(9)Income Taxes

For the years ended December 31, 2013, 2012 and 2011 net income before income taxes and non-controlling interest consisted of the following (in thousands):



	Year Ended December 31,
	2013		2012		2011
U.S. operations	$	9,225	$	15,595	$	21,909
Foreign operations		62,352		58,504		39,989
	$	71,577	$	74,099	$	61,898

Income tax expense attributable to income from operations consisted of (in thousands):



	Year Ended December 31,
	2013		2012		2011
Current
Federal	$	2,032	$	1,557	$	6,261
State		37		38		29
Foreign		1,783		2,209		1,241
		3,852		3,804		7,531
Deferred
Federal		2,777		5,297		2,623
State		(469)		(257)		89
Foreign		897		974		841
		3,205		6,014		3,553
Income tax expense	$	7,057	$	9,818	$	11,084

The reconciliations between the Company’s income tax expense and the amounts computed by applying the U.S. federal income tax rate of 35.0% for the years ended December 31, 2013, 2012 and 2011 are as follows (in thousands):



	Year Ended December 31,
	2013		2012		2011
Computed expected tax expense	$	25,052	$	25,935	$	21,668
Increase (decrease) in income taxes resulting from:
Foreign tax differential		(19,046)		(17,294)		(11,919)
State income tax expense, net of federal income tax benefit		(514)		(66)		154
Subpart F income		1,255		1,404		851
Increase (decrease) in uncertain tax liabilities		124		(78)		185
Non-deductible stock-based compensation		92		86		68
Other		94		(169)		77
	$	7,057	$	9,818	$	11,084

As of December 31, 2013 the Company had $33.0 million and $7.3 million of net operating loss (NOL) carry forwards available to offset future foreign and state taxable income, respectively. The NOL carry forwards will begin to expire in 2017 and 2029 for foreign and state income tax purposes, respectively.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2013 and 2012 are presented below (in thousands):



	Year Ended December 31,
	2013		2012
Deferred tax assets:
Accounts receivable (owned fleet)	$	44	$	179
Accrued expenses and other current liabilities		105		78
State taxes		1		1
Unearned revenue		190		1,983
Stock-based compensation		1,777		1,540
Interest expense		8		6
Tax credits		4		8
Net operating loss carry forwards		1,488		1,562
Gross deferred tax assets		3,617		5,357

Deferred tax liabilities:
Intangible assets		112		296
Depreciation and amortization		37,131		36,817
Foreign deferred tax liabilities		3,325		3,222
Deferred subpart F income		4,087		2,832
Unrealized gain		29		52
Net deferred tax liability	$	41,067	$	37,862

The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company’s management considers the projected future taxable income for making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, the Company’s management believes it is more likely than not the Company will realize the benefits of the deductible differences noted above.

Deferred income taxes have not been provided on the undistributed earnings of foreign subsidiaries. As of December 31, 2013, the amount of such earnings totaled approximately $190.0 million. These earnings have been permanently reinvested and the Company does not plan to initiate any action that would precipitate the payment of income taxes thereon. The amount of income taxes that would have resulted had such earnings been repatriated is not practically determinable.

The Company is required to recognize in the financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company has elected to record penalties and interest associated with uncertain tax position within income tax expense. The Company accrues for unrecognized tax benefits based upon its best estimate of the additional taxes, interest and penalties expected to be paid. These estimates are updated over time as more definitive information becomes available from taxing authorities, completion of tax audits, expiration of statute of limitations, or upon occurrence of other events.

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



Balance at January 1, 2012	$	256
Increases related to prior year tax positions		7
Increases related to current year tax positions		31
Decreases related to lapsing of statute		(72)
Decreases related to settlement		(40)
Balance at December 31, 2012		182
Increases related to prior year tax positions		116
Increases related to current year tax positions		19
Decreases related to lapsing of statute		(9)
Decreases related to settlement		(168)
Balance at December 31, 2013	$	140

The unrecognized tax benefits of approximately $0.1 million at December 31, 2013, if recognized, would reduce the Company’s effective tax rate. The Company accrued potential interest and penalties of less than $0.1 million related to unrecognized tax benefits for each of the years ended December 31, 2013 and 2012. The Company does not believe the total amount of unrecognized tax benefit as of December 31, 2013 will increase or decrease significantly in the next twelve months.

The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. With few exceptions, as of December 31, 2013, the Company is no longer subject to U.S. federal, state, local or foreign examinations by tax authorities for years before 2009. In June 2013, the Company received notification from the IRS that they had completed their examination for both 2008 and 2009, making changes to taxable income for those years. The changes did not materially alter the Company’s income tax for those years.