INCOME TAXES

The Company follows the provisions of the Financial Accounting Standards Codification 740 (“ASC 740”), “Income Taxes.” A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



	2015			2014			2013
Beginning of year	$	8,288,000		$	7,351,000		$	4,168,000
Additions based on tax positions related to the current year	1,765,000			1,328,000			1,595,000
Additions for tax positions in prior years	428,000			634,000			1,633,000
Reductions for tax positions in prior years	(336,000		)	(676,000		)	(45,000		)
Reductions as a result of completed audit examinations	(4,162,000		)	—			—
Reductions as a result of a lapse of the applicable statute of limitations	(608,000		)	(349,000		)	—
End of year	$	5,375,000		$	8,288,000		$	7,351,000

If recognized, unrecognized tax benefits would affect the effective tax rate.

The Company recognizes interest and penalties related to unrecognized tax benefits through the provision for income taxes. The Company has accrued approximately $325,000 and $821,000 for interest as of December 31, 2015 and 2014, respectively. Interest recorded during 2015, 2014 and 2013 was not considered significant.

The Company is also subject to periodic and routine audits in both domestic and foreign tax jurisdictions, and it is reasonably possible that the amounts of unrecognized tax benefits could change as a result of an audit.

Based on the current audits in process, the payment of taxes as a result of audit settlements, and the completion of tax examinations, the Company does not expect these to have a material impact on the Company’s financial position or results of operations.

For the majority of tax jurisdictions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2011.

In December 2015, the Protecting Americans from Tax Hikes (PATH) Act was signed into law and reinstated retroactively to January 1, 2015 for various tax provisions known as tax "extenders" that had expired as of December 31, 2014. In accordance with ASC 740-45-15, the effects of changes in tax rates and laws on deferred tax balances and tax rates are recognized in the period the new legislation is enacted. As a result, the impact of the new legislation is reflected in the Company's consolidated financial position and results of operations in the fourth quarter of 2015.

The provision for income taxes is based on the earnings reported in the accompanying consolidated financial statements. The Company recognizes deferred income tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred income tax liabilities and assets are determined based on the cumulative temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates. Deferred income tax expense is measured by the net change in deferred income tax assets and liabilities during the year.

The foreign components of income before the provision for income taxes were not material as of December 31, 2015, 2014 and 2013. The components of the provision for income taxes are as follows:



	2015		2014		2013
Currently payable:
Federal	$	129,379,597	$	108,689,911	$	95,285,094
State	2,908,000		2,236,000		3,259,000
Foreign	276,000		978,000		1,353,000
Total	132,563,597		111,903,911		99,897,094
Net deferred:
Primarily federal	12,558,000		14,818,000		5,237,000
Provision for income taxes	$	145,121,597	$	126,721,911	$	105,134,094

The currently payable provision is further reduced by the tax benefits associated with the exercise, vesting or disposition of stock under the stock plans described in Note 5. These reductions totaled approximately $5.0 million, $10.8 million and $7.4 million in 2015, 2014 and 2013, respectively, and were recognized as an adjustment of additional paid-in capital.

The effective income tax rates are different from the statutory federal income tax rates for the following reasons:



	2015		2014		2013
Statutory federal income tax rate	35.00	%	35.00	%	35.0	%
State income taxes, net of federal income tax benefit	0.40		0.30		0.6
Domestic production exclusion	(2.80	)	(2.60	)	(3.1	)
Research tax credit ⁽¹⁾	(0.80	)	(2.00	)	(0.4	)
Reduction in Reserve for Uncertain Tax Provisions	(0.60	)	—		—
Other	0.10		(0.20	)	(0.1	)
Effective income tax rate	31.30	%	30.50	%	32.0	%

⁽¹⁾ - Research tax credits applied in 2014 related to prior tax year amended tax filings were approximately 1.3 percentage points of the 2 percentage point reduction in the effective income tax rate.

The tax effect of temporary differences which give rise to deferred income tax assets and liabilities at December 31, 2015 and 2014, are as follows:



	2015						2014
	Current			Non-Current			Current			Non-Current
Assets:
Accruals not currently deductible	$	3,890,858		$	266,802		$	2,605,711		$	224,803
Stock based compensation	16,636,615			3,723,490			13,508,845			2,508,304
Impairment loss on available-for-sale securities	—			73,954			—			135,724
Other	3,839,115			15,755			4,440,407			19,765
Total deferred income tax assets	24,366,588			4,080,001			20,554,963			2,888,596
Liabilities:
Excess tax over book depreciation	—			(53,538,861		)	—			(46,017,949		)
Goodwill	—			(16,047,068		)	—			(8,868,168		)
Unrealized gain on investments	—			(961,980		)	—			(6,368,670		)
Intangible assets	—			(3,056,712		)	—			(1,205,230		)
Other	(2,114,430		)	—			(1,117,956		)	—
Net deferred income taxes	$	22,252,158		$	(69,524,620	)	$	19,437,007		$	(59,571,421	)

Income taxes paid in cash were approximately $138.0 million, $128.8 million and $97.1 million in 2015, 2014 and 2013, respectively.

No provision has been made for U.S. Federal and State income taxes on foreign taxes that may result from remittances of undistributed earnings of foreign subsidiaries as of December 31, 2015, 2014 and 2013. The Company expects such earnings will remain reinvested in those foreign subsidiaries indefinitely. Undistributed foreign earnings were not material as of December 31, 2015, 2014 and 2013.