Reconciliations of income taxes computed using the U.S. Federal statutory rate to the effective income tax rates are as follows:

As noted in the above table, the most significant contributor to the difference between the federal statutory rate and the effective rate for 2004 and 2003 is attributed to currency exchange impact on the foreign income tax calculation. The Company’s New Zealand subsidiaries use the U.S. Dollar as their functional currency for financial reporting purposes, but income taxes are calculated from New Zealand Dollar financial statements and re-measured into U.S. Dollars. Volatility in exchange rates creates variable results when computing income in different currencies. The most significant difference in the relative income computations for 2004 and 2003 was attributable to depreciation, depletion, and amortization (DD&A). Because of the relative strengthening of the New Zealand Dollar vs. the U.S. Dollar, the value of the tax DD&A deduction reflects the relative appreciation in the New Zealand Dollar tax basis of amortizable assets vs. the historical U.S. Dollar investment costs. As a result, taxable income (and accordingly income tax expense) computed in New Zealand Dollars and then converted to U.S. Dollars at the average exchange rates for each respective year was significantly less than net income computed in the subsidiaries’ U.S. Dollar financial statements. Additionally, the deferred tax asset is revalued at the ending exchange rate for each period. This revaluation also resulted in favorable adjustments for 2004, 2003, and 2002. In aggregate, the Company recognized foreign exchange benefits to tax expense in the amounts of $2.5 million, $2.9 million, and $0.2 million for 2004, 2003, and 2002, respectively. If exchange rates remain volatile in the future significant fluctuations in the impact on the Company’s effective tax rate are likely to continue.

In addition to the exchange impact, the Company also had a favorable adjustment in 2004 from a correction in the tax basis of the TAWN assets. The majority of these adjustments were discovered when preparing the 2002 New Zealand tax returns which were due and filed in March 2004. Additionally, the basis adjustments resulted in an increase in the acquired deferred tax asset balance of $1.1 million.

The primary unfavorable differences between the federal statutory and the effective rate are attributable to state income taxes (computed net of the offsetting federal benefit), which were $1.1 million, $0.4 million and $0.3 million for 2004, 2003, and 2002, respectively. Additional, the Company recorded adjustments to the cumulative Louisiana deferred tax liability in the amounts of $0.9 million and $1.2 million during 2004 and 2003, respectively due to its increased level of business activity in Louisiana. The Company calculates its Louisiana income tax using the "apportionment" accounting method. Under apportionment accounting, total federal taxable income is allocated based on the proportional level of U.S. business activity within the state. Due to the relative increase in the Company’s Louisiana activity, the Company increased its estimate of future Louisiana taxable income that will result from the reversal of prior years’ timing differences. The 2004 increase was primarily due to acquisitions and development activities in Lake Washington. The 2003 increase was primarily due to development activities in Lake Washington.

The New Zealand statutory rate is 33%, which resulted in differences of $0.3 million, $0.2 million, and $0.1 million for 2004, 2003, and 2002 respectively vs. the U.S. statutory rate. The 2004 favorable rate impact is more than offset by a $0.6 million accrual for taxes expected to be incurred on a planned dividend from the Company’s New Zealand subsidiaries. Except for a limited dividend tied to a cost of capital computation, the Company does not compute a provision for U.S. taxes on the undistributed earnings of our New Zealand subsidiaries as management has plans to reinvest such earnings outside of the United States indefinitely. If, in the future, these earnings are distributed into the U.S. in the form of dividends or otherwise, we may be subject to U.S. income taxes and New Zealand withholding taxes. It is not practical, however, to estimate the amount of taxes that may be payable if such remittances occur. Presently, there are no foreign tax credits available to reduce the U.S. taxes on such amounts if repatriated.

The Company is currently evaluating the possibility of utilizing a special one-time tax deduction relating to the repatriation of foreign earnings created by the American Jobs Creation Act of 2004. To be eligible the Company would need to develop a qualified domestic reinvestment plan. As of this date the Company has not yet completed this evaluation or developed a reinvestment plan. However, as of December 31, 2004 the Company is in a cumulative tax loss position with respect to its foreign operations. The Company believes the maximum available deduction would be limited to the 2005 taxable earnings of its foreign subsidiaries, if any. The Company will not be in a position to make a reasonable estimate until later in the year as to how much, if any, income will be available to repatriate at the reduced rate.

The tax effects of temporary differences representing the net deferred tax liability (asset) at December 31, 2004 and 2003, were as follows: