INCOME TAXES

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



	Fiscal Year Ended March 31,
	2017			2016			2015
Domestic	$	86,050		$	(94,174	)	$	(126,582	)
Foreign	(9,085		)	55,824			(146,298		)
Income (loss) from continuing operations before income taxes	$	76,965		$	(38,350	)	$	(272,880	)

Provision (benefit from) for current and deferred income taxes consists of the following:



	Fiscal Year Ended March 31,
	2017			2016			2015
Current:
U.S. federal	$	19,271		$	792		$	2,773
U.S. state and local	2,521			938			(1,406		)
Foreign	(13,012		)	(31,508		)	2,944
Total current income taxes	8,780			(29,778		)	4,311
Deferred:
U.S. federal	969			1,211			1,575
U.S. state and local	2,395			(231		)	72
Foreign	(2,482		)	(1,250		)	632
Total deferred income taxes	882			(270		)	2,279
Provision (benefit from) for income taxes	$	9,662		$	(30,048	)	$	6,590

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



	Fiscal Year Ended March 31,
	2017		2016		2015
U.S. federal statutory rate	35.0	%	35.0	%	35.0	%
State and local taxes, net of U.S. federal benefit	4.9	%	1.6	%	0.9	%
Tax amortization of goodwill	1.3	%	(3.2	)%	(0.6	)%
Foreign tax rate differential⁽¹⁾	(1.4	)%	25.8	%	(12.1	)%
Foreign earnings	5.5	%	(3.7	)%	(1.5	)%
Tax credits ⁽²⁾	(45.8	)%	98.7	%	—
Domestic production deduction	(2.5	)%	—		—
Valuation allowance—domestic	10.1	%	(77.8	)%	(16.8	)%
Valuation allowance—foreign	0.1	%	10.4	%	(5.1	)%
Change in reserves	2.9	%	(7.0	)%	(1.6	)%
Other	2.4	%	(1.4	)%	(0.6	)%
Effective tax rate	12.5	%	78.4	%	(2.4	)%

(1) The foreign rate differential in relation to foreign earnings, for all periods presented, are primarily driven by changes in the mix of our foreign earnings.

(2) Tax benefits were recorded for fiscal years ended March 31, 2017 and March 31,2016 attributable to certain tax credits related to software development activities

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



	March 31,
	2017			2016
Deferred tax assets:
Accrued compensation expense	$	131,305		$	82,230
Equity Compensation	25,048			22,446
Deferred revenue	41,977			33,254
Domestic net operating loss carryforward	4,495			28,811
Tax credit carryforward	52,639			76,565
Foreign net operating loss carryforwards	15,636			16,910
Business reorganization	24,103			24,143
Sales returns and allowances (including bad debt)	3,942			2,257
Deferred rent	8,865			5,359
Other	4,045			—
Total deferred tax assets	312,055			291,975
Less: Valuation allowance	(184,085		)	(170,574		)
Net deferred tax assets	127,970			121,401
Deferred tax liabilities:
Capitalized software and depreciation	(120,715		)	(104,294		)
Convertible debt	(5,219		)	(12,716		)
Intangible amortization	(38,068		)	(8,306		)
Other	—			(896		)
Total deferred tax liabilities	(164,002		)	(126,212		)
Net deferred tax liability(a)	(36,032		)	(4,811		)

(a) As of March 31, 2017 and 2016, $36,032 and $4,811, respectively, is included in other long-term liabilities.

The valuation allowance is primarily attributable to deferred tax assets 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 indefinite lived intangibles, which cannot be used to offset deferred tax assets, as well as deferred tax liabilities related to intangibles as a result of the acquisition of Social Point.

At March 31, 2017, we had domestic net operating loss carryforwards totaling $50,208 of which $640 will expire in 2022, $24,022 will expire from 2023 to 2027, $24,263 will expire from 2028 to 2032, and $1,283 will expire in 2037. In addition, we had foreign net operating loss carryforwards of $277,892, of which $25,331 will expire in 2020, $244,527 will expire in 2022, $29 will expire in 2026, $727 will expire in 2035, and the remainder may be carried forward indefinitely.

At March 31, 2017, we had domestic credit carryforwards totaling $150,811 of which $83,371 expire in 2031 to 2036, and the remainder may be carried forward indefinitely. In addition, we had foreign credit carryforwards of $1,691 of which $1,037 expire in 2019, $191 expire in 2028, $80 expire in 2029, $230 expire in 2030, and $153 will expire in 2031.

The total amount of undistributed earnings of foreign subsidiaries was approximately $162,800 at March 31, 2017 and $197,300 at March 31, 2016. 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.

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 years ended March 31, 2017, 2016 and 2015, we recognized an increase in interest and penalties of $877, $1,098 and $771, respectively. The gross amount of interest and penalties accrued as of March 31, 2017 and March 31, 2016 was $4,090 and $3,213, respectively.

As of March 31, 2017 and March 31, 2016, we had gross unrecognized tax benefits, including interest and penalties, of $120,198 and $56,012, of which $36,940 and $41,285, respectively, would affect our effective tax rate if realized.

We are no longer subject to audit for U.S. federal income tax returns for periods prior to our fiscal year ended March 31, 2013 and state income tax returns for periods prior to the fiscal year ended March 31, 2012. 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 March 31, 2012. U.S. federal taxing authorities have completed examinations of our income tax returns through the fiscal year ended October 31, 2009. The statute relating to the fiscal year ended March 31, 2013 has expired. The IRS is currently examining our income tax returns for the fiscal year ended March 31, 2015.

The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. Although potential resolution of uncertain tax positions involve multiple tax periods and jurisdictions, it is reasonably possible that a reduction of up to $31,000 of unrecognized tax benefits may occur within the next 12 months, some of which, depending on the nature of the settlement or expiration of statutes of limitations, may affect the Company’s income tax provision and therefore benefit the resulting effective tax rate. The actual amount could vary significantly depending on the ultimate timing and nature of any settlements.

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



	Fiscal Year Ended March 31,
	2017			2016		2015
Balance, beginning of period	$	52,799		$	40,591	$	23,536
Additions:
Current year tax positions	65,669			12,208		8,297
Prior year tax positions	5,086			—		9,040
Reduction of prior year tax positions	—			—		—
Lapse of statute of limitations	(7,469		)	—		(256		)
Other, net	—			—		(26		)
Balance, end of period	$	116,085		$	52,799	$	40,591

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.