Income Taxes

Total income from continuing operations before income taxes, classified by source of income, was as follows:



	Year Ended December 31,
	2013		2012		2011
	(In thousands)
U.S.	$	122,517	$	131,722	$	138,683
Outside the U.S.	36,155		37,784		20,028
Income from continuing operations before income taxes	$	158,672	$	169,506	$	158,711

The provision for income taxes, classified by the timing and location of payment, was as follows:



	Year Ended December 31,
	2013			2012			2011
	(in thousands)
Current tax expense
Federal	$	46,925		$	40,821		$	40,515
State	4,891			4,705			2,620
Foreign	1,914			2,345			1,712
Deferred tax (benefit) expense
Federal	(7,011		)	(249		)	2,471
State	(635		)	101			575
Foreign	(762		)	505			(15		)
Income taxes	$	45,322		$	48,228		$	47,878

Net deferred tax assets consisted of:



	December 31,
	2013			2012
	(In thousands)
Property, equipment and intangible assets	$	(10,153	)	$	(8,553	)
Accrued compensation	15,696			14,693
Accrued expenses	12,718			5,491
Foreign operations	603			186
Valuation allowance on foreign deferred tax assets	(227		)	—
Foreign net operating losses	1,441			1,259
Valuation allowance on foreign net operating losses	(1,441		)	(1,259		)
Capital loss carryovers	241			484
Deferred tax asset on unrecognized tax positions	1,736			2,226
Other	921			807
Net deferred tax assets	$	21,535		$	15,334

As of December 31, 2013, the Company had foreign net operating loss carryforwards of approximately $4.3 million before applying tax rates for the respective jurisdictions. These foreign net operating loss carryforwards have an indefinite life, subject to a full valuation allowance. In addition, the Company has recorded a valuation allowance on approximately $0.7 million of foreign deferred tax assets before applying the tax rate of the respective jurisdiction.

Balance sheet presentation:



	December 31,
	2013			2012
	(In thousands)
Current deferred tax assets	$	26,684		$	26,198
Non-current net deferred tax liabilities	(5,149		)	(10,864		)
Net deferred tax assets	$	21,535		$	15,334

The statutory United States federal income tax rate reconciles to the effective income tax rates for continuing operations as follows:



	Year Ended December 31,
	2013		2012		2011
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	1.6	%	1.5	%	1.7	%
Benefits and taxes related to foreign operations	(7.2	)%	(8.5	)%	(3.4	)%
Unrecognized tax positions	(0.2	)%	0.1	%	(0.8	)%
Adjustment to current and deferred taxes, prior years	—	%	(0.5	)%	(0.9	)%
Other	(0.6	)%	0.9	%	(1.4	)%
Effective income tax rates	28.6	%	28.5	%	30.2	%

The Company's effective income tax rates from continuing operations were 28.6% and 28.5% for the years ended December 31, 2013 and 2012, respectively. The effective tax rate for discontinued operations was 37.1% for the years ended December 31, 2013 and 2012, respectively. The effective income tax rate for the year ended December 31, 2013 was lower than the United States federal statutory rate of 35% primarily due to the recurring impact of foreign operations, partially offset by state income taxes, and reflects adjustments to our federal accruals. Additionally, the effective income tax rate was further reduced by the settlement of unrecognized tax positions and legislation retroactively extending the U.S. controlled foreign corporation look-through rules. The effective income tax rate for the period ended December 31, 2012 was lower than the United States federal statutory rate of 35% primarily due to the recurring impact of foreign operations, partially offset by state income taxes. Additionally, the 2012 effective income tax rate includes a $4.5 million benefit related to a change in estimate of the benefit from foreign operations.

As of December 31, 2013 and 2012, the Company’s gross unrecognized tax benefits totaled $4.0 million and $4.4 million, respectively. It is expected that $4.0 million of the total as of December 31, 2013 would favorably affect the effective tax rate if resolved in the Company’s favor. The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits:



	2013			2012			2011
	(In thousands)
Balance, January 1	$	4,415		$	4,570		$	6,017
Changes for tax positions of prior years	503			410			173
Increases for tax positions related to the current year	1,164			—			2,062
Settlements and lapsing of statutes of limitations	(2,035		)	(565		)	(3,682		)
Balance, December 31	$	4,047		$	4,415		$	4,570

It is reasonably possible that the Company’s unrecognized tax benefits could decrease within the next 12 months by as much as $3.5 million due to settlements and the expiration of applicable statutes of limitations.

The Internal Revenue Service is currently conducting an examination of the Company's United States federal income tax returns for tax years 2009, 2010, and 2011, as well as a limited examination of the 2007 federal income tax return as amended. As of December 31, 2013, the Company has not been advised of any material adjustments.

The practice of the Company is to recognize interest and penalties related to income tax matters in the provision for income taxes. The Company did not incur any material interest or penalties for 2013 and 2012. The Company had $1.6 million and $2.3 million of accrued interest and penalties at December 31, 2013 and 2012, respectively.

The Company has not provided deferred United States income taxes on approximately $169.0 million of accumulated and undistributed earnings of its foreign subsidiaries. The Company's intent is for such earnings to be permanently reinvested in operations outside the United States. Determination of the deferred United States income tax liability on these earnings is not practicable because such liability, if any, is dependent on circumstances existing if and when remittance occurs.