Income Taxes

The components of income before provision for income taxes were as follows for the years ended December 31, 2013, 2012 and 2011 (in thousands):



	2013		2012		2011
U.S.	$	365,821	$	245,252	$	257,656
Foreign	53,733		76,339		49,539
Income before provision for income taxes	$	419,554	$	321,591	$	307,195

The provision for income taxes consisted of the following for the years ended December 31, 2013, 2012 and 2011 (in thousands):



	2013			2012			2011
Current tax provision:
Federal	$	77,671		$	94,423		$	39,517
State	8,034			10,046			2,953
Foreign	13,019			18,952			10,193
Deferred tax provision (benefit):
Federal	24,210			(582		)	54,980
State	(1,106		)	(2,045		)	4,413
Foreign	1,869			(3,189		)	1,209
Change in valuation allowance	2,370			(3		)	(6,974		)
Total	$	126,067		$	117,602		$	106,291

The Company’s effective rate differed from the U.S. federal statutory rate as follows for the years ended December 31, 2013, 2012 and 2011:



	2013		2012		2011
U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State taxes	3.4		3.5		2.8
Nondeductible stock-based compensation	0.8		1.3		0.8
U.S. federal and state research and development credits	(3.5	)	(0.6	)	(2.4	)
Change in state tax rates	—		(0.4	)	(0.1	)
Foreign earnings	(2.6	)	(3.5	)	(2.2	)
Expiration of capital loss carryforward	—		—		2.1
Disallowed officer compensation	0.1		0.6		—
Domestic production activities deduction	(4.3	)	—		—
Other	0.5		0.7		0.9
Change in the deferred tax asset valuation allowance	0.6		—		(2.3	)
	30.0	%	36.6	%	34.6	%

The components of the net deferred tax asset and the related valuation allowance as of December 31, 2013 and 2012 were as follows (in thousands):



	December 31, 2013			December 31, 2012
Net operating loss and credit carryforwards	$	25,498		$	21,556
Depreciation and amortization	—			5,813
Compensation costs	45,246			46,298
Other	16,936			19,333
Deferred tax assets	87,680			93,000
Depreciation and amortization	(15,607		)	—
Acquired intangible assets	(19,530		)	(26,002		)
Internal-use software development costs capitalized	(31,970		)	(24,301		)
Deferred tax liabilities	(67,107		)	(50,303		)
Valuation allowance	(1,251		)	(430		)
Net deferred tax assets	$	19,322		$	42,267

As of December 31, 2013, the Company had U.S. federal NOL carryforwards of approximately $30.7 million related to acquisitions during 2012, which expire at various dates through 2029. As of December 31, 2013 and 2012, the Company had state NOL carryforwards of approximately $59.0 million and $48.2 million, respectively, which expire at various dates through 2024. The Company also had foreign NOL carryforwards of approximately $2.4 million and $1.0 million as of December 31, 2013 and 2012, respectively. The majority of the foreign NOL carryforwards have no expiration dates. As of December 31, 2013 and 2012, the Company had U.S. federal and state research and development tax credit carryforwards of $10.0 million and $1.7 million, respectively, which will expire at various dates through 2031. As of December 31, 2013 and 2012, the Company had foreign tax credit carryforwards of $4.4 million and $4.3 million, respectively, which will expire at various dates through 2023.

As of December 31, 2013 and 2012, the Company recorded a valuation allowance on its deferred tax assets of $1.3 million and $0.4 million, respectively, an increase of $0.8 million.

As of December 31, 2013, undistributed earnings of non-U.S. subsidiaries totaled $167.3 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 $33.0 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, 2013, 2012 and 2011 (in thousands):



	2013			2012			2011
Balance at beginning of year	$	20,902		$	12,496		$	10,773
Gross increases — tax positions of prior periods	2,878			12,173			—
Gross increases — current-period tax positions	2,834			2,251			2,824
Gross decreases — tax positions of prior periods	(1,213		)	(6,018		)	(794		)
Gross decreases — settlements	(750		)	—			(307		)
Balance at end of year	$	24,651		$	20,902		$	12,496

As of December 31, 2013, 2012 and 2011, the Company had approximately $30.6 million, $26.9 million and $17.2 million, respectively, of total unrecognized tax benefits, including $5.9 million of accrued interest and penalties as of December 31, 2013 and 2012 and $4.7 million of accrued interest and penalties as of December 31, 2011. Interest and penalties related to unrecognized tax benefits are recorded in the provision for income taxes and was insignificant during the year ended December 31, 2013. Interest and penalties included in the provision for income taxes for the years ended December 31, 2012 and 2011 were $1.2 million and $0.4 million, respectively. 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, 2013, the Company believes it is reasonably possible that approximately $3.2 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 2014 as a result of ongoing audits.

The Company's income tax return for the 2010 tax year is currently under audit by the Internal Revenue Service. In addition, certain state tax and foreign tax returns for the 2008 through 2011 tax years are currently under audit by 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, all tax years are open for examination by the U.S. federal and state taxing jurisdictions to which the Company is subject due to net operating losses and the limited number of prior year audits by taxing jurisdictions. In our major foreign jurisdictions, tax years after 2009 are open for examination.