Income Taxes

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



	Year Ended December 31,
	2016		2015		2014
	(in thousands)
U.S.	$	168,692	$	151,209	$	138,616
Outside the U.S.	31,288		32,776		35,142
Income from continuing operations before income taxes	$	199,980	$	183,985	$	173,758

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



	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Current tax expense
Federal	$	62,216		$	50,794		$	67,985
State	8,163			5,476			6,278
Foreign	745			592			1,689
Deferred tax (benefit) expense
Federal	(7,723		)	(112		)	(21,398		)
State	(2,655		)	(737		)	(2,116		)
Foreign	(137		)	(57		)	(153		)
Income taxes	$	60,609		$	55,956		$	52,285

Net deferred tax assets consisted of:



	December 31,
	2016			2015
	(in thousands)
Property, equipment and intangible assets	$	(9,171	)	$	(8,899	)
Accrued compensation	17,365			16,274
Accrued expenses	43,176			35,415
Foreign operations	(941		)	(868		)
Valuation allowance on foreign deferred tax assets	(145		)	(153		)
Foreign net operating losses	2,064			1,897
Valuation allowance on foreign net operating losses	(1,270		)	(1,383		)
Deferred tax asset on unrecognized tax positions	1,107			1,200
Other	335			(1,555		)
Net deferred tax assets	$	52,520		$	41,928

Balance sheet presentation:



	December 31,
	2016			2015
	(in thousands)
Non-current net deferred tax assets	$	52,812		$	42,434
Non-current net deferred tax liabilities	(292		)	(506		)
Net deferred tax assets	$	52,520		$	41,928

As of December 31, 2016, the Company had foreign net operating loss carryforwards of approximately $6.8 million before applying tax rates for the respective jurisdictions, subject to a valuation allowance of $3.9 million. Approximately $2.3 million of our foreign net operating losses may expire between 2019 and 2025. 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.

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



	Year Ended December 31,
	2016		2015		2014
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	1.7	%	1.7	%	1.6	%
Benefits and taxes related to foreign operations	(5.2	)%	(6.2	)%	(6.2	)%
Windfall tax benefit on share-based compensation	(1.7	)%	—	%	—	%
Unrecognized tax positions	0.2	%	(0.2	)%	(0.4	)%
Other	0.3	%	0.1	%	0.1	%
Effective income tax rates	30.3	%	30.4	%	30.1	%

The Company's effective income tax rates from continuing operations were 30.3%, 30.4% and 30.1% for the years ended December 31, 2016, 2015 and 2014, respectively. The effective income tax rate for discontinued operations was 37.1% for the year ended December 31, 2014.

The effective income tax rates for the years ended December 31, 2016 and 2015 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. The effective income tax rate for the year ended December 31, 2016 was further reduced by the adoption of ASU 2016-09, which requires that excess tax benefits and deficiencies from share-based compensation be recorded as tax expense or benefit in the income statement. The adoption resulted in a $3.4 million tax benefit for the year ended December 31, 2016. Additionally, the effective income tax rate for the year ended December 31, 2015 was reduced by the settlement of unrecognized tax positions.

As of December 31, 2016 and 2015, the Company’s gross unrecognized tax benefits totaled $2.7 million and $3.1 million, respectively. After considering the deferred income tax accounting impact, it is expected that about $1.6 million of the total as of December 31, 2016 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:



	2016			2015			2014
	(in thousands)
Balance, January 1	$	3,137		$	3,395		$	4,047
Changes for tax positions of prior years	580			116			5
Increases for tax positions related to the current year	181			772			1,201
Settlements and lapsing of statutes of limitations	(1,207		)	(1,146		)	(1,858		)
Balance, December 31	$	2,691		$	3,137		$	3,395

It is reasonably possible that the Company’s unrecognized tax benefits could decrease within the next 12 months by as much as $2.7 million due to settlements and the expiration of applicable statutes of limitations. The Company's federal income tax returns for tax years 2013, 2014, and 2015 remain subject to examination by the Internal Revenue Service.

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 2016 and 2015. The Company had $0.7 million and $0.5 million of accrued interest and penalties at December 31, 2016 and 2015, respectively.

The Company has not provided deferred United States income taxes on approximately $264.4 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. We plan to utilize these earnings to fund overseas operations and working capital needs as well as facilitate overseas growth including, but not limited to, investment in new hotel contracts and acquisitions intended to further our global growth strategy. 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.