10.

INCOME TAXES

For financial reporting purposes, income from continuing operations before income taxes includes the following components, in thousands:


	Year Ended December 31,
	2015		2014		2013
Income from continuing operations before income taxes:
United States	$	164,282	$	65,176	$	58,157
Foreign		134,391		142,114		139,585

	$	298,673	$	207,290	$	197,742

Components of income tax expense, in thousands, were as follows:


	Year Ended December 31,
	2015			2014			2013
Current income tax expense:
Federal	$	54,447		$	56,624		$	28,289
State		8,942			7,380			5,544
Foreign		35,438			35,307			47,645

		98,827			99,311			81,478

Deferred income tax expense (benefit):
Federal		10,620			(20,735	)		143
State		878			(2,429	)		75
Foreign		(2,568	)		(3,468	)		(7,045	)

		8,930			(26,632	)		(6,827	)

Total income tax expense attributed to continuing operations	$	107,757		$	72,679		$	74,651

A reconciliation of income tax expense computed at statutory tax rates compared to effective income tax rates was as follows:


	Year Ended December 31,
	2015			2014			2013
Statutory rate		35.0	%		35.0	%		35.0	%
Federal tax credits		-0.3	%		-1.8	%		-2.8	%
Uncertain tax positions		3.3	%		0.4	%		2.5	%
Foreign rate differential		-4.7	%		-9.0	%		-5.6	%
Foreign deferred tax liability on unremitted earnings		0.5	%		8.0	%		7.5	%
State income taxes, net of Federal benefit		1.9	%		2.1	%		1.7	%
Other		0.4	%		0.4	%		-0.5	%

Effective income tax rates from continuing operations		36.1	%		35.1	%		37.8	%

The increase in the effective tax rate is primarily due to increases related to the mix of income by country, accruals for uncertain tax positions and reduced federal jobs credits, partially offset by lower deferred tax on foreign unremitted earnings resulting from our international acquisitions in 2015.

The Company’s effective income tax rate from discontinued operations for the years ended December 31, 2015, 2014 and 2013 was (0.7%), (10.0%) and 30.7%, respectively. The Company recognized a $21.6 million and $8.6 million tax benefit in 2015 and 2014, respectively, due to the deferred tax benefit associated with excess outside basis over financial reporting basis from the divestiture of several of our agent-based businesses, resulting in a negative effective tax rate.

The countries having the greatest impact on the tax rate adjustment line shown in the above table as “Foreign rate differential” for the years ended December 31, 2015, 2014 and 2013 were Australia, Netherlands, Singapore and the United Kingdom.

In 2015, 2014, and 2013, income tax benefits attributable to employee stock option transactions of $4.2 million, $1.2 million and $1.5 million, respectively, were allocated to shareholders’ equity.

Significant temporary differences between reported financial and taxable earnings that give rise to deferred income tax assets and liabilities, in thousands, were as follows:


	Year Ended December 31,
	2015			2014
Deferred income tax assets:
Net operating loss carryforwards	$	111,288		$	123,777
Benefit plans		33,347			32,329
Accrued expenses		28,179			28,539
Tax credits		13,882			14,717
Foreign currency translation		2,183			10,851
Allowance for doubtful accounts		3,796			4,363
Reserves not currently deductible for tax purposes		4,404			3,552
Other		21,824			20,901

Gross deferred income tax assets		218,903			239,029

Less valuation allowance		(100,205	)		(109,240	)

Total deferred income tax assets	$	118,698		$	129,789

Deferred income tax liabilities:
Acquired intangibles amortization	$	139,137		$	150,482
Foreign earnings		33,597			33,869
Excess tax depreciation over financial depreciation		42,634			33,182
Prepaid expenses		7,553			10,005

Total deferred income tax liabilities		222,921			227,538

Net deferred income tax liability	$	104,223		$	97,749

Deferred income tax liabilities included in the balance sheet are:
Deferred income tax liability—current	$	1,693		$	1,117
Deferred income tax liability—long-term		102,530			96,632

Net deferred income taxes	$	104,223		$	97,749

At December 31, 2015, we had federal and foreign net operating loss (“NOL”) carryforwards in the amount of $289.0 million which resulted in a net deferred tax asset of $21.9 million which is available to reduce current taxes. The NOL carryforwards are attributable to acquired and foreign companies. NOLs and tax credit carryforwards expire in periods starting 2016 through 2031. The valuation allowances, which reduce deferred tax assets to an amount that will more likely than not be realized, were $100.2 million at December 31, 2015 and $109.2 million at December 31, 2014. Our valuation allowance decreased by $9.0 million in 2015 on a net basis as a result of the following: losses in certain foreign jurisdictions that likely will provide no tax benefit and releasing valuation allowances related to the utilization of NOLs during the year that had full valuation allowances.

We have historically determined that a portion of undistributed earnings of our foreign subsidiaries will be repatriated to the United States, and accordingly, we have provided a deferred tax liability totaling $33.6 million and $33.9 million at December 31, 2015 and 2014, respectively, on such foreign source income. For the years ended December 31, 2015 and 2014, we have accrued U.S. income taxes on $168.1 million and $167.6 million, respectively, of unremitted foreign earnings and profits. At December 31, 2015, we have determined we have foreign earnings of approximately $191.2 million which will be permanently reinvested, and therefore deferred income taxes of approximately $28.0 million have not been provided on such foreign subsidiary earnings.

In preparing our tax returns, we are required to interpret complex tax laws and regulations. On an ongoing basis, we are subject to examinations by federal and state tax authorities that may give rise to different interpretations of these complex laws and regulations. The number of tax years that remain open and subject to tax audits varies depending upon the tax jurisdiction. Our most significant taxing jurisdictions include the U.S., United Kingdom and France. The Company files income tax returns in the U.S. and various states as well as foreign jurisdictions. Tax years 2008 and 2010 forward remain open under U.S. statutes of limitation. Due to the nature of the examination process, it generally takes years before these examinations are completed and matters are resolved. At December 31, 2015, we were under examination by the U.S. Internal Revenue Service for tax years 2008, 2010, 2011, 2012 and 2013. At December 31, 2015, we believe the aggregate amount of any additional tax liabilities that may result from examinations, if any, will not have a material adverse effect on our financial condition, results of operations or cash flows.

The following summarizes the activity related to our unrecognized tax benefits recorded in accordance with ASC 740-10 in 2015, 2014 and 2013, in thousands:


	For the year ended December 31,
	2015			2014			2013
Beginning balance	$	23,807		$	22,680		$	13,990
Increases for positions taken in current year		1,768			580			374
Increases for positions taken in prior years		4,241			4,318			12,316
Decreases for positions taken in prior years		—			(2,243	)		(2,061	)
Decrease due to settlements with taxing authorities		(440	)		(1,528	)		—
Expiration of the statute of limitations for the assessment of taxes		(417	)		—			(1,939	)

Ending balance	$	28,959		$	23,807		$	22,680

The unrecognized tax benefits at December 31, 2015 were $29.0 million of tax benefits that, if recognized, would affect our effective tax rate. We recognize interest related to unrecognized tax benefits and penalties as income tax expense. Total interest and penalties recognized as part of income tax expense (benefit) were $5.1 million, $(0.2) million and $5.2 million for December 31, 2015, 2014 and 2013, respectively. At December 31, 2015 and 2014, the aggregate recorded liability for interest and potential penalties was $16.1 million and $11.0 million, respectively. We do not expect our unrecognized tax benefits to change significantly over the next twelve months.