INCOME TAXES

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



	Year Ended December 31,
	2014			2015			2016
Current:
Federal	$	24,741		$	10,295		$	32,198
State	2,761			1,503			3,682
Foreign	53			40			76
Total current	27,555			11,838			35,956
Deferred:
Federal	(698		)	(7,475		)	13,641
State	(813		)	1,683			1,959
Foreign	—			—			35
Total deferred	(1,511		)	(5,792		)	15,635
Total provision for income taxes	$	26,044		$	6,046		$	51,591


10.	INCOME TAXES — (CONTINUED)

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



	December 31,
	2015			2016
Deferred tax assets:
Reserve for bad debts	$	2,849		$	2,437
Accrued compensation	10,725			5,562
Stock compensation	12,686			14,268
Net operating losses	36,406			30,319
Accrued reserve and other	3,515			2,097
Unrealized loss on securities	377			326
Deferred rent	7,274			7,814
Deferred revenue	2,243			—
Deferred gain on the sale of building	9,128			8,166
Total deferred tax assets, prior to valuation allowance	85,203			70,989

Valuation allowance	(9,347		)	(8,557		)
Total deferred tax assets, net of valuation allowance	75,856			62,432

Deferred tax liabilities:
Prepaids	(1,335		)	(1,753		)
Depreciation	(13,047		)	(13,045		)
Intangibles	(56,952		)	(58,747		)
Total deferred tax liabilities	(71,334		)	(73,545		)

Net deferred tax assets (liabilities)	$	4,522		$	(11,113	)

As of December 31, 2015 and 2016, a valuation allowance has been established for certain deferred tax assets due to the uncertainty of realization. The valuation allowance as of December 31, 2015 and 2016 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 an increase of approximately $2 million for the year ended December 31, 2015 and a decrease of approximately $1 million for the year ended December 31, 2016. 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 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. The decrease for the year ended December 31, 2016 is due to a decrease in the valuation allowance for foreign deferred tax assets of approximately $1 million.

The Company had U.S. income before income taxes of approximately $71 million, $2 million and $135 million for the years ended December 31, 2014, 2015 and 2016, respectively. The Company had foreign income before income taxes of approximately $273,000, $1 million and $2 million for the years ended December 31, 2014, 2015 and 2016, respectively.


10.	INCOME TAXES — (CONTINUED)

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,
	2014			2015			2016
Expected federal income tax provision at statutory rate	$	24,820		$	903		$	47,832
State income taxes, net of federal benefit	1,965			(678		)	3,638
Foreign income taxes, net effect	336			469			(31		)
Increase (decrease) in valuation allowance	(2,397		)	1,956			(103		)
Nondeductible compensation	554			574			141
Nondeductible transaction costs	—			229			103
Meals and entertainment	415			1,032			712
Tax rate changes	61			1,203			283
Research credits	—			—			(920		)
Other adjustments	290			358			(64		)
Income tax expense, net	$	26,044		$	6,046		$	51,591

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 $3 million, $1 million, and $34 million in income taxes for the years ended December 31, 2014, 2015 and 2016, respectively.

The Company has net operating loss carryforwards for international income tax purposes of approximately $27 million, which do not expire. The Company has federal net operating loss carryforwards of approximately $49 million that begin to expire in 2020, state net operating loss carryforwards with a tax value of approximately $6 million that begin to expire in 2020 and state income tax credit carryforwards with a tax value of approximately $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 million, $1 million and $5 million in 2014, 2015 and 2016, respectively.

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



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
Increase for current year tax positions	368
Decrease for prior year tax positions	(6,115		)
Expiration of the statute of limitation for assessment of taxes	(74		)
Unrecognized tax benefits as of December 31, 2016	$	1,843


10.	INCOME TAXES — (CONTINUED)

Approximately $1 million of the unrecognized tax benefits as of December 31, 2015 and 2016 would favorably affect the annual effective tax rate, if recognized in future periods. The Company recognized $62,000 and $83,000 for interest and penalties in its consolidated statements of operations for the years ended December 31, 2014 and 2015, respectively. The Company reversed interest and penalties of $416,000 in its consolidated statements of operations for the year ended December 31, 2016. The Company had liabilities of $466,000, $549,000 and $133,000 for interest and penalties in its consolidated balance sheets as of December 31, 2014, 2015 and 2016, respectively. The Company does not anticipate the amount of the unrecognized tax benefits will 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 2013 through 2015 remain open to examination. For states that have a four-year statute of limitations, the state income tax returns for tax years 2012 through 2015 remain open to examination. The Company’s U.K. income tax returns for tax years 2010 through 2015 remain open to examination.