11. INCOME TAXES

We account for our tax positions in accordance with Codification Topic Income Taxes. Under the guidance, we evaluate uncertain tax positions based on the two-step approach. The first step is to evaluate each uncertain tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in an audit, including resolution of related appeals or litigation processes, if any. For tax positions that are not likely of being sustained upon audit, the second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement.

As of March 31, 2014, we had $149 thousand of total gross unrecognized tax benefits recorded for uncertain income tax position in accordance with Income Taxes in the Codification. During the year ended March 31, 2015, this liability decreased to $72 thousand due to statutes of limitations expiring.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):

	Year Ended March 31,
	2015			2014

Beginning balance	$	149		$	316
Reductions to uncertain tax positions		(77	)		(167	)
Ending balance	$	72		$	149

At March 31, 2015, if the unrecognized tax benefits of $72 thousand were to be recognized, including the effect of interest, penalties and federal tax benefit, the impact would have been $101 thousand. At March 31, 2014, if the unrecognized tax benefits of $149 thousand were to be recognized, including the effect of interest, penalties and federal tax benefit, the impact would have been $193 thousand.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the fiscal years ended March 31, 2015 and 2014, we recognized $4 thousand and $7 thousand, respectively, of interest related to uncertain tax positions, and did not recognize any additional penalties. We had $43 thousand and $65 thousand accrued for the payment of interest at March 31, 2015 and 2014, respectively.

We file income tax returns, including returns for our subsidiaries, with federal, state, local, and foreign jurisdictions. Tax years 2011, 2012 and 2013 are subjected to examination by federal and state taxing authorities. Various state and local income tax returns are also under examination by taxing authorities. We do not believe that the outcome of any examination will have a material impact on our financial statements.

A reconciliation of income taxes computed at the statutory federal income tax rate of 35% to the provision for income taxes included in the consolidated statements of operations is as follows (in thousands, except percentages):

	Year Ended March 31,
	2015			2014			2013

Statutory federal income tax rate		35	%		35	%		35	%
Income tax expense computed at the U.S. statutory federal rate	$	27,410		$	21,040		$	20,555
State income tax expense—net of federal benefit		4,193			3,080			2,894
Non-deductible executive compensation		222			248			150
Other		648			457			316
Provision for income taxes	$	32,473		$	24,825		$	23,915
Effective income tax rate		41.5	%		41.3	%		40.7	%

The effective income tax rate for the year ended March 31, 2015 was 41.5%, a change from 41.3% of the previous fiscal year. The change in the effective income tax rate is due to changes in state apportionment factors.

The components of the provision for income taxes are as follows (in thousands):

	Year Ended March 31,
	2015			2014			2013
Current:
Federal	$	27,665		$	23,313		$	20,041
State		6,667			5,033			4,453
Foreign		3			15			36
Total current expense		34,335			28,361			24,530

Deferred:
Federal		(1,591	)		(3,274	)		(581	)
State		(271	)		(262	)		(34	)
Total deferred expense (benefit)		(1,862	)		(3,536	)		(615	)

Provision for income taxes	$	32,473		$	24,825		$	23,915

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities were as follows (in thousands):

	March 31,
	2015			2014
Deferred Tax Assets:
Accrued vacation	$	1,955		$	1,700
Deferred compensation		89			1,010
Deferred revenue		369			260
Reserve for credit losses		2,066			2,111
Restricted Stock		1,431			1,164
State net operating loss carryforward		1,223			1,287
Other credits and carryforwards		12			99
Other accruals and reserves		687			576
Gross deferred tax assets		7,832			8,207
Less: valuation allowance		(1,223	)		(1,287	)
Net deferred tax assets		6,609			6,920

Deferred Tax Liabilities:
Basis difference in fixed assets		(1,238	)		(1,056	)
Basis difference in operating leases		(2,356	)		(4,674	)
Basis difference in tax deductible goodwill		(2,411	)		(2,449	)
Total deferred tax liabilities		(6,005	)		(8,179	)

Net deferred tax assets (liabilities)	$	604		$	(1,259	)

Reported as:
Deferred tax assets - current	$	3,643		$	3,742
Deferred tax assets - long-term		232			-
Deferred tax liabilities - long-term		(3,271	)		(5,001	)
Net deferred tax liabilities	$	604		$	(1,259	)

As of March 31, 2015, we have state net operating losses of approximately $28.0 million, which have begun to expire.

The valuation allowance resulted from management's determination, based on available evidence, that it was more likely than not that the state net operating loss deferred tax asset balance of $1.2 million and $1.3 million as of March 31, 2015 and 2014, respectively, may not be realized.