NOTE 19. INCOME TAXES

The domestic and foreign components of income before provision for income taxes are as follows (in thousands):


				Year ended June 30,
		2013		2012		2011
Domestic	$	231,342	$	263,790	$	215,200
Foreign		12,694		11,201		12,123
Income before income taxes	$	244,036	$	274,991	$	227,323

The components of income tax expense are as follows (in thousands):


					Year ended June 30,
		2013			2012		2011
Current:
Federal	$	47,038		$	76,874	$	59,095
State and local		10,767			16,678		13,578
Foreign		3,440			3,332		2,845
Total current		61,245			96,884		75,518
Deferred:
Federal		26,218			9,000		6,175
State and local		5,313			1,458		1,194
Foreign		(429	)		195		218
Total deferred		31,102			10,653		7,587
Total income tax expense	$	92,347		$	107,537	$	83,105

Income tax expense differs from the amounts computed by applying the statutory U.S. income tax rate of 35 percent as a result of the following (in thousands):


					Year ended June 30,
		2013			2012			2011
Expected tax expense computed at federal rate	$	85,413		$	96,247		$	79,563
State and local taxes, net of federal benefit		10,452			11,788			9,602
(Nonincludible) nondeductible items		(929	)		2,424			(1,735	)
Incremental effect of foreign tax rates		(1,376	)		(1,026	)		(914	)
Other		(1,213	)		(1,896	)		(3,411	)
Total income tax expense	$	92,347		$	107,537		$	83,105

The tax effects of temporary differences that give rise to deferred taxes are presented below (in thousands):


		June 30,
		2013			2012
Deferred tax assets:
Deferred compensation and post-retirement obligations	$	34,597		$	31,880
Reserves and accruals		27,640			28,289
Stock-based compensation		13,409			26,682
Deferred rent		3,522			3,130
Original issue discount related to the Notes		177			486
Other		7,723			4,427
Total deferred tax assets		87,068			94,894
Deferred tax liabilities:
Goodwill and other intangible assets		(162,739	)		(143,616	)
Unbilled revenue		(11,583	)		(9,448	)
Prepaid expenses		(4,638	)		(4,313	)
Other		(9,040	)		(7,184	)
Total deferred tax liabilities		(188,000	)		(164,561	)
Net deferred tax liability	$	(100,932	)	$	(69,667	)

The Company is subject to income taxes in the U.S. and various state and foreign jurisdictions. Tax statutes and regulations within each jurisdiction are subject to interpretation and require the application of significant judgment. The Company's consolidated federal income tax returns through June 30, 2009 are no longer subject to audit. The Company is currently under examination by four state jurisdictions and one foreign jurisdiction for years ended June 30, 2004 through June 30, 2011. The Company does not expect the resolution of these examinations to have a material impact on its results of operations, financial condition or cash flows.

During the years ended June 30, 2013 and June 30, 2012, the Company's income tax expense was favorably impacted by non-taxable gains on assets invested in corporate-owned life insurance (COLI) policies, and tax benefits related to deductions claimed for income from domestic production activities.

In connection with the issuance of the Notes referred to in Note 13, there was original issue discount (OID) created for income tax purposes. Over the term of the Notes, this OID will generate additional interest expense for income tax reporting purposes.

U.S. income taxes have not been provided for with respect to undistributed earnings of foreign subsidiaries that have been permanently reinvested outside the United States. As of June 30, 2013, the estimated deferred liability associated with these undistributed earnings is approximately $7.1 million.

The Company's total liability for unrecognized tax benefits as of June 30, 2013, 2012 and 2011 was $8.2 million, $7.0 million and $5.9 million, respectively. Of the $8.2 million unrecognized tax benefit at June 30, 2013, $2.6 million, if recognized, would impact the Company's effective tax rate. A reconciliation of the beginning and ending amount of unrecognized benefits is shown in the table below (in thousands):


					Year ended June 30,
		2013			2012			2011
Beginning of year	$	7,013		$	5,897		$	5,189
Additions based on current year tax positions		1,261			1,181			2,711
Reductions based on prior year tax positions		—			—			(2,003	)
Lapse of statute of limitations		(90	)		(65	)		—
End of year	$	8,184		$	7,013		$	5,897

The Company recognizes net interest and penalties as a component of income tax expense. During the year ended June 30, 2012, the Company's income tax expense was reduced by $0.3 million, related to interest earned in connection with amended returns and carryback claims filed by the Company related to prior years. Over the next 12 months, the Company does not expect a significant increase or decrease in the unrecognized tax benefits recorded at June 30, 2013. As of June 30, 2013, $7.5 million of the unrecognized tax benefits are included in other long-term liabilities, with the remainder included in other balance sheet accounts.