(7) Income Taxes

Income (loss) before provision for (benefit from) income taxes consists of the following:

	Year Ended June 30,

	2014		2013		2012
	(Dollars in Thousands)
Domestic	$	121,329	$	54,587	$	(14,086	)
Foreign		7,204		2,851		(1,066	)


Income (loss) before provision for (benefit from) income taxes	$	128,533	$	57,438	$	(15,152	)

The provision for (benefit from) income taxes shown in the accompanying consolidated statements of operations is composed of the following:

	Year Ended June 30,

	2014		2013			2012
	(Dollars in Thousands)
Federal—
Current	$	—	$	—		$	—
Deferred		32,996		7,867			(3,409	)
State—
Current		528		136			191
Deferred		1,005		693			33
Foreign—
Current		7,785		7,068			3,292
Deferred		436		(3,588	)		(1,451	)


	$	42,750	$	12,176		$	(1,344	)

The provision for (benefit from) income taxes differs from that based on the federal statutory rate due to the following:

	Year Ended June 30,

	2014			2013			2012
	(Dollars in Thousands)
Federal tax provision (benefit) at statutory rate	$	44,989		$	20,103		$	(5,303	)
State income taxes		78			88			124
Subpart F and dividend income		6,667			4,456			4,189
Foreign taxes and rate differences		1,881			2,298			1,001
Stock-based compensation		631			900			2,968
Tax credits		(8,902	)		(4,816	)		(3,913	)
Tax contingencies		(261	)		(168	)		(2,385	)
Return to provision adjustments		150			(149	)		442
Domestic production activity deduction		(2,443	)		—			—
Valuation allowance		(16	)		(1,813	)		1,431
Benefit from foreign restructuring		—			(9,266	)		—
Other		(24	)		543			102


Provision for (benefit from) income taxes	$	42,750		$	12,176		$	(1,344	)

Deferred tax assets (liabilities) consist of the following at June 30, 2014 and 2013:

	Year Ended June 30,

	2014			2013
	(Dollars in Thousands)
Deferred tax assets:
Federal and state credits	$	4,354		$	4,918
Foreign tax credits		4,752			33,310
Federal and state loss carryforwards		104			6,221
Capital loss carryforwards		8,012			8,076
Foreign loss carryforwards		1,672			1,653
Deferred revenue		4,823			4,198
Restructuring accruals		26			34
Other reserves and accruals		6,074			4,834
Intangible assets		419			719
Property, leasehold improvements, and other basis differences		2,005			2,829
Other temporary differences		3,065			3,504


		35,306			70,296
Deferred tax liabilities:
Deferred revenue		(194	)		(151	)
Intangible assets		(1,295	)		(1,444	)
Property, leasehold improvements, and other basis differences		(298	)		(16	)
Other temporary differences		(826	)		(677	)


		(2,613	)		(2,288	)
Valuation allowance		(9,959	)		(9,943	)


Net deferred tax assets	$	22,734		$	58,065

As of June 30, 2014, we have available U.S. federal net operating loss carryforwards of $106.8 million which relate to stock-based compensation tax deductions in excess of book compensation expense (APIC NOLs) that will be credited to additional paid in capital when such deductions reduce taxes payable as determined based on a "with-and-without" approach. APIC NOLs will reduce federal taxes payable if realized in future periods, but NOLs relating to such benefits are not included in the table above.

We have foreign net operating loss carryforwards of $6.9 million which will expire beginning in 2019 and others with no expiration date. We also have federal and state research and development tax credits, and alternative minimum tax (AMT) credit carryforwards of $ 4.4 million. The research and development tax credits expire at various dates from 2019 through 2034, while the AMT credit carryforwards have an unlimited carryforward period.

In fiscal 2014 and fiscal 2013, we recorded reductions in the income taxes payable of $0.7 million and $0.5 million, respectively, with an increase to additional paid in capital, for the benefits of excess stock-based compensation deductions recognized during the period in the United States and United Kingdom.

In fiscal 2013, we restructured our Canadian affiliate, AspenTech Canada Ltd (ATC). The restructuring was considered a deemed liquidation for tax purposes resulting in (i) the elimination of a deferred tax liability of $9.3 million associated with a basis difference and (ii) recognition of a capital loss for tax purposes of $22.2 million.

Our valuation allowance for deferred tax assets was $10.0 million and $9.9 million as of June 30, 2014 and 2013 respectively. The most significant portion of the valuation allowance is attributable to a reserve against the U.S. capital loss carryforward deferred tax asset of $8.0 million discussed in the preceding paragraph.

We have determined that we underwent an ownership change (as defined under section 382 of the Internal Revenue Code of 1986, as amended) during fiscal 2011. As such, the utilization of certain tax attributes is subject to an annual limitation. The annual limitation is not expected to impact the realizability of the deferred tax assets.

For fiscal 2014, our income tax provision included amounts determined under the provisions of ASC 740 intended to satisfy additional income tax assessments, including interest and penalties, that could result from any tax return positions for which the likelihood of sustaining the position on audit does not meet a threshold of "more likely than not." Tax liabilities were recorded as a component of our income taxes payable and other non-current liabilities. The ultimate amount of taxes due will not be known until examinations are completed and settled or the audit periods are closed by statutes.

A reconciliation of the reserve for uncertain tax positions is as follows:

	Year Ended June 30,

	2014			2013			2012
	(Dollars in Thousands)
Uncertain tax positions, beginning of year	$	22,031		$	21,906		$	24,835
Gross increases—tax positions in prior period		112			1,150			2,072
Gross decreases—tax positions in prior period		—			—			(1,468	)
Gross increases—tax positions in current period		—			—			—
Gross decreases—lapse of statutes		(823	)		(1,172	)		(2,954	)
Currency translation adjustment		(127	)		147			(579	)


Uncertain tax positions, end of year	$	21,193		$	22,031		$	21,906

At June 30, 2014, the total amount of unrecognized tax benefits is $21.2 million, and of that amount, $18.4 million, if recognized, would reduce the effective tax rate. Our policy is to recognize interest and penalties related to income tax matters as provision for (benefit from) income taxes. At June 30, 2014, we had approximately $2.0 million of accrued interest and $1.0 million of penalties related to uncertain tax positions. We recorded a benefit for interest and penalties of approximately $0.1 million during fiscal 2014. We do not anticipate the total amount of unrecognized tax benefits to significantly change within the next twelve months.

Fiscal years 2007-2013 are subject to audit in the United States and Canada.

Subsidiaries of Aspen Technology in a number of countries outside of the U.S. and Canada are also subject to tax audits. We estimate that the effects of such tax audits are not material to our consolidated financial statements.