G.	Income Taxes

The provision for income taxes on continuing operations consisted of the following for the years ended September 30:

(in thousands)	2014		2013		2012
Current	$	4,979	$	5,153	$	2,437
Deferred		937		261		1,855
Total income tax expense	$	5,916	$	5,414	$	4,292

Income tax expense on continuing operations differs from the “expected” income tax expense computed by applying the U.S. federal statutory rate of 34 % to earnings before income taxes for the years ended September 30 as a result of the following:

(in thousands)	2014		2013		2012
Computed expected tax expense	$	5,750	$	5,037	$	4,108
State income taxes, net of federal benefit		242		146		140
Stock-based compensation and other permanent differences		(76)		231		44
Total income tax expense	$	5,916	$	5,414	$	4,292

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. The significant components of the Company’s deferred tax assets and liabilities at September 30 were as follows:

(in thousands)	2014		2013
Deferred tax assets (liabilities):
Definite and indefinite lived intangibles	$	(16,447)	$	(16,481)
Property and equipment		(9,141)		(9,873)
Patron tax		5,209		4,351
Other		(1,931)		267
Net deferred tax liabilities	$	(22,310)	$	(21,736)

The net deferred taxes are recorded in the balance sheets as follows:

	2014		2013
Current assets	$	5,378	$	4,618
Long-term liabilities		(27,688)		(26,354)
Net deferred tax liabilities	$	(22,310)	$	(21,736)

Included in the Company’s deferred tax liabilities at September 30, 2014 is approximately $ 17.2 million representing the tax effect of indefinite lived intangible assets from club acquisitions which are not deductible for tax purposes. These deferred tax liabilities will remain in the Company’s balance sheet until the related clubs are sold.

The Company may recognize the tax benefit from uncertain tax positions only if it is at least more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon settlement with the taxing authorities. We recognize accrued interest related to unrecognized tax benefits as a component of interest expense. We recognize penalties related to unrecognized tax benefits as a component of miscellaneous income (expense) in accordance with regulatory requirements.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the years ended September 30, 2014, 2013 and 2012, the Company recognized no interest and penalties for unrecognized tax benefits. The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states. The last three years remain open to tax examination. The Company’s income tax returns for the years ended September 30, 2012 and 2011 are currently under examination.