Income Taxes

The components of income before income taxes and income tax expense for the years ended December 31, 2014, 2013 and 2012 are as follows (in thousands):



	Years ended December 31,
	2014			2013			2012
Income before income taxes:
Domestic	$	38,359		$	31,738		$	27,827
Foreign	4,464			6,750			7,975
Total income before income taxes	$	42,823		$	38,488		$	35,802

Income tax expense (benefit):
Current:
Federal	$	11,799		$	10,348		$	7,846
State and local	2,600			2,130			1,653
Foreign	1,439			2,539			2,899
Total current	15,838			15,017			12,398
Deferred:
Federal	(9		)	226			856
State and local	(23		)	159			236
Foreign	(81		)	(670		)	(376		)
Total deferred	(113		)	(285		)	716
Total income tax expense	$	15,725		$	14,732		$	13,114

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. The sources and tax effects of the differences are as follows:



	December 31,
	2014		2013		2012
Federal income tax rate	35.0	%	35.0	%	35.0	%
State and local taxes net of federal benefit	4.3		3.9		3.4
Domestic production deduction	(3.7	)	—		—
Foreign tax rate differential	(0.2	)	(1.4	)	(0.1	)
Permanent differences	2.0		1.5		1.9
Reduction of uncertain tax position liabilities	—		—		(4.5	)
Other	(0.7	)	(0.7	)	0.9
Effective tax rate	36.7	%	38.3	%	36.6	%

The decrease in the effective income tax rate during 2014 compared to 2013 is primarily due to an increase in benefits from the Domestic Production Deduction available under Internal Revenue Code (IRC) Section 199 which was not taken in previous years. During the third and fourth quarters of 2014, we completed a study to determine the Company's qualifying activities under IRC Section 199. As a result, we recorded income tax benefits totaling $0.9 million resulting from a claim for the Domestic Production Deduction on our 2013 U.S. Federal income tax return, and similar claims we expect to make for tax years 2011 and 2012.

Uncertain Tax Positions

As of December 31, 2014 and 2013, we had no uncertain tax positions reflected on our consolidated balance sheet. In 2012, we recognized an income tax benefit of $1.6 million on the reduction of an uncertain tax position liability relating to a prior tax deduction that is now outside the applicable statute of limitations. The income tax benefit included a $1.4 million reduction in the uncertain tax position liability and the reversal of $0.2 million of accrued interest and penalties.

We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. For the years ended December 31, 2014, 2013 and 2012, we recognized $0, $0 and $(0.2) million, respectively, of interest expense (income) related to these tax positions which is reflected within income tax expense in the consolidated statements of operations. The Company files income tax returns in U.S. federal, state and local jurisdictions, and various non-U.S. jurisdictions, and is subject to audit by tax authorities in those jurisdictions. Tax years 2010 through 2013 remain open to examination by these tax jurisdictions, and earlier years remain open to examination in certain of these jurisdictions which have longer statutes of limitations.

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest, is as follows (in thousands):



	Years ended December 31,
	2014		2013		2012
Unrecognized tax benefits at beginning of the year	$	—	$	—	$	1,418
Additions related to current year tax positions	—		—		—
Additions related to prior year tax positions	—		—		—
Settlements	—		—		—
Reductions due to lapse of statute of limitations	—		—		(1,418		)
Unrecognized tax benefits at end of the year	$	—	$	—	$	—

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Significant components of the our deferred tax assets and liabilities are as follows (in thousands):



	December 31,
	2014			2013
Deferred tax assets:
Allowance for doubtful accounts	$	704		$	508
Accrued liabilities and other	1,882			1,787
Stock-based compensation expense	391			629
Net federal, state and foreign operating loss carryforwards	1,375			922
Deferred tax assets	4,352			3,846
Valuation allowance on deferred tax assets	(1,247		)	(584		)
Deferred tax liabilities:
Intangible assets, property and equipment, principally due to difference in depreciation and amortization	7,939			7,677
Net deferred tax liabilities	$	(4,834	)	$	(4,415	)

As of December 31, 2014, we had foreign net operating loss carryforwards of $6.2 million for tax purposes, which will be available to offset future taxable income. If not used, these carryforwards will expire beginning in 2018.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets may not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon these factors, management placed a valuation allowance of $1.2 million and $0.6 million as of December 31, 2014 and 2013, respectively, against certain deferred tax assets, including net operating loss carryforwards, due to the uncertainty of future profitability in foreign jurisdictions. Management believes it is more likely than not that the Company will realize the benefits of the remaining deferred tax assets.

Foreign Income

As of December 31, 2014, we had approximately $25.2 million of accumulated undistributed earnings generated by our foreign subsidiaries. No provision has been made for income taxes that would be payable upon the distribution of such earnings since we intend to permanently reinvest these earnings. If these earnings were distributed in the form of dividends or otherwise, the distributions would be subject to U.S. federal income tax at the statutory rate of 35 percent, less foreign tax credits available to offset such distributions, if any. In addition, such distributions may be subject to withholding taxes in the various tax jurisdictions. Determination of the deferred income tax liability on undistributed earnings is not practicable due the complexities associated with calculating a liability which is dependent on future circumstances existing if and when a distribution occurs.