Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Components of Income Tax Expense (Benefit)

Income tax expense (benefit) consists of the following components (in thousands):


	For the Years Ended December 31,
	2013		2012			2011
Current
Federal	$	54,093	$	8,376		$	18,996
State and local		7,840		680			2,526

Current income tax expense		61,933		9,056			21,522
Deferred
Federal		84,974		(20,695	)		32,432
State and local		12,444		(1,678	)		6,310

Deferred income tax expense (benefit)		97,418		(22,373	)		38,742
Total income tax expense (benefit)	$	159,351	$	(13,317	)	$	60,264

Income Tax Expense (Benefit) at Company's Effective Tax Rate

Income tax expense (benefit) at the Company’s effective tax rate differed from the statutory tax rate as follows (in thousands):


	For the Years Ended December 31,
	2013		2012			2011
Income (loss) before income taxes	$	412,818	$	(35,451	)	$	(6,133	)

Tax provision at statutory tax rate of 35%		144,486		(12,408	)		(2,147	)
Effect of:
Impact of loss of REIT qualification		—		—			62,660
State and local income tax		12,828		(1,266	)		(1,311	)
Permanent acquisition costs		—		610			—
Contingent purchase price		1,680		—			—
Other		357		(253	)		1,062

Total income tax expense (benefit)	$	159,351	$	(13,317	)	$	60,264

Components of Deferred Income Tax Assets and Liabilities

Deferred tax assets and liabilities represent the basis differences between assets and liabilities measured for financial reporting versus income-tax return purposes. The following table summarizes the significant components of deferred tax assets and liabilities (in thousands):


	December 31,
	2013			2012
Deferred tax assets
Reverse loans	$	41,330		$	28,424
Accrued expenses		26,260			15,282
Servicer curtailment		21,635			—
Mandatory call obligation		20,169			20,919
Intangible assets		19,929			9,308
Unrecognized tax benefits		8,537			8,753
Share-based compensation		7,676			7,546
Deferred revenue		1,178			5,540
Capital loss carryforwards		—			22,922
Other		34,408			20,219

Total deferred tax assets		181,122			138,913
Valuation allowance		(7,453	)		(30,712	)

Total deferred tax assets, net of valuation allowance		173,669			108,201
Deferred tax liabilities
Net investment in residential loans		(53,715	)		(54,231	)
Discount on convertible notes		(27,969	)		(32,384	)
Goodwill		(35,080	)		(20,434	)
Intangible assets		(12,369	)		(17,083	)
Deferred debt issuance costs		(10,955	)		(8,635	)
Servicing rights		(143,087	)		(8,003	)
Other		(12,101	)		(8,448	)

Total deferred tax liabilities		(295,276	)		(149,218	)

Net deferred tax assets (liabilities)	$	(121,607	)	$	(41,017	)

Schedule of Activity in Valuation Allowance on Deferred Tax Assets

The following table summarizes the activity in the valuation allowance on deferred tax assets (in thousands):


	For the Years Ended December 31,
	2013			2012			2011
Balance at beginning of year	$	30,712		$	29,899		$	5,101
Charges to income tax expense		72			894			25,520
Deductions		(23,331	)		(81	)		(722	)

Balance at end of year	$	7,453		$	30,712		$	29,899

Reconciliation of Unrecognized Tax Benefits

A reconciliation of the beginning and ending balances of the total liability for unrecognized tax benefits is as follows (in thousands):


	For the Years Ended December 31,
	2013			2012			2011
Gross unrecognized tax benefits at the beginning of the year	$	17,537		$	9,026		$	7,671
Increases (reductions) related to prior year tax positions		(5,921	)		8,602			1,335
Increases related to current year tax positions		2,044			1,255			166
Reductions as a result of a lapse of the statute of limitations		(1,137	)		(1,346	)		(146	)

Gross unrecognized tax benefits at the end of the year	$	12,523		$	17,537		$	9,026