Income Taxes

Income before income taxes from continuing operations attributable to CoreLogic is as follows for the years ended December 31, 2015, 2014 and 2013:



(in thousands)	2015					2014				2013
	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	$	155,345	$	23,790		$	86,195	$	22,988	$	94,744	$	43,022
Foreign	16,729		(970		)	19,196		—		11,881		795
Total	$	172,074	$	22,820		$	105,391	$	22,988	$	106,625	$	43,817

For the years ended December 31, 2015, 2014 and 2013, income before income taxes from 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, 2015, 2014 and 2013:



(in thousands)	2015				2014					2013
	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	$	17,108	$	7,910	$	186		$	7,603	$	19,294		$	14,083
State	2,166		1,190		2,137			1,265		(1,596		)	2,151
Foreign	3,394		—		3,249			—		2,006			222
	22,668		9,100		5,572			8,868		19,704			16,456
Deferred:
Federal	29,561		—		26,769			—		14,568			—
State	3,562		—		1,299			—		(273		)	—
Foreign	1,603		—		(3,870		)	—		(326		)	—
	34,726		—		24,198			—		13,969			—
Total income tax provision	$	57,394	$	9,100	$	29,770		$	8,868	$	33,673		$	16,456

A reconciliation of the provision for taxes based on the federal statutory income tax rate on income from continuing operations attributable to CoreLogic to our effective income tax rate is as follows for the years ended December 31, 2015, 2014 and 2013:



	2015				2014				2013
	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	3.4		3.4		6.2		3.6		4.0		3.2
Foreign taxes (less than) in excess of federal rate	0.4		1.5		(5.6	)	—		1.0		(0.6	)
Non-deductible expenses, including Separation-related	0.5		—		1.7		—		4.9		—
Change from investee to subsidiary	(2.5	)	—		—		—		(2.3	)	—
Change in uncertain tax positions	(0.7	)	—		1.3		—		2.7		—
Research and development credits	(2.6	)	—		(7.9	)	—		(10.2	)	—
Other items, net	(0.1	)	—		(2.5	)	—		(3.5	)	—
Effective income tax rate	33.4	%	39.9	%	28.2	%	38.6	%	31.6	%	37.6	%

We recorded income tax benefits of $4.5 million and $8.4 million during the years ended December 31, 2015 and 2014, respectively, related to domestic research and development credits.

As of December 31, 2015, we had an estimated $23.7 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, 2015 and 2014 are as follows:



(in thousands)	2015			2014
Deferred tax assets:
Net losses and credit carryforwards	$	92,537		$	98,633
Deferred revenue	132,359			137,090
Bad debt reserves	1,042			2,962
Employee benefits	46,586			47,414
Accrued expenses and loss reserves	32,796			29,791
Other	—			(989		)
Less: valuation allowance	(19,171		)	(21,912		)
	$	286,149		$	292,989
Deferred tax liabilities:
Depreciable and amortizable assets	279,435			247,458
Investment in affiliates	11,199			19,169
Other	4,658			—
	$	295,292		$	266,627
Net deferred tax (liability)/asset	$	(9,143	)	$	26,362

As of December 31, 2015 and 2014, we had federal net operating losses (“NOLS”) of $181.4 million and $195.5 million, respectively, which begin to expire in 2021. The state NOLS were $251.1 million and $289.4 million as December 31, 2015 and 2014, respectively, which begin to expire in 2016. The foreign NOLS were $12.8 million and $15.3 million as of December 31, 2015 and 2014, respectively. As of December 31, 2015 we had available federal capital losses of $20.0 million beginning to expire in 2017. As of December 31, 2015 we had available state capital losses of $87.9 million expiring at various times beginning in 2016. 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, 2015 and 2014, we had valuation allowances of approximately $19.2 million and $21.9 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 $2.7 million is primarily due to the release of a foreign valuation allowance from the emergence of cumulative losses in recent years and a return to sustainable operating profits, as well as projections of future taxable income.

Unrecognized Tax Benefits

A reconciliation of the unrecognized tax benefits for the years ended December 31, 2015, 2014 and 2013 are as follows:



(in thousands)	2015			2014			2013
Unrecognized tax benefits - opening balance	$	35,663		$	55,325		$	52,654
Gross increases - tax positions in prior period	13			2,950			—
Gross decreases - tax positions in prior period	(2,152		)	(22,698		)	—
Gross increases - current-period tax positions	896			651			2,671
Settlements with taxing authorities	(119		)	(565		)	—
Unrecognized tax benefits - ending balance	$	34,301		$	35,663		$	55,325

Included in the December 31, 2015 and 2014 balances are $13.3 million and $12.7 million, respectively, of unrecognized tax benefits that, if recognized, would have an impact on the effective tax rate. The remaining $21.5 million for the years ended December 31, 2015 and 2014 would be offset against FAFC receivable pursuant to the Tax Sharing Agreement entered in connection with the Separation and may have an impact to the effective tax rate depending upon the settlement of ongoing examination as discussed below.

We recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2015 and 2014, we had $17.3 million and $16.0 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, 2015, 2014 and 2013, we recognized approximately $0.2 million, $0.6 million and $0.8 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. Adequate amounts of tax and related interest and penalties, if any, have been provided for any adjustments that may result from these examinations.

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 $23.7 million within the next twelve months. The estimated change is primarily related to Internal Revenue Service audits, subject to the FAFC indemnification, of which approximately $21.5 million will have no impact to net income.