Income Taxes

The components of income before provision for income taxes were as follows for the years ended December 31, 2014, 2013 and 2012 (in thousands):



	2014		2013		2012
U.S.	$	408,391	$	365,821	$	245,252
Foreign	71,385		53,733		76,339
Income before provision for income taxes	$	479,776	$	419,554	$	321,591

The provision for income taxes consisted of the following for the years ended December 31, 2014, 2013 and 2012 (in thousands):



	2014			2013			2012
Current tax provision:
Federal	$	153,471		$	77,671		$	94,423
State	4,978			8,034			10,046
Foreign	13,259			13,019			18,952
Deferred tax (benefit) provision:
Federal	(13,073		)	24,210			(582		)
State	(15,220		)	(1,106		)	(2,045		)
Foreign	2,442			1,869			(3,189		)
Change in valuation allowance	(29		)	2,370			(3		)
Total	$	145,828		$	126,067		$	117,602

The Company’s effective rate differed from the U.S. federal statutory rate as follows for the years ended December 31, 2014, 2013 and 2012:



	2014		2013		2012
U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State taxes	2.3		3.4		3.5
Nondeductible stock-based compensation	1.4		0.8		1.3
U.S. federal and state research and development credits	(3.2	)	(3.5	)	(0.6	)
Change in state tax rates	(0.3	)	—		(0.4	)
Foreign earnings	(1.9	)	(2.6	)	(3.5	)
Disallowed officer compensation	0.1		0.1		0.6
Domestic production activities deduction	(2.2	)	(4.3	)	—
Change in the deferred tax asset valuation allowance	—		0.6		—
State software development activities	(2.4	)	—		—
Other	1.6		0.5		0.7
	30.4	%	30.0	%	36.6	%

The components of the net deferred tax asset and the related valuation allowance as of December 31, 2014 and 2013 were as follows (in thousands):



	2014			2013
Accrued bonus	$	19,572		$	14,266
Deferred revenue	9,536			5,691
Deferred rent	10,518			6,738
Stock-based compensation	27,538			30,125
Net operating losses	11,466			14,392
Tax credit carryforwards	18,066			11,107
Other	7,276			5,361
Deferred tax assets	103,972			87,680
Depreciation and amortization	(14,868		)	(15,607		)
Acquired intangible assets	(40,126		)	(19,530		)
Internal-use software development costs capitalized	(39,396		)	(31,970		)
Deferred tax liabilities	(94,390		)	(67,107		)
Valuation allowance	(1,222		)	(1,251		)
Net deferred tax assets	$	8,360		$	19,322

As of December 31, 2014 and 2013, the Company had U.S. federal NOL carryforwards of approximately $26.1 million and $30.7 million related to acquisitions completed during 2012, which expire at various dates through 2029. As of December 31, 2014 and 2013, the Company had state NOL carryforwards of approximately $45.0 million and $59.0 million, respectively, which expire at various dates through 2034. The Company also had foreign NOL carryforwards of approximately $0.3 million and $2.4 million as of December 31, 2014 and 2013, respectively. The majority of the foreign NOL carryforwards have no expiration dates. As of December 31, 2014 and 2013, the Company had U.S. federal and state research and development tax credit carryforwards of $30.5 million and $10.0 million, respectively, which will expire at various dates through 2029. As of December 31, 2014, the Company had no foreign tax credit carryforwards. As of December 31, 2013, the Company had foreign tax credit carryforwards of $4.4 million.

As of December 31, 2014 and 2013, the Company recorded a valuation allowance on its deferred tax assets of $1.2 million and $1.3 million, respectively, a decrease of $0.1 million.

As of December 31, 2014, undistributed earnings of non-U.S. subsidiaries totaled $224.0 million. No provision for U.S. income and foreign withholding taxes has been made for these permanently reinvested foreign earnings because it is expected that such earnings will be reinvested indefinitely. If these earnings were distributed to the U.S in the form of dividends or otherwise, it would be included in the Company's U.S. taxable income. The amount of unrecognized deferred income tax liability related to these earnings is $45.0 million.

During 2013 and 2012, the Company corrected immaterial errors in its reported income tax expense attributable to prior fiscal periods, which reduced income tax expense by $3.6 million and $5.3 million, respectively, during those years.

The following is a rollforward of the Company’s unrecognized tax benefits for the years ended December 31, 2014, 2013 and 2012 (in thousands):



	2014			2013			2012
Balance at beginning of year	$	24,651		$	20,902		$	12,496
Gross increases — tax positions of prior periods	12,925			2,878			12,173
Gross increases — current-period tax positions	2,106			2,834			2,251
Gross decreases — tax positions of prior periods	(6,362		)	(1,213		)	(6,018		)
Gross decreases — settlements	—			(750		)	—
Balance at end of year	$	33,320		$	24,651		$	20,902

As of December 31, 2014, 2013 and 2012, the Company had approximately $41.1 million, $30.6 million and $26.9 million, respectively, of total unrecognized tax benefits, including $7.7 million of accrued interest and penalties as of December 31, 2014 and $5.9 million of accrued interest and penalties as of both December 31, 2013 and 2012. The Company's unrecognized tax benefits are included in other liabilities in the consolidated balance sheets. Interest and penalties related to unrecognized tax benefits are recorded in the provision for income taxes and were $1.8 million for the year ended December 31, 2014 and insignificant for the year ended December 31, 2013. Interest and penalties included in the provision for income taxes for the year ended December 31, 2012 were $1.2 million. If recognized, all amounts of unrecognized tax benefits would have resulted in a reduction of income tax expense, impacting the effective income tax rate.

As of December 31, 2014, the Company believes it is reasonably possible that $4.3 million of its unrecognized tax benefits, each of which is individually insignificant, including research and development credits and transfer pricing adjustments, may be recognized by the end of 2015 as a result of ongoing audits.

The Company's U.S. federal income tax returns for the 2012 and 2011 tax years are currently under audit by the Internal Revenue Service. In addition, certain state and foreign income tax returns from 2008 through 2013 are currently under audit in those jurisdictions. The Company does not expect the results of these examinations to have a material effect on its financial condition, results of operations or cash flows.

Generally, in the U.S. federal and state taxing jurisdictions, tax periods in which certain loss and credit carryovers are generated remain open for audit until such time as the limitation period ends for the year in which such losses or credits are utilized. In major foreign jurisdictions, tax years after 2010 are open for examination.