13. INCOME TAXES

The components of income before income taxes for the years ended December 31, 2013, 2014 and 2015 are as follows (in thousands):


	2013		2014		2015
Domestic	$	13,697	$	57,767	$	50,563
Foreign		32,776		28,401		5,638
Total	$	46,473	$	86,168	$	56,201

The following is a reconciliation from the tax computed at statutory income tax rates to the Company’s income tax expense for the years ended December 31, 2013, 2014, and 2015 (in thousands):


	2013		2014		2015
Tax computed at statutory U.S. federal income tax rates	$	16,270	$	30,160	$	19,652
Non-controlling interest		(2,750)		(1,229)		(2,807)
Income taxes in excess (below) statutory U.S. tax rates:
Guyana		701		(284)		379
Bermuda and Turks & Caicos		(3,203)		(4,712)		1,704
Turks & Caicos intercompany note receivable write-down		(8,572)		—		—
Foreign tax reserve		2,081		2,095		2,468
State taxes		400		1,252		935
Change in valuation allowance		(476)		(2,548)		(5,949)
Foreign tax credit expiration		1,820		2,999		6,396
Other, net		3,265		415		1,359
Income tax expense	$	9,536	$	28,148	$	24,137

The components of income tax expense (benefit) for the years ended December 31, 2013, 2014 and 2015 are as follows (in thousands):

\
	2013		2014		2015
Current:
United States—Federal	$	1,703	$	14,761	$	(1,308)
United States—State		895		1,347		(383)
Foreign		11,787		12,153		7,959
Total current income tax expense	$	14,385	$	28,261	$	6,268
Deferred:
United States—Federal	$	(5,273)	$	5,205	$	16,760
United States—State		169		466		1,636
Foreign		255		(5,784)		(527)
Total deferred income tax expense (benefit)		(4,849)		(113)		17,869
Consolidated:
United States—Federal	$	(3,570)	$	19,966	$	15,452
United States—State		1,064		1,813		1,253
Foreign		12,042		6,369		7,432
Total income tax expense	$	9,536	$	28,148	$	24,137

The significant components of deferred tax assets and liabilities are as follows as of December 31, 2014 and 2015 (in thousands):


	2014		2015
Deferred tax assets:
Receivables reserve	$	1,321	$	702
Temporary differences not currently deductible for tax		8,001		7,236
Deferred compensation		2,019		2,135
Foreign tax credit carryforwards		10,576		4,180
Pension		436		1,153
Net operating losses		4,171		4,463
Valuation allowance		(13,763)		(7,814)
Total deferred tax asset		12,761		12,055
Deferred tax liabilities:
Property, plant and equipment, net	$	27,681	$	43,718
Intangible assets, net		12,021		13,743
Tax on foreign earnings		1,050		—
Total deferred tax liabilities		40,752		57,461
Net deferred tax liabilities	$	27,991	$	45,406

Deferred tax assets and liabilities are reflected in the accompanying consolidated balance sheets as follows (in thousands):


	2014		2015
Deferred tax assets:
Current	$	2,588	$	—
Long term		—		—
Total deferred tax asset	$	2,588	$	—
Deferred tax liabilities:
Current	$	213	$	—
Long term		30,366		45,406
Total deferred tax liabilities	$	30,579	$	45,406
Net deferred tax liabilities	$	27,991	$	45,406

As of December 31, 2015, the Company adopted ASU 2015-17 which requires deferred tax liabilities and assets to be classified as non- current in a classified balance sheet.

As of December 31, 2015, the Company estimated that it had gross state and foreign net operating loss (“NOL”) carryforwards of $40.7 million and $8.6 million respectively. The state NOL’s will expire at various dates between 2016 and 2036. The foreign NOL consists of $5.5 million from Aruba, which will expire between 2016 and 2019. The remaining foreign NOL is from Guyana and has no expiration. The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing NOL deferred tax assets. A significant piece of negative evidence evaluated was the cumulative loss incurred by certain state and foreign reporting jurisdictions over the three-year period ended December 31, 2014. On the basis of this evaluation, the Company believed it was more likely than not that the benefit from these state and foreign NOL carryforwards would not be realized. In recognition of this risk at December 31, 2014, the Company provided a valuation allowance of $1.7 million and $1.4 million for the state and foreign NOL carryforwards, respectively. At December 31, 2015 our state and foreign NOL carryforward valuation allowance was $2.0 million and $1.7 million, respectively.

As of December 31, 2014, the Company had $10.5 million of foreign tax credits. During the year ended December 31, 2015, $6.3 million of foreign tax credit carryforwards expired. The remaining amount will expire in 2016. Similar to prior years, the Company examined its projected mix of foreign source and U.S. source earnings and concluded it is more likely than not that it will not generate sufficient foreign source income to utilize its existing foreign tax credits prior to their expiration date. As a result, the Company has continued to maintain a full valuation allowance against these credits through December 31, 2015.

The Company has approximately $156.9 million of undistributed earnings of its foreign subsidiaries that as of December 31, 2015 are considered to be indefinitely reinvested and accordingly, no U.S. federal or state income taxes have been provided thereon. Determination of the amount of unrecognized deferred U.S. income tax liability is not practical because of the complexities associated with its hypothetical calculation.

The Company had net unrecognized tax benefits (including interest and penalty) of $14.0 million as of December 31, 2013, $16.5 million as of December 31, 2014 and $18.9 million as of December 31, 2015. The net increase of the reserve during the year ended December 31, 2015 was attributable to additions to uncertain tax positions taken in the current and prior years.

The following shows the activity related to unrecognized tax benefits during the three years ended December 31, 2015 (in thousands):


Gross unrecognized tax benefits at December 31, 2012		10,336
Increase in uncertain tax positions		4,137
Lapse in statute of limitations		—
Gross unrecognized tax benefits at December 31, 2013		14,050
Increase in uncertain tax positions		1,675
Lapse in statute of limitations		(226)
Settlements		—
Gross unrecognized uncertain tax benefits at December 31, 2014		15,499
Increase in uncertain tax positions		1,717
Lapse in statute of limitations		—
Settlements		—
Gross unrecognized uncertain tax benefits at December 31, 2015	$	17,216

The Company’s accounting policy is to classify interest and penalties related to income tax matters as part of income tax expense. The accrued amounts for interest and penalties are $1.7 million as of December 31, 2015, and $1.0 million as of December 31, 2014, and $0.4 million as of December 31, 2013.

All $18.9 million of unrecognized tax benefits (including interest and penalty) would affect the effective tax rate if recognized.

The Company and its subsidiaries file income tax returns in the U.S. and in various state and local jurisdictions. The statute of limitations related to the consolidated U.S. federal income tax return is closed for all tax years up to and including 2011. The expiration of the statute of limitations related to the various state income tax returns that the Company and subsidiaries file varies by state. The Company does not expect that the amount of unrecognized tax benefits relating to U.S. tax matters will change significantly within the next 12 months.

The Company also files an income tax return in Guyana. See Note 15 relating to certain tax matters pertaining to those filings. There is no expected settlement date of those matters and upon settlement, which might not occur in the near future, the payment may vary significantly from the amounts currently recorded. The Company will continue to update amounts recorded as new developments arise.