October 31, 2013	$	—

The decrease in our provision for income taxes in fiscal 2013, as compared to 2012, is due to the income tax assessment payment of $1.8 million made in 2012, related to the Hacienda’s examination of the tax year ended December 31, 2004. In addition, we were able to take advantage of additional tax credits through California’s Enterprise Zone Hiring Credit Program (EZC) and an increase in the Section 199 deduction in fiscal 2013.