NOTE 24 – Income Taxes

The provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2015			2014			2013
Current taxes:
Federal	$	43,962		$	100,262		$	26,695
State		9,672			21,835			9,954
Foreign		1,329			(1,831	)		365
		54,963			120,266			37,014
Deferred taxes:
Federal		(9,396	)		(275	)		(20,724	)
State		3,056			(8,064	)		(2,000	)
Foreign		608			(263	)		(1,968	)
		(5,732	)		(8,602	)		(24,692	)
Provision for income taxes	$	49,231		$	111,664		$	12,322

Reconciliation of the statutory federal income tax rate with our company’s effective income tax rate is as follows:

	Year Ended December 31,
	2015			2014			2013
Statutory rate	$	49,548		$	101,778		$	64,831
State income taxes, net of federal income tax		7,908			14,860			11,433
Change in valuation allowance		535			(2,433	)		1,659
Provision to return		904			(2,956	)		(3,003	)
Investment in subsidiary		(4,800	)		—			(58,153	)
Change in uncertain tax position		(3,903	)		276			(2,956	)
Non-taxable book gain		—			—			(2,647	)
Revaluation of deferred taxes		—			—			(2,290	)
Other, net		(961	)		139			3,448
	$	49,231		$	111,664		$	12,322

Tax effect of temporary differences and carryforwards that comprise significant portions of deferred tax assets and liabilities (in thousands):

	December 31,
	2015			2014
Deferred tax assets:
Deferred compensation	$	173,759		$	161,972
Net operating loss carryforwards		48,831			50,251
Accrued expenses		65,451			37,673
Unrealized loss on investments		27,769			35,855
Depreciation		10,055			13,306
Receivable reserves		16,343			10,595
Investment and jobs creation credit		-			350
Total deferred tax assets		342,208			310,002
Valuation allowance		(12,738	)		(7,385	)
		329,470			302,617
Deferred tax liabilities:
Goodwill and other intangibles		(33,437	)		(24,346	)
Change in accounting method		(625	)		(12,270	)
Prepaid expenses		(4,211	)		(3,602	)
Other		(6,070	)		(4,257	)
		(44,343	)		(44,475	)
Net deferred tax asset	$	285,127		$	258,142

Our net deferred tax asset at December 31, 2015, includes net operating loss carryforwards of $77.4 million that expire between 2016 and 2035. A valuation allowance is recorded to the extent that it is more likely than not that any portion of the deferred tax asset will not be realized. The valuation allowance was increased by $5.4 million to adjust the tax benefit of certain state tax credits and foreign net operating losses that we have determined is more likely than not realizable. We believe the realization of the remaining net deferred tax asset of $285.1 million is more likely than not based on the ability to carry back losses against prior year taxable income and expectations of future taxable income.

The current tax payable, included in accounts payable and accrued expenses, is a receivable of $1.0 million and a payable of $31.3 million as of December 31, 2015 and 2014, respectively.

We have recorded income tax expense at U.S. tax rates on all profits, except for undistributed profits of our foreign subsidiaries that are considered indefinitely reinvested. Determination of the amount of unrecognized deferred tax liability related to indefinitely reinvested profits is not feasible. If management’s intentions or U.S. tax laws change in the future, there may be a significant impact on the provision for income taxes to record a change in the tax liability in the period the change occurs.

Uncertain Tax Positions

As of December 31, 2015 and 2014, we had $2.7 million and $5.5 million, respectively, of gross unrecognized tax benefits, all of which, if recognized, would impact the effective tax rate. We recognize interest and penalties related to uncertain tax positions in provision for income taxes/(benefits) in the consolidated statements of operations. As of December 31, 2015 and 2014, we had accrued interest and penalties of $0.8 million and $1.2 million, respectively, before benefit of federal tax deduction, included in accounts payable and accrued expenses on our consolidated statements of financial condition. The amount of interest and penalties recognized on our consolidated statements of operations for the years ended December 31, 2015, 2014, and 2013 was not significant.

The following table summarizes the activity related to our company’s unrecognized tax benefits from January 1, 2013 to December 31, 2015 (in thousands):

	Year Ended December 31,
	2015			2014			2013
Beginning balance	$	5,510		$	5,158		$	1,750
Increase related to prior year tax positions		1,206			627			3,044
Decrease related to prior year tax positions		(33	)		(443	)		(40	)
Increase related to current year tax positions		-			294			133
Decrease related to settlements with taxing authorities		(4,815	)		(126	)		(6,086	)
Decrease related to lapsing of statute of limitations		—			—			(356	)
Increase related to business acquisitions		849			—			6,713
Ending balance	$	2,717		$	5,510		$	5,158

We file income tax returns with the U.S. federal jurisdiction, various states, and certain foreign jurisdictions. We are not subject to U.S. federal examination for taxable years before 2011. We are not subject to certain state and local, or non-U.S. income tax examinations for taxable years before 2008.

There is a reasonable possibility that the unrecognized tax benefits will change within the next 12 months as a result of the expiration of various statutes of limitations or for the resolution of U.S. federal and state examinations, but we do not expect this change to be material to the consolidated financial statements.