13) Income Taxes

Income tax expense is comprised of the following for the indicated periods (in thousands):


	Years Ended September 30,
	2016		2015			2014
Current:
Federal	$	18,724	$	28,793		$	19,747
State		5,344		8,143			4,909
Deferred
Federal		7,485		(3,719	)		596
State		2,185		(382	)		63

	$	33,738	$	32,835		$	25,315

The provision for income taxes differs from income taxes computed at the Federal statutory rate as a result of the following (in thousands):


	Years Ended September 30,
	2016			2015			2014
Income from continuing operations before taxes	$	78,672		$	70,391		$	61,399

Provision for income taxes:
Tax at Federal statutory rate	$	27,535		$	24,637		$	21,490
Impact of Partnership loss not subject to federal income taxes		477			3,228			628
State taxes net of federal benefit		5,672			4,922			3,310
Permanent differences		80			78			57
Deferred tax benefit		—			(3,179	)		—
Change in valuation allowance		26			3,027			—
Change in unrecognized tax benefit		—			81			(113	)
Other		(52	)		41			(57	)

	$	33,738		$	32,835		$	25,315

The components of the net deferred taxes for the years ended September 30, 2016 and September 30, 2015 using current tax rates are as follows (in thousands):


	September 30,
	2016			2015
Deferred tax assets:
Net operating loss carryforwards	$	5,791		$	7,367
Vacation accrual		3,367			3,295
Pension accrual		8,549			9,244
Allowance for bad debts		1,728			2,654
Fair value of derivative instruments		—			6,773
Insurance accrual		25,828			24,682
Inventory capitalization		1,128			1,038
Alternative minimum tax credit carryforward		266			266
Other, net		2,512			1,630

Total deferred tax assets		49,169			56,949
Valuation allowance		(3,053	)		(3,027	)

Net deferred tax assets	$	46,116		$	53,922

Deferred tax liabilities:
Property and equipment	$	3,999		$	2,831
Inventory costing method		—			497
Fair value of derivative instruments		788			—
Intangibles		35,976			34,286

Total deferred tax liabilities	$	40,763		$	37,614

Net deferred taxes	$	5,353		$	16,308

In order to fully realize the net deferred tax assets, the Partnership’s corporate subsidiaries will need to generate future taxable income. A valuation allowance is recognized if, based on the weight of available evidence including historical tax losses, it is more likely than not that some or all of deferred tax assets will not be realized. The net change in the total valuation allowance for the fiscal year ended September 30, 2016 was an increase of $26 thousand. The net change in the total valuation allowance for the fiscal year ended September 30, 2015 was an increase of $3.0 million. Based upon a review of a number of factors and all available evidence, including recent historical operating performance, the expectation of sustainable earnings, and the confidence that sufficient positive taxable income would continue in all tax jurisdictions for the foreseeable future, management concludes for the year ended September 30, 2016, it is more likely than not that the Partnership will realize the full benefit of its deferred tax assets, net of existing valuation allowance at September 30, 2016.

As of January 1, 2016, Star Acquisitions, a wholly-owned subsidiary of the Partnership, had a Federal net operating loss carry forward (“NOLs”) of approximately $3.9 million. The Federal NOLs, which will expire between 2018 and 2024, are generally available to offset any future taxable income but are also subject to annual limitations of between $1.0 million and $2.2 million.

FASB ASC 740-10-05-6 Income Taxes, Uncertain Tax Position, provides financial statement accounting guidance for uncertainty in income taxes and tax positions taken or expected to be taken in a tax return. At September 30, 2016, we did not have unrecognized income tax benefits.

Our continuing practice is to recognize interest and penalties related to income tax matters as a component of income tax expense. We file U.S. Federal income tax returns and various state and local returns. A number of years may elapse before an uncertain tax position is audited and finally resolved. For our Federal income tax returns we have four tax years subject to examination. In our major state tax jurisdictions of New York, Connecticut, and Pennsylvania we have four years that are subject to examination. In the state tax jurisdiction of New Jersey we have five tax years that are subject to examination. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, based on our assessment of many factors including past experience and interpretation of tax law, we believe that our provision for income taxes reflect the most probable outcome. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events.