Entity information:
INCOME TAXES
Income tax expense for the years ended September 30, 2017, 2016, and 2015 consisted of the following:
 
2017

 
2016

 
2015

 
(Dollars in thousands)
Current:
 
 
 
 
 
Federal
$
38,127

 
$
33,298

 
$
30,079

State
4,734

 
4,677

 
4,395

 
42,861

 
37,975

 
34,474

Deferred:
 
 
 
 
 
Federal
712

 
286

 
2,869

State
210

 
184

 
332

 
922

 
470

 
3,201

 
$
43,783

 
$
38,445

 
$
37,675



The Company's effective tax rates were 34.2%, 31.5%, and 32.5% for the years ended September 30, 2017, 2016, and 2015, respectively. The increase in the effective tax rate for the year ended September 30, 2017 was due primarily to the accounting method change for low income housing partnership investments. See "Note 1. Summary of Significant Accounting Policies" for further discussion regarding the accounting method change and "Note 6. Low Income Housing Partnerships" for additional information regarding the income tax expense components of the low income housing partnership investments. The differences between such effective rates and the statutory Federal income tax rate computed on income before income tax expense resulted from the following:
 
2017
 
2016
 
2015
 
Amount
 
%
 
Amount
 
%
 
Amount
 
%
 
(Dollars in thousands)
Federal income tax expense
 
 
 
 
 
 
 
 
 
 
 
computed at statutory Federal rate
$
44,772

 
35.0
 %
 
$
42,679

 
35.0
 %
 
$
40,519

 
35.0
 %
Increases (decreases) in taxes resulting from:
 
 
 
 
 
 
 
 
 
 
 
State taxes, net of Federal tax effect
3,452

 
2.7

 
3,308

 
2.7

 
3,257

 
2.8

Low income housing tax credits, presented net of proportional amortization in 2017
(2,468
)
 
(2.0
)
 
(4,815
)
 
(4.0
)
 
(4,316
)
 
(3.7
)
ESOP related expenses, net
(1,052
)
 
(0.8
)
 
(1,127
)
 
(0.9
)
 
(1,222
)
 
(1.1
)
Other
(921
)
 
(0.7
)
 
(1,600
)
 
(1.3
)
 
(563
)
 
(0.5
)
 
$
43,783

 
34.2
 %
 
$
38,445

 
31.5
 %
 
$
37,675

 
32.5
 %

Deferred income tax expense represents the change in deferred income tax assets and liabilities excluding the tax effects of the change in net unrealized gain (loss) on AFS securities, interest rate swaps and changes in the market value of restricted stock between the grant date and vesting date. The sources of these differences and the tax effect of each as of September 30, 2017, 2016, and 2015 were as follows:
 
2017

 
2016

 
2015

 
(Dollars in thousands)
Salaries, deferred compensation and employee benefits
$
437

 
$
(143
)
 
$
(12
)
Low income housing partnerships
285

 
(318
)
 
(763
)
ACL
185

 
480

 
(75
)
Premises and equipment
14

 
1,593

 
(129
)
FHLB stock dividends
4

 
(1,357
)
 
4,083

Capitol Federal Foundation contribution
—

 
—

 
418

Other, net
(3
)
 
215

 
(321
)
 
$
922

 
$
470

 
$
3,201



The components of the net deferred income tax liabilities as of September 30, 2017 and 2016 were as follows:
 
2017

 
2016

 
(Dollars in thousands)
Deferred income tax assets:
 
 
 
Salaries, deferred compensation and employee benefits
$
2,583

 
$
3,020

Low income housing partnerships
1,478

 
1,763

ESOP compensation
1,724

 
1,566

ACL
711

 
896

Other
2,621

 
2,528

Gross deferred income tax assets
9,117

 
9,773

 
 
 
 
Valuation allowance
(1,795
)
 
(1,804
)
Gross deferred income tax asset, net of valuation allowance
7,322

 
7,969

 
 
 
 
Deferred income tax liabilities:
 
 
 
FHLB stock dividends
23,242

 
23,238

Premises and equipment
6,105

 
6,091

Unrealized gain on AFS securities
2,000

 
3,595

Other
433

 
419

Gross deferred income tax liabilities
31,780

 
33,343

 
 
 
 
Net deferred tax liabilities
$
24,458

 
$
25,374



The Company assesses the available positive and negative evidence surrounding the recoverability of its deferred tax assets and applies its judgment in estimating the amount of valuation allowance necessary under the circumstances.  At both September 30, 2017 and 2016, the Company had a valuation allowance of $1.8 million related to the net operating losses generated by the Company's consolidated Kansas corporate income tax return. The companies included in the consolidated Kansas corporate income tax return are the holding company and Capitol Funds, Inc., as the Bank files a Kansas privilege tax return. Based on the nature of the operations of the holding company and Capitol Funds, Inc., management believes there will not be sufficient taxable income to fully utilize the deferred tax assets noted above; therefore, a valuation allowance has been recorded for the related amounts at September 30, 2017 and 2016.

Accounting Standard Codification ("ASC") 740 Income Taxes prescribes a process by which a tax position taken, or expected to be taken, on an income tax return is determined based upon the technical merits of the position, along with whether the tax position meets a more-likely-than-not-recognition threshold, to determine the amount, if any, of unrecognized tax benefits to recognize in the financial statements. Estimated penalties and interest related to unrecognized tax benefits are included in income tax expense in the consolidated statements of income. For the year ended September 30, 2017 and 2016, the Company had no unrecognized tax benefits. For the year ended September 30, 2015, the Company's unrecognized tax benefits, estimated penalties and interest, and related activities were insignificant.

The Company files income tax returns in the U.S. federal jurisdiction and the state of Kansas, as well as other states where it has either established nexus under an economic nexus theory or has exceeded enumerated nexus thresholds based on the amount of interest income derived from sources within a given state. With few exceptions, the Company is no longer subject to U.S. federal and state examinations by tax authorities for fiscal years before 2014.