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INCOME TAXES
6 Months Ended
Jun. 30, 2014
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES
Income tax expense for the three months ended June 30, 2014, was $38.6 million, or 27.1% of income before taxes, compared with $63.7 million, or 28.6% of income before taxes for the three months ended June 30, 2013. Income tax expense for the six months ended June 30, 2014, was $54.8 million, or 27.0% of pre-tax income, compared with $130.3 million, or 27.2% of pre-tax income for the six months ended June 30, 2013. The Company’s effective tax rates for these periods differ from the U.S. federal statutory rate of 35% due primarily to the effect of income earned by certain of the Company’s entities outside of the U.S. being taxed at rates lower than the federal statutory rate, partially offset by state income taxes and non-deductible share-based compensation expenses. The Company intends to indefinitely reinvest outside the U.S. all of its undistributed foreign earnings that were not previously subject to U.S. tax.
The Company’s effective tax rate for the three and six months ended June 30, 2014, did not include the tax benefit from the U.S. federal Research and Development (“R&D”) credit because the credit expired at the end of 2013.  If the credit is reinstated retroactively, the tax benefit will be recorded discretely in the period of reinstatement. In addition to reflecting net 2013 U.S. federal R&D credit, the income tax provision for the six months ended June 30, 2013, also reflected a discrete net benefit related to 2012 federal R&D credit which was retroactively reinstated in January of 2013.
As of June 30, 2014, the Company had total gross unrecognized tax benefits of approximately $81.6 million compared with approximately $74.0 million as of December 31, 2013, representing a net increase of approximately $7.6 million for the six months ended June 30, 2014. If recognized, these gross unrecognized tax benefits would reduce the effective tax rate in the period of recognition. Gross interest and penalties related to unrecognized tax benefit accrued were approximately $4.2 million and $3.4 million as of June 30, 2014, and December 31, 2013, respectively.
The Company files federal, state and foreign income tax returns in many jurisdictions in the U.S. and abroad. Generally, years before 2010 are closed for most significant jurisdictions except for California, for which all years before 2008 are considered closed. Certain of the Company’s unrecognized tax benefits could reverse based on the normal expiration of various statutes of limitations, which could affect the Company’s effective tax rate in the period in which they reverse.
The Company is subject to the examination of its income tax returns by the Internal Revenue Service (the "IRS") and other tax authorities. The outcome of these audits cannot be predicted with certainty. Management regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of the Company’s provision for income taxes. If any issues addressed in the tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.