13. INCOME TAXES

Components of income (loss) before income taxes are as follows:

	Fiscal Year Ended March 31,

	2013			2012			2011
Domestic	$	16,924		$	(62,655	)	$	29,926
Foreign		(43,036	)		(41,182	)		33,697

Income (loss) from continuing operations before income taxes	$	(26,112	)	$	(103,837	)	$	63,623

Provision for current and deferred income taxes consists of the following:

	Fiscal Year Ended March 31,

	2013			2012			2011
Current:
U.S. federal	$	3,705		$	(729	)	$	3,193
U.S. state and local		456			(55	)		1,521
Foreign		1,730			2,769			6,189

Total current income taxes		5,891			1,985			10,903
Deferred:
U.S. federal		(1,821	)		1,712			(798	)
U.S. state and local		134			126			(45	)
Foreign		846			40			(241	)

Total deferred income taxes		(841	)		1,878			(1,084	)

Provision for income taxes	$	5,050		$	3,863		$	9,819

A reconciliation of our effective tax rate to the U.S. statutory federal income tax rate is as follows:

	Fiscal Year Ended March 31,

	2013			2012			2011
U.S. federal statutory rate		(35.0	)%		(35.0	)%		35.0	%
Foreign tax rate differential		41.5	%		10.6	%		(8.0	)%
Tax amortization of goodwill		7.7	%		1.8	%		2.8	%
Foreign earnings		4.0	%		(2.3	)%		2.7	%
State and local taxes, net of U.S. federal benefit		2.3	%		0.0	%		1.3	%
Valuation allowance		(6.2	)%		25.5	%		(18.8	)%
Other		5.0	%		3.1	%		0.4	%

Effective tax rate		19.3	%		3.7	%		15.4	%

The effects of temporary differences that gave rise to our deferred tax assets and liabilities were as follows:

	March 31,

	2013			2012
Deferred tax assets:
Current deferred tax assets:
Sales returns and allowances (including bad debt)	$	7,823		$	7,017
Inventory reserves		1,054			815
Deferred rent		4,017			1,843
Deferred revenue		6,790			2,339
Other		17,763			14,920

Total current deferred tax assets		37,447			26,934
Less: Valuation allowance		(20,858	)		(15,921	)

Net current deferred tax assets		16,589			11,013
Noncurrent deferred tax assets:
Equity compensation		2,598			2,574
Domestic net operating loss carryforward		142,385			166,887
Foreign tax credit carryforward		8,724			7,680
Foreign net operating loss carryforwards		29,682			22,898

Total noncurrent deferred tax assets		183,389			200,039
Less: Valuation allowance		(112,054	)		(118,247	)

Net noncurrent deferred tax assets		71,335			81,792
Deferred tax liabilities:
Current deferred tax liabilities:
Capitalized software and depreciation		(65,808	)		(46,886	)

Total current deferred tax liabilities		(65,808	)		(46,886	)

Net current deferred tax liability	$	(49,219	)	$	(35,873	)

Noncurrent deferred tax liabilities:
Convertible debt		(19,471	)		(26,380	)
Intangible amortization		(2,703	)		(1,867	)
Capitalized software and depreciation		(3,940	)		(22,511	)

Total noncurrent deferred tax liabilities		(26,114	)		(50,758	)

Net noncurrent deferred tax asset	$	45,221		$	31,034

The valuation allowance is primarily attributable to net operating losses for which no benefit is provided due to uncertainty with respect to their realization. The net deferred tax liability is primarily the result of deferred tax liabilities related to goodwill which cannot be used to offset deferred tax assets.

At March 31, 2013, we had domestic net operating loss carryforwards totaling $363,311, which will begin to expire in 2026. In addition, we had foreign net operating loss carryforwards of $234,956, of which $5,656 will begin to expire in 2014, $214,544 will begin to expire in 2016, $1,614 will expire in 2023, and the remainder may be carried forward indefinitely.

The total amount of undistributed earnings of foreign subsidiaries was approximately $104,100 at March 31, 2013 and $151,400 at March 31, 2012. It is our intention to reinvest undistributed earnings of our foreign subsidiaries and thereby indefinitely postpone their remittance. Accordingly, no provision has been made for foreign withholding taxes or U.S. income taxes which may become payable if undistributed earnings of foreign subsidiaries are repatriated. It is not practicable to estimate the tax liability that would arise if these earnings were remitted.

We are regularly audited by domestic and foreign taxing authorities. Audits may result in tax assessments in excess of amounts claimed and the payment of additional taxes. We believe that our tax return positions comply with applicable tax law and that we have adequately provided for reasonably foreseeable assessments of additional taxes. Additionally, we believe that any assessments in excess of the amounts provided for will not have a material adverse effect on the Consolidated Financial Statements.

As of March 31, 2013 and 2012, we had gross unrecognized tax benefits, including interest and penalties, of $21,712 and $22,406, respectively, of which $14,302 and $15,646, respectively, would affect our effective tax rate if realized.

The aggregate changes to the liability for gross uncertain tax positions, excluding interest and penalties, were as follows:

	Fiscal Year Ended March 31,

	2013			2012			2011
Balance, beginning of period	$	20,328		$	13,352		$	9,195
Additions:
Current year tax positions		73			1,741			1,077
Prior year tax positions		2,812			5,805			4,097
Reduction of prior year tax positions		(2,605	)		—			—
Lapse of statute of limitations		(81	)		(750	)		(1,273	)
Other, net		(127	)		180			256

Balance, end of period	$	20,400		$	20,328		$	13,352

We recognize interest and penalties related to uncertain tax positions in the provision for income taxes in our Consolidated Statements of Operations. For the fiscal year ended March 31, 2013, we recognized a decrease in interest and penalties of approximately $766. For the fiscal years ended March 31, 2012 and 2011, we recognized an increase in interest and penalties of approximately $339 and $5, respectively. The gross amount of interest and penalties accrued as of March 31, 2013 and 2012 was approximately $1,312 and $2,078, respectively.

We are generally no longer subject to audit for U.S. federal income tax returns for periods prior to our fiscal year ended October 31, 2010 and state income tax returns for periods prior to the fiscal year ended October 31, 2004. With few exceptions, we are no longer subject to income tax examinations in non-U.S. jurisdictions for years prior to our fiscal year ended October 31, 2010. U.S. federal taxing authorities have completed examinations of our income tax returns through the fiscal years ended October 31, 2009. Certain U.S. state taxing authorities are currently examining our income tax returns for fiscal years ending October 31, 2004 through October 31, 2009. The determination as to further adjustments to our gross unrecognized tax benefits during the next 12 months is not practicable.

We believe that we have provided for any reasonably foreseeable outcomes related to our tax audits and that any settlement will not have a material adverse effect on our consolidated financial statements. However, there can be no assurances as to the possible outcomes.