3. Income Taxes

The Company is subject to future federal, state, and foreign income taxes and has recorded net deferred tax assets on the Consolidated Balance Sheets at December 31, 2016 and 2015. Deferred tax assets and liabilities are determined based on the difference between the financial accounting and tax bases of assets and liabilities. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2016 and 2015 are as follows (in thousands):

	December 31,
	2016			2015
Deferred tax assets:
Accounts receivable	$	1,034		$	2,455
Accrued liabilities		5,747			7,671
Equity-based compensation		5,535			4,304
Capitalized costs		861			1,207
Accrued sales taxes		439			348
Deferred rent		939			1,344
State tax credits		4,650			4,339
Foreign subsidiary net operating losses		212			386
Valuation allowance		(4,031	)		(4,916	)
Other		805			695
		16,191			17,833
Deferred tax liabilities:
Intangible assets		11,056			10,457
Depreciation		2,321			2,763
		13,377			13,220
Net deferred tax assets	$	2,814		$	4,613

The components of income from domestic and foreign operations before income tax expense for the years ended December 31, 2016, 2015 and 2014 are as follows (in thousands):

	Year Ended December 31,
	2016		2015		2014
Domestic	$	186,234	$	152,040	$	118,448
Foreign		9,873		10,801		9,550
Total	$	196,107	$	162,841	$	127,998

The components of the income tax provision for the years ended December 31, 2016, 2015 and 2014 are as follows (in thousands):

	Year Ended December 31,
	2016			2015			2014
Current:
Federal	$	56,053		$	47,195		$	37,076
State		8,204			6,308			5,593
Foreign		5,819			4,331			5,034
		70,076			57,834			47,703
Deferred:
Federal		2,086			1,252			(1,490	)
State		(268	)		(300	)		(375	)
Foreign		(21	)		580			160
		1,797			1,532			(1,705	)
Total	$	71,873		$	59,366		$	45,998

The income tax benefits related to the exercise of stock options were approximately $0.1 million, $2.7 million, and $3.1 million for the years ended December 31, 2016, 2015 and 2014, respectively.

As a result of losses in foreign locations, the Company has net operating loss carry-forwards (“NOLs”) of approximately $0.9 million available to offset future income. Approximately $0.8 million of the NOLs expire in 2018 to 2025 and the remainder does not expire. The Company has established a valuation allowance for substantially all of these NOLs because the ability to utilize them is not more likely than not.

The Company has tax credit carry-forwards of approximately $7.2 million available to offset future state tax. These tax credit carry-forwards expire in 2017 to 2026. These credits represent a deferred tax asset of $4.7 million after consideration of the federal benefit of state tax deductions. A valuation allowance of $2.6 million has been established for these credits because the ability to use them is not more likely than not.

Deferred taxes are not provided for temporary differences of approximately $44.0 million, $41.0 million, and $35.7 million as of December 31, 2016, 2015 and 2014, respectively, representing earnings of non-U.S. subsidiaries that are intended to be permanently reinvested. Those earnings are considered to be indefinitely reinvested; accordingly, no provision for U.S. federal and state income taxes has been provided thereon. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to adjustment for foreign tax credits) and withholding taxes payable to various foreign countries. It is impractical to calculate the tax impact until such repatriation occurs.

The following is a summary of the items that cause recorded income taxes to differ from taxes computed using the statutory federal income tax rate for the years ended December 31, 2016, 2015 and 2014:

	Year Ended December 31,
	2016			2015			2014

Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
Effect of:
State income tax, net of federal benefit		2.7			2.5			2.7
State credit carryforwards		(0.2	)		(0.3	)		0.1
U.S. federal R&D tax credit		(0.7	)		(0.7	)		(0.9	)
Foreign operations		(0.2	)		(0.4	)		(0.4	)
Tax contingencies		0.6			0.5			(0.4	)
Other permanent differences		(0.5	)		(0.1	)		0.1
Change in valuation allowance		(0.1	)		-			(0.3	)
Income taxes		36.6	%		36.5	%		35.9	%

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended December 31, 2016, 2015 and 2014 (in thousands):

	December 31,
	2016			2015			2014

Unrecognized tax benefits at January 1,	$	(5,789	)	$	(4,455	)	$	(5,122	)
Gross amount of increases in unrecognized tax benefits as a result of tax positions taken during a prior period		(756	)		(1,687	)		(18	)
Gross amount of decreases in unrecognized tax benefits as a result of tax positions taken during a prior period		270			292			508
Gross amount of increases in unrecognized tax benefits as a result of tax positions taken during the current period		(791	)		-			(481	)
Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations		128			61			658
Unrecognized tax benefits at December 31,	$	(6,938	)	$	(5,789	)	$	(4,455	)

The Company’s unrecognized tax benefits totaled $6.9 million and $5.8 million as of December 31, 2016 and 2015, respectively. Included in these amounts are unrecognized tax benefits totaling $5.1 million and $4.0 million as of December 31, 2016 and 2015, respectively, which, if recognized, would affect the effective tax rate.

The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within its global operations in income tax expense. For the years ended December 31, 2016, 2015 and 2014, the Company recognized $0.3 million, $0.2 million, and $0.1 million, respectively, of expense for the potential payment of interest and penalties. Accrued interest and penalties were $1.5 million and $1.3 million for the years ended December 31, 2016 and 2015. The Company conducts business globally and, as a result, files income tax returns in the United State federal jurisdiction and in many state and foreign jurisdictions. The Company is generally no longer subject to U.S. federal, state, and local, or non-US income tax examinations for the years before 2012. Due to the expiration of statutes of limitations in multiple jurisdictions globally during 2017, the Company anticipates it is reasonably possible that unrecognized tax benefits may decrease by $0.6 million.