Income Taxes

Income before income taxes from continuing operations is as follows for the years ended December 31, 2014, 2013 and 2012:



	2014				2013				2012
	Continuing Operations Attributable to CoreLogic		Equity In Earnings of Affiliates		Continuing Operations Attributable to CoreLogic		Equity In Earnings of Affiliates		Continuing Operations Attributable to CoreLogic			Equity In Earnings of Affiliates
United States	$	86,195	$	22,988	$	94,744	$	43,022	$	125,644		$	56,928
Foreign	19,196		—		11,881		795		(2,074		)	1,153
Total	$	105,391	$	22,988	$	106,625	$	43,817	$	123,570		$	58,081

For the years ended December 31, 2014, 2013 and 2012, income on continuing operations attributable to Corelogic includes income of certain incorporated noncontrolling interests.

Provision for Income Taxes

The provision for taxes consists of the following for the years ended December 31, 2014, 2013 and 2012:



(in thousands)	2014					2013					2012
	Continuing Operations Attributable to CoreLogic			Equity In Earnings of Affiliates		Continuing Operations Attributable to CoreLogic			Equity In Earnings of Affiliates		Continuing Operations Attributable to CoreLogic			Equity In Earnings of Affiliates
Current:
Federal	$	186		$	7,603	$	19,294		$	14,083	$	23,574		$	18,929
State	2,137			1,265		(1,596		)	2,151		5,389			2,846
Foreign	3,249			—		2,006			222		(3,358		)	323
	5,572			8,868		19,704			16,456		25,605			22,098
Deferred:
Federal	26,769			—		14,568			—		25,530			—
State	1,299			—		(273		)	—		2,658			—
Foreign	(3,870		)	—		(326		)	—		9,695			—
	24,198			—		13,969			—		37,883			—
Total income tax provision	$	29,770		$	8,868	$	33,673		$	16,456	$	63,488		$	22,098

A reconciliation of the provision for taxes based on the federal statutory income tax rate on income from continuing operations to our effective income tax rate is as follows for the years ended December 31, 2014, 2013 and 2012:



(in thousands)	2014				2013				2012
	Continuing Operations Attributable to CoreLogic		Equity In Earnings of Affiliates		Continuing Operations Attributable to CoreLogic		Equity In Earnings of Affiliates		Continuing Operations Attributable to CoreLogic		Equity In Earnings of Affiliates
Federal statutory income tax rate	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	6.2		3.6		4.0		3.2		6.1		3.2
Foreign taxes (less than) in excess of federal rate	(5.6	)	—		1.0		(0.6	)	5.0		(0.1	)
Non-deductible expenses, including Separation-related	1.7		—		4.9		—		0.3		—
Gain on disposition of subsidiary	—		—		—		—		—		—
Change from investee to subsidiary	—		—		(2.3	)	—		—		—
Change in uncertain tax positions	1.3		—		2.7		—		0.1		—
Research and development credits	(7.9	)	—		(10.2	)	—		—		—
Other items, net	(2.5	)	—		(3.5	)	—		4.9		—
Effective income tax rate	28.2	%	38.6	%	31.6	%	37.6	%	51.4	%	38.1	%

During the year ended December 31, 2014, we recorded income tax benefits of $8.4 million related to domestic research and development credits related to tax years 2013 and 2014.

As of December 31, 2014, we had an estimated $13.2 million of undistributed earnings from foreign subsidiaries that are intended to be indefinitely reinvested in foreign operations. No incremental U.S. tax has been provided for these earnings. If in the future these earnings are repatriated to the U.S., or if we determine that the earnings will be remitted in the foreseeable future, additional tax provisions may be required. It is not practicable to calculate the deferred taxes associated with those earnings because of the variability of multiple factors that would need to be assessed at the time of assumed repatriation; however, foreign tax credits may be available to reduce federal income taxes in the event of distribution.

Deferred Tax Assets and Liabilities

Deferred income taxes arise from temporary differences between financial reporting and tax reporting bases of assets and liabilities, and operating loss and tax credit carryforwards for tax purposes. The components of the deferred income tax assets and liabilities as of December 31, 2014 and 2013 are as follows:



(in thousands)	2014			2013
Deferred tax assets:
Net losses and credit carryforwards	$	98,633		$	41,582
Deferred revenue	137,090			115,850
Bad debt reserves	2,962			5,205
Employee benefits	47,414			48,646
Accrued expenses and loss reserves	29,791			29,976
Other	(989		)	324
Less: valuation allowance	(21,912		)	(24,173		)
	$	292,989		$	217,410
Deferred tax liabilities:
Depreciable and amortizable assets	247,458			190,905
Investment in affiliates	19,169			16,985
	$	266,627		$	207,890
Net deferred tax asset	$	26,362		$	9,520

As of December 31, 2014 and 2013, we had federal net operating losses (“NOLS”) of $195.5 million and $55.0 million, respectively, which begin to expire in 2021. The state NOLS were $289.4 million and $94.8 million as December 31, 2014 and 2013, respectively, which begin to expire in 2015. The foreign NOLS were $15.3 million and $25.4 million as of December 31, 2014 and 2013, respectively, of which approximately $2.2 million have an indefinite expiration and the remainder begin to expire in 2015. The increase in the federal and state NOLS was primarily due to the acquisition of MSB/DataQuick. As of December 31, 2014 we had available federal capital losses of $19.4 million expiring in 2017. As of December 31, 2014 we had available state capital losses of $87.2 million expiring at various times beginning in 2015. The change of ownership provisions of the Tax Reform Act of 1986 may limit utilization of a portion of our domestic NOL and tax credit carryforwards to future periods. Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities.

As of December 31, 2014 and 2013, we had valuation allowances of approximately $21.9 million and $24.2 million, respectively, against certain U.S. and foreign deferred tax assets to reflect the deferred tax asset at the net amount that is more likely than not to be realized. The decrease in the valuation allowance recorded of approximately $2.3 million is primarily an offset to foreign deferred tax assets, which we believe is more likely than not that future taxable income will be sufficient to realize.

Unrecognized Tax Benefits

A reconciliation of the unrecognized tax benefits for the years ended December 31, 2014, 2013 and 2012 are as follows:



(in thousands)	2014			2013		2012
Unrecognized tax benefits - opening balance	$	55,325		$	52,654	$	19,302
Gross increases - tax positions in prior period	2,950			—		33,787
Gross decreases - tax positions in prior period	(22,698		)	—		(21		)
Gross increases - current-period tax positions	651			2,671		—
Settlements with taxing authorities	(565		)	—		(163		)
Expiration of the statute of limitations for the assessment of taxes	—			—		(251		)
Unrecognized tax benefits - ending balance	$	35,663		$	55,325	$	52,654

Included in the December 31, 2014 and 2013 balances are $12.7 million and $11.2 million, respectively, of unrecognized tax benefits that, if recognized, would have an impact on the effective tax rate. The remaining $21.5 million and $44.1 million for the years ended December 31, 2014 and 2013, respectively, would be offset against FAFC receivable pursuant to the Tax Sharing Agreement entered in connection with the Separation. In addition, our reserves increased by $1.9 million due to our acquisition of MSB/DataQuick, which were presented as a reduction to deferred tax assets for net operating loss carry forwards.

We recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2014 and 2013, we had $16.0 million and $9.1 million, respectively, accrued for the payment of interest and penalties. These balances are gross amounts before any tax benefits and are included in other liabilities in the accompanying consolidated balance sheets. For the years ended December 31, 2014, 2013 and 2012, we recognized approximately $0.6 million, $0.8 million and $0.6 million, respectively in interest and penalties, in the accompanying consolidated statements of income. Our material tax jurisdiction is the U.S. With a few minor exceptions, we are no longer subject to U.S. federal, state, local, or foreign income tax examinations by tax authorities for years prior to December 31, 2006. Our income tax returns, in several jurisdictions, are being examined by various tax authorities. Management believes that adequate amounts of tax and related interest and penalties, if any, have been provided for any adjustments that may result from these examinations.

During the year ended December 31, 2014, we effectively settled our 2007-2010 Internal Revenue Service ("IRS") exam, which resulted in a reversal of approximately $0.3 million in unrecognized tax benefits. The decrease in our reserves for uncertain tax positions relates primarily to the settlement of the claim, on our behalf by FAFC, for an uncertain tax position on a prior year tax return. The claim is for FAFC losses reported and is subject to indemnification from FAFC under the Tax Sharing Agreement. As of December 31, 2014, the liability was reduced by approximately $29.6 million of which the impact to net income was zero.

We are currently under examination for the tax years 2005 through 2011 by the U.S. and various taxing authorities. It is reasonably possible the amount of the unrecognized benefit with respect to certain unrecognized positions could significantly increase or decrease within the next twelve months. We estimate that unrecognized tax benefits could decrease by up to $21.6 million within the next twelve months. The estimated change is primarily related to IRS audits, subject to the FAFC indemnification, and will have no impact to net income.