DREAMWORKSANIMATIONSKG,INC. NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS—(Continued) taxes incurred from the Separation Date through December 31, 2004, and foreign taxes for the entire year. The following are the components of the provision for income taxes (in thousands): Current: Federal ...................................................... $95,472 State and Local ................................................ 9,277 Foreign ...................................................... 2,318 Total current provision .............................................. 107,067 Deferred: Federal ...................................................... (16,741) Total deferred benefit ............................................... (16,741) Total income tax provision ........................................... $90,326 The provision for income taxes for the year ended December 31, 2004 differed from the amounts computed by applying the U.S. federal income tax rate of 35% to income before income before income taxes as a result of the following (in thousands): U.S. Federal statutory rate .............................................. 35.0% U.S. state taxes, net of Federal benefit ..................................... 2.1 Pre-Separation income not subject to tax ................................... (14.3) Revaluation of deferred tax assets, net ..................................... (0.5) Permanent and other items .............................................. (1.0) 21.3% The tax effects of temporary differences for the period from October 28, 2004 through December 31, 2004 that give rise to a significant portion of the deferred tax assets and deferred tax liabilities are presented below (in thousands): Deferral tax assets: Film assets ................................................... $ 8,806 Abandonedfilms .............................................. 32,497 Basis step-up, related party (see below) ............................ 620,633 Expense accruals .............................................. 7,969 State taxes ................................................... 3,042 672,947 Less: Valuation allowance .......................................... (577,600) Net deferred tax assets ......................................... 95,347 Deferred tax liabilities: Fixed assets .................................................. (1,032) Other ....................................................... (972) (2,004) $ 93,343 In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on the generation of taxable income during the periods in which temporary differences become deductible. At the time of the Separation, the net deferred tax assets recorded as a result of the Company’s change in 93