Income Taxes

Reconciliations of the statutory U.S. federal income tax rates to our effective tax rate for continuing operations follow:



	Years Ended December 31,
	2016		2015		2014
Statutory rate	35.0	%	35.0	%	35.0	%
State tax, net of federal benefit	3.1		3.0		2.9
Impact of state rate change on net deferred tax liabilities, net of federal benefit	(0.5	)	0.5		4.4
State, valuation allowance adjustments on net operating losses	1.0		(0.2	)	(4.0	)
Unrecognized tax benefits, U.S. federal and state, net of federal benefit	1.6		(0.5	)	4.8
Other, net	(0.6	)	(0.3	)	(1.2	)
Effective tax rate	39.6	%	37.5	%	41.9	%

The effective tax rate varies from the statutory U.S. federal rate of 35 percent primarily due to the impact of state taxes, net of federal benefit, for the years ended December 31, 2016, 2015 and 2014.

Income tax expense consists of:



	December 31,
	2016			2015			2014
Current provision:
Federal	$	228,505		$	215,950		$	137,573
State	24,336			26,057			43,282
Total current provision	252,841			242,007			180,855
Deferred (benefit)/provision:
Federal	(89,518		)	(69,546		)	(40,370		)
State	786			(7,681		)	(518		)
Total deferred (benefit)/provision	(88,732		)	(77,227		)	(40,888		)
Provision for income tax expense	$	164,109		$	164,780		$	139,967

The tax effect of temporary differences that give rise to deferred tax assets and liabilities include the following:



	December 31,
	2016			2015
Deferred tax assets:
Loan reserves	$	72,125		$	45,082
Stock-based compensation plans	16,471			16,939
Deferred revenue	793			209
Operating loss and credit carryovers	8,371			16,106
Unrealized losses	5,364			9,949
Accrued expenses not currently deductible	13,605			10,696
Unrecorded tax benefits	5,702			15,251
Other	10,844			9,871
Total deferred tax assets	133,275			124,103
Deferred tax liabilities:
Gains on repurchased debt	126,403			190,936
Fixed assets	6,831			6,237
Acquired intangible assets	6,288			6,724
Other	2,933			1,794
Total deferred tax liabilities	142,455			205,691
Net deferred tax liabilities	$	(9,180	)	$	(81,588	)

Included in operating loss carryovers is a valuation allowance of $88.4 million and $83.7 million as of December 31, 2016 and 2015, respectively, against a portion of our state net operating loss carryovers that management believes is more likely than not to expire prior to being realized. As of December 31, 2016, we have apportioned state net operating loss carryforwards of $12.9 million which begin to expire in 2029.

Accounting for Uncertainty in Income Taxes

The following table summarizes changes in unrecognized tax benefits:



	December 31,
	2016			2015			2014
Unrecognized tax benefits at beginning of year	$	47,109		$	59,405		$	7,344
Increases resulting from tax positions taken during a prior period	110,894			3,456			45,184
Decreases resulting from tax positions taken during a prior period	(3,285		)	(10,121		)	—
Increases resulting from tax positions taken during the current period	817			3,447			7,713
Decreases related to settlements with taxing authorities	(123		)	(7,481		)	(236		)
Reductions related to the lapse of statute of limitations	(2,831		)	(1,597		)	(600		)
Unrecognized tax benefits at end of year	$	152,581		$	47,109		$	59,405

As of December 31, 2016, the gross unrecognized tax benefits are $152.6 million. Included in the $152.6 million are $120.0 million of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate. As a part of the Spin-Off, the Company recorded a liability related to uncertain tax positions for which it is indemnified by Navient. In addition, we believe we are indemnified by Navient for uncertain tax positions relating to historical transactions among entities that are now subsidiaries of Navient that should have been recorded at the time of the Spin-Off. See Note 2, “Significant Accounting Policies — Correction Recorded in the Current Period” and “—Income Taxes,” for additional details.

Tax related interest and penalty expense is reported as a component of income tax expense. As of December 31, 2016, 2015 and 2014, the total amount of income tax-related accrued interest and penalties, net of related benefit, recognized in the consolidated balance sheets was $20.2 million, $7.0 million and $5.9 million, respectively.

For the years ended December 31, 2016, 2015 and 2014, the total amount of income tax-related accrued interest, net of related tax benefit, recognized in the consolidated statements of income was $5.1 million, $1.4 million and $2.3 million, respectively.

The Company or one of its subsidiaries files income tax returns at the U.S. federal level and in most U.S. states. U.S. federal income tax returns filed for years 2012 and prior are no longer subject to examination. Various combinations of subsidiaries, tax years, and jurisdictions remain open for review, subject to statute of limitations periods (typically 3 to 4 prior years). We do not expect the resolution of open audits to have a material impact on our unrecognized tax benefits.