Income Taxes

Income tax expense (benefit) for 2016, 2015 and 2014 consists of the following:



	For the Years Ended
(In thousands)	2016			2015			2014

Current:
Federal	$	252,795		$	140,921		$	114,508
State	31,642			18,647			13,504
Foreign	9,030			17,205			13,824
Total current expense	293,467			176,773			141,836
Deferred:
Federal	(18,014		)	60,015			95,057
State	(2,103		)	5,680			8,873
Foreign	8,600			(450		)	2,975
Total deferred expense (benefit)	(11,517		)	65,245			106,905

Total income tax expense	$	281,950		$	242,018		$	248,741

Temporary differences between the financial statement carrying amounts and tax basis of assets and liabilities that give rise to significant portions of deferred income taxes at the end of 2016 and 2015 relate to the following:



(In thousands)	2016			2015

Deferred tax assets:
Accrued expenses	$	25,454		$	27,555
Tax credits and separate return net operating losses	27,762			29,265
Share based compensation	81,133			69,555
Contract and service revenues and costs	59,217			—
Other	9,723			16,334
Total deferred tax assets	203,289			142,709

Deferred tax liabilities:
Software development costs	(275,888		)	(216,435		)
Depreciation and amortization	(133,424		)	(133,242		)
Prepaid expenses	(30,255		)	(25,655		)
Contract and service revenues and costs	—			(10,684		)
Other	(3,050		)	(3,589		)
Total deferred tax liabilities	(442,617		)	(389,605		)

Net deferred tax liability	$	(239,328	)	$	(246,896	)

At the end of 2016, we had net operating loss carry-forwards subject to Section 382 of the Internal Revenue Code for U.S. federal income tax purposes of $4 million that are available to offset future U.S. federal taxable income, if any, through 2020. We had net operating loss carry-forwards from foreign jurisdictions of $37 million that are available to offset future taxable income with no expiration. We had a deferred tax asset for state net operating loss carry-forwards of $1 million which are available to offset future taxable income, if any, through 2034. In addition, we have a state income tax credit carry-forward of $13 million available to offset income tax liabilities through 2030, and a foreign jurisdiction tax credit carry-forward available to offset future tax liabilities of $1 million through 2027. We expect to fully utilize the net operating loss and tax credit carry-forwards in future periods.

At the end of 2016, we had not provided tax on the cumulative undistributed earnings of our foreign subsidiaries of approximately $111 million, because it is our intention to reinvest these earnings indefinitely. If these earnings were distributed, we would be subject to U.S. federal and state income taxes and foreign withholding taxes, net of U.S. foreign tax credits which may be available. The calculation of this unrecognized deferred tax liability is complex and not practicable.

The effective income tax rates for 2016, 2015, and 2014 were 31%, 31%, and 32%, respectively. These effective rates differ from the U.S. federal statutory rate of 35% as follows:



	For the Years Ended
(In thousands)	2016			2015			2014

Tax expense at statutory rates	$	321,452		$	273,483		$	270,961
State income tax, net of federal benefit	22,644			16,129			19,301
Tax credits	(23,881		)	(20,681		)	(19,469		)
Foreign rate differential	(16,468		)	(14,821		)	(13,057		)
Permanent differences	(20,330		)	(14,314		)	(12,253		)
Other, net	(1,467		)	2,222			3,258

Total income tax expense	$	281,950		$	242,018		$	248,741

A reconciliation of the beginning and ending amount of unrecognized tax benefit is presented below:



(In thousands)	2016			2015			2014

Unrecognized tax benefit - beginning balance	$	4,878		$	7,202		$	2,100
Gross decreases - tax positions in prior periods	—			(4,323		)	(804		)
Gross increases - tax positions in prior periods	—			690			5,906
Gross increases - tax positions in current year	6,945			2,824			—
Settlements	(1,859		)	(1,299		)	—
Currency translation	(195		)	(216		)	—

Unrecognized tax benefit - ending balance	$	9,769		$	4,878		$	7,202

If recognized, $6 million of the unrecognized tax benefit will favorably impact our effective tax rate. We do not anticipate that our unrecognized tax benefits will decrease significantly within the next twelve months. During 2016, we filed amended federal returns for 2011, 2012 and 2013. Our 2011 through 2014 federal returns are currently under examination by the Internal Revenue Service. We have various state and foreign returns under examination.

The ending amounts of accrued interest and penalties related to unrecognized tax benefits were less than $1 million in 2016 and $1 million in 2015. We classify interest and penalties as income tax expense in our consolidated statement of operations.

The foreign portion of our earnings before income taxes was $86 million, $83 million, and $68 million in 2016, 2015, and 2014 respectively, and the remaining portion was domestic.