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Income Taxes
 9 Months Ended
Sep. 30, 2014
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
During the three months ended September 30, 2014, and 2013, the Company recorded income tax provisions of $10.2 million and $10.3 million, respectively. During the nine months ended September 30, 2014, and 2013, the Company recorded income tax provisions of $35.9 million and $30.1 million, respectively.
The effective tax rates for the respective periods are shown below:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Federal provision
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
State provision
5.8
 %
 
5.2
 %
 
5.8
 %
 
5.2
 %
State benefit
(2.0
)%
 
(1.8
)%
 
(2.0
)%
 
(1.8
)%
Changes in state apportionment(1)
0.0
 %
 
(4.0
)%
 
0.0
 %
 
(1.7
)%
Tax reserves(2)
0.0
 %
 
1.8
 %
 
0.0
 %
 
0.7
 %
International benefit(3)
(8.7
)%
 
(4.8
)%
 
(5.0
)%
 
(2.0
)%
Permanent items(4)
5.7
 %
 
1.1
 %
 
4.1
 %
 
1.3
 %
Other(5)
(10.6
)%
 
0.0
 %
 
(4.0
)%
 
0.0
 %
Effective rate
25.2
 %
 
32.5
 %
 
33.9
 %
 
36.7
 %
________________________
(1)
Represents changes in state apportionment methodologies.
(2)
Represents reserves taken for certain tax positions adopted by the Company.
(3)
Relates primarily to the lower tax rate on the income attributable to international operations.
(4)
Represents a provision for nondeductible items.
(5)
Includes the effect of discrete items, primarily relates to the recognition of tax benefit as a result of a favorable tax settlement with taxing authorities as discussed below.
The Company’s subsidiary in Costa Rica is operating under a 100% tax holiday through December 31, 2018 and a 50% tax holiday for the subsequent four years. The impact of the tax holiday in Costa Rica for the three and nine months ended September 30, 2014 was immaterial.
The Company had gross unrecognized tax benefits of $19.0 million and $83.0 million at September 30, 2014 and December 31, 2013, respectively. The total gross unrecognized tax benefits that, if recognized, would result in a net tax benefit of $14.4 million and $13.5 million as of September 30, 2014 and December 31, 2013, respectively. The decrease in total gross unrecognized tax benefits was due to a favorable tax settlement with taxing authorities related to a previously uncertain tax position associated with AACC’s pre-merger tax revenue recognition policy. As a result of the settlement, the Company reclassed $58.0 million of the gross unrecognized tax benefit to deferred tax liabilities, $14.3 million to income tax payable, and recognized $4.3 million of tax benefit during the three months ended September 30, 2014. The decrease was partially offset by increases in the gross unrecognized tax benefit of $12.6 million associated with certain business combinations. The uncertain tax benefit is included in “Other liabilities” in the Company’s condensed consolidated statements of financial condition.
During the three and nine months ended September 30, 2014, the Company did not provide for United States income taxes or foreign withholding taxes on the quarterly undistributed earnings from operations of its subsidiaries operating outside of the United States. Undistributed net income of these subsidiaries during the three and nine months ended September 30, 2014, was approximately $8.2 million and $11.5 million, respectively.