INCOME TAXES

The components of the provision for income taxes attributable to operations consist of the following (in thousands):



	Year Ended December 31,
	2013			2014			2015
Current:
Federal	$	26,516		$	24,741		$	10,295
State	3,996			2,761			1,503
Foreign	31			53			40
Total current	30,543			27,555			11,838
Deferred:
Federal	(10,919		)	(698		)	(7,475		)
State	(1,849		)	(813		)	1,683
Foreign	28			—			—
Total deferred	(12,740		)	(1,511		)	(5,792		)
Total provision for income taxes	$	17,803		$	26,044		$	6,046


10.	INCOME TAXES — (CONTINUED)

The components of deferred tax assets and liabilities consist of the following (in thousands):



	December 31,
	2014			2015
Deferred tax assets:
Reserve for bad debts	$	1,825		$	2,849
Accrued compensation	7,287			10,725
Stock compensation	8,758			12,686
Net operating losses	15,665			36,406
Accrued reserve and other	3,360			3,515
Unrealized loss on securities	491			377
Deferred rent	5,902			7,274
Deferred revenue	1,879			2,243
Deferred gain on the sale of building	10,690			9,128
Total deferred tax assets, prior to valuation allowance	55,857			85,203

Valuation allowance	(7,783		)	(9,347		)
Total deferred tax assets, net of valuation allowance	48,074			75,856

Deferred tax liabilities:
Prepaids	(1,258		)	(1,335		)
Depreciation	(9,806		)	(13,047		)
Intangibles	(47,720		)	(56,952		)
Total deferred tax liabilities	(58,784		)	(71,334		)

Net deferred tax assets (liabilities)	$	(10,710	)	$	4,522

As of December 31, 2014 and 2015, a valuation allowance has been established for certain deferred tax assets due to the uncertainty of realization. The valuation allowance as of December 31, 2014 includes an allowance for unrealized losses on ARS investments and foreign deferred tax assets. The valuation allowance as of December 31, 2015 includes an allowance for unrealized losses on ARS investments, foreign deferred tax assets and state net operating losses and tax credits. The valuation allowance for the deferred tax asset for unrealized losses on ARS has been recorded as an adjustment to accumulated other comprehensive loss.

The Company established the valuation allowance because it is more likely than not that a portion of the deferred tax asset for certain items will not be realized based on the weight of available evidence. A valuation allowance was established for the unrealized losses on securities as the Company has not historically generated capital gains, and it is uncertain whether the Company will generate sufficient capital gains in the future to absorb the capital losses. A valuation allowance was established for the foreign deferred tax assets due to the cumulative loss in recent years in those jurisdictions. The Company has not had sufficient taxable income historically to utilize the foreign deferred tax assets, and it is uncertain whether the Company will generate sufficient taxable income in the future to utilize the deferred tax assets. Similarly, the Company has established a valuation allowance for net operating losses and tax credits in certain states where it is uncertain whether the Company will generate sufficient taxable income to utilize the net operating losses and tax credits before they expire.

The Company’s change in valuation allowance was a decrease of approximately $3.2 million for the year ended December 31, 2014 and an increase of approximately $1.6 million for the year ended December 31, 2015. The increase for the year ended December 31, 2015 is due to an increase in the valuation allowance for U.S. deferred tax assets of approximately $2.2 million primarily related to the change in local tax law that occurred during the first quarter of 2015, partially offset by the decrease in the valuation allowance for foreign deferred tax assets of approximately $551,000.


10.	INCOME TAXES — (CONTINUED)

The Company had U.S. income before income taxes of approximately $53.2 million, $70.6 million and $1.5 million for the years ended December 31, 2013, 2014 and 2015, respectively. The Company had foreign losses of approximately $5.6 million for the year ended December 31, 2013. The Company had foreign income before income taxes of approximately $273,000 and $1.1 million for the years ended December 31, 2014 and 2015, respectively.

The Company’s provision for income taxes resulted in effective tax rates that varied from the statutory federal income tax rate as follows (in thousands):



	Year Ended December 31,
	2013			2014			2015
Expected federal income tax provision at statutory rate	$	16,638		$	24,820		$	903
State income taxes, net of federal benefit	885			1,965			(678		)
Foreign income taxes, net effect	(724		)	336			469
Increase (decrease) in valuation allowance	588			(2,397		)	1,956
Nondeductible compensation	431			554			574
Nondeductible transaction costs	—			—			229
Meals and entertainment	272			415			1,032
Tax rate changes	25			61			1,203
Other adjustments	(312		)	290			358
Income tax expense, net	$	17,803		$	26,044		$	6,046

The Company’s U.K. subsidiaries with foreign losses are disregarded entities for U.S. income tax purposes. Accordingly, the losses from these disregarded entities are included in the Company’s consolidated federal income tax provision at the statutory rate. Federal income taxes attributable to income from these disregarded entities are reduced by foreign taxes paid by those disregarded entities.

The Company paid approximately $6.5 million, $3.0 million, and $1.3 million in income taxes for the years ended December 31, 2013, 2014 and 2015, respectively.

The Company has net operating loss carryforwards for international income tax purposes of approximately $24.6 million, which do not expire. The Company has federal net operating loss carryforwards of approximately $64.3 million that begin to expire in 2020, state net operating loss carryforwards with a tax value of approximately $6.9 million that begin to expire in 2020 and state income tax credit carryforwards with a tax value of approximately $2.3 million that begin to expire in 2020. The Company realized a cash benefit relating to the use of its tax loss carryforwards of approximately $1.2 million and $1.3 million in 2014 and 2015, respectively.


10.	INCOME TAXES — (CONTINUED)

The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):



Unrecognized tax benefits as of December 31, 2012	$	3,909
Increase for current year tax positions	66
Increase for prior year tax positions	2,037
Expiration of the statute of limitation for assessment of taxes	(55		)
Unrecognized tax benefits as of December 31, 2013	5,957
Increase for current year tax positions	51
Decrease for prior year tax positions	(189		)
Expiration of the statute of limitation for assessment of taxes	(70		)
Unrecognized tax benefits as of December 31, 2014	5,749
Increase for prior year tax positions	1,954
Expiration of the statute of limitation for assessment of taxes	(39		)
Unrecognized tax benefits as of December 31, 2015	$	7,664

Approximately $1.5 million and $1.4 million of the unrecognized tax benefits as of December 31, 2014 and 2015, respectively, would favorably affect the annual effective tax rate, if recognized in future periods. The Company recognized $62,000, $62,000 and $83,000 for interest and penalties in its consolidated statements of operations for the years ended December 31, 2013, 2014 and 2015, respectively. The Company had liabilities of $404,000, $466,000 and $549,000 for interest and penalties in its consolidated balance sheets as of December 31, 2013, 2014 and 2015, respectively. The Company does not anticipate the amount of the unrecognized tax benefits to change significantly over the next twelve months.

The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. The Company’s federal income tax returns and most state income tax returns for tax years 2012 through 2014 remain open to examination. For states that have a four year statute of limitations, the state income tax returns for tax years 2011 through 2014 remain open to examination. The Company’s U.K. income tax returns for tax years 2009 through 2014 remain open to examination.