(8) Income Taxes

The components of income before income taxes and income tax expense for the years ended December 31, 2013, 2012 and 2011 are as follows (in thousands):

	Years ended December 31,
	2013		2012		2011
Income before income taxes:
Domestic	$	31,738	$	27,827	$	21,976
Foreign		6,750		7,975		6,415
Total income before income taxes	$	38,488	$	35,802	$	28,391

Income tax expense:
Current:
Federal	$	10,348	$	7,846	$	6,869
State and local		2,130		1,653		1,750
Foreign		2,539		2,899		1,765
Total current		15,017		12,398		10,384
Deferred:
Federal		226		856		310
State and local		159		236		48
Foreign		(670)		(376)		(211)
Total deferred		(285)		716		147
Total income tax expense	$	14,732	$	13,114	$	10,531

The difference between the expense for income tax expense computed at the statutory rate and the reported amount of income tax expense is as follows:

	December 31,
	2013		2012		2011
Federal income tax rate	35.0	%	35.0	%	35.0	%
State and local taxes net of federal benefit	3.9		3.4		4.1
Foreign taxes	(1.4)		(0.1)		(1.2)
Permanent differences	1.5		1.9		2.1
Valuation allowance adjustments	—		—		0.1
Reduction of uncertain tax position liabilities	—		(4.5)		(3.1)
Other	(0.7)		0.9		0.1

Effective tax rate	38.3	%	36.6	%	37.1	%

Uncertain Tax Positions

During the third quarter of 2012, we recognized an income tax benefit of $1,602,000 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 $1,418,000 reduction in the uncertain tax position liability and the reversal of $184,000 of accrued interest and penalties. During the fourth quarter of 2011, we recognized an income tax benefit of $891,000 on the reduction of an uncertain tax position liability relating to a period that is outside the applicable statute of limitations. The income tax benefit included an $800,000 reduction in the uncertain tax position liability and the reversal of $91,000 of accrued interest and penalties. Excluding the impact of these income tax benefits in both years, our effective income tax rate was 41.1% and 40.2% for the years ended December 31, 2012 and 2011, respectively. As of December 31, 2013 and 2012, we had no uncertain tax positions reflected on our consolidated balance sheet.

We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. For the years ended December 31, 2013, 2012 and 2011, we recognized $0, $(160,000) and $(6,000), respectively, of interest expense (income) related to these tax positions which is reflected within income tax expense in the consolidated statements of operations. We and our subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. We are no longer subject to U.S. federal, state and local, or non-U.S. income tax examination by tax authorities for years prior to 2009.

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

	Years ended December 31,
	2012		2011
Unrecognized tax benefits at beginning of the year	$	1,418	$	2,218
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)		(800)
Unrecognized tax benefits at end of the year	$	—	$	1,418

Deferred Income Taxes

The tax effects of temporary differences between the financial reporting and tax basis of assets and liabilities that are included in the net deferred tax assets and liabilities are summarized as follows (in thousands):

	December 31,
	2013		2012
Deferred tax assets:
Allowance for doubtful accounts	$	508	$	492
Accrued liabilities		1,787		1,131
Stock-based compensation expense		629		499
Net federal, state and foreign operating loss carryforwards		922		288
Deferred tax assets		3,846		2,410
Deferred tax liabilities:
Intangible assets, property and equipment, principally due to difference in depreciation and amortization		7,677		6,990
Net deferred tax liabilities		(3,831)		(4,580)
Less valuation allowance		(584)		(263)
Net deferred tax liabilities, net of valuation allowance	$	(4,415)	$	(4,843)

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 believes it is more likely than not that the Company will realize the benefits of deferred tax assets, net of the valuation allowance.

As of December 31, 2013, we had utilized all of our available credit carryovers for Federal tax purposes. In addition, as of December 31, 2013, we had foreign net operating loss carryforwards of $886,000 which expire in 2014 and beyond. There is a valuation allowance of $584,000 against the foreign net operating loss carryforwards due to the uncertainty of future profitability in foreign jurisdictions.

Foreign Income

As of December 31, 2013, we had approximately $27,890,000 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.