Income Taxes

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



	Year Ended December 31,
	2014		2013		2012
	(in thousands)
U.S.	$	138,616	$	122,517	$	131,722
Outside the U.S.	35,142		36,155		37,784
Income from continuing operations before income taxes	$	173,758	$	158,672	$	169,506

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



	Year Ended December 31,
	2014			2013			2012
	(in thousands)
Current tax expense
Federal	$	67,985		$	46,925		$	40,821
State	6,278			4,891			4,705
Foreign	1,689			1,914			2,345
Deferred tax (benefit) expense
Federal	(21,398		)	(7,011		)	(249		)
State	(2,116		)	(635		)	101
Foreign	(153		)	(762		)	505
Income taxes	$	52,285		$	45,322		$	48,228

Net deferred tax assets consisted of:



	December 31,
	2014			2013
	(in thousands)
Property, equipment and intangible assets	$	(8,687	)	$	(10,153	)
Accrued compensation	15,124			15,696
Accrued expenses	35,023			12,718
Foreign operations	790			603
Valuation allowance on foreign deferred tax assets	(153		)	(227		)
Foreign net operating losses	1,800			1,441
Valuation allowance on foreign net operating losses	(1,800		)	(1,441		)
Deferred tax asset on unrecognized tax positions	1,283			1,736
Other	1,026			1,162
Net deferred tax assets	$	44,406		$	21,535

As of December 31, 2014, the Company had foreign net operating loss carryforwards of approximately $5.5 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 $0.5 million of foreign deferred tax assets before applying the tax rate of the respective jurisdiction.

Balance sheet presentation:



	December 31,
	2014		2013
	(in thousands)
Current net deferred tax assets	$	23,860	$	26,684
Non-current net deferred tax assets (liabilities)	20,546		(5,149		)
Net deferred tax assets	$	44,406	$	21,535

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



	Year Ended December 31,
	2014		2013		2012
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	1.6	%	1.6	%	1.5	%
Benefits and taxes related to foreign operations	(6.2	)%	(7.2	)%	(8.5	)%
Unrecognized tax positions	(0.4	)%	(0.2	)%	0.1	%
Adjustment to current and deferred taxes, prior years	—	%	—	%	(0.5	)%
Other	0.1	%	(0.6	)%	0.9	%
Effective income tax rates	30.1	%	28.6	%	28.5	%

The Company's effective income tax rates from continuing operations were 30.1% and 28.6% for the years ended December 31, 2014 and 2013, respectively. The effective tax rate for discontinued operations was 37.1% for the years ended December 31, 2014 and 2013.

The effective income tax rates for the years ended December 31, 2014 and 2013 were 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 effective income tax rates for the years ended December 31, 2014 and 2013 were reduced by the settlement of unrecognized tax positions. The effective income tax rate for the year ended December 31, 2013 also included the impact of legislation retroactively extending the U.S. controlled foreign corporation look-through rules.

As of December 31, 2014 and 2013, the Company’s gross unrecognized tax benefits totaled $3.4 million and $4.0 million, respectively. After considering the deferred income tax accounting impact, it is expected that $2.8 million of the total as of December 31, 2014 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:



	2014			2013			2012
	(in thousands)
Balance, January 1	$	4,047		$	4,415		$	4,570
Changes for tax positions of prior years	5			503			410
Increases for tax positions related to the current year	1,201			1,164			—
Settlements and lapsing of statutes of limitations	(1,858		)	(2,035		)	(565		)
Balance, December 31	$	3,395		$	4,047		$	4,415

It is reasonably possible that the Company’s unrecognized tax benefits could decrease within the next 12 months by as much as $3.4 million due to settlements and the expiration of applicable statutes of limitations.

The Internal Revenue Service has concluded their examination of the Company’s United States federal income tax returns for all tax years prior to 2012. There were no significant 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 2014 and 2013. The Company had $0.7 million and $1.6 million of accrued interest and penalties at December 31, 2014 and 2013, respectively.

The Company has not provided deferred United States income taxes on approximately $205.2 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.