NOTE 19. INCOME TAXES

The domestic and foreign components of income before provision for income taxes are as follows (in thousands):

	Year ended June 30,
	2016		2015		2014
Domestic	$	207,641	$	187,332	$	204,879
Foreign		15,971		14,190		13,763
Income before income taxes	$	223,612	$	201,522	$	218,642

The components of income tax expense are as follows (in thousands):

	Year ended June 30,
	2016			2015			2014
Current:
Federal	$	54,507		$	37,159		$	53,055
State and local		9,401			8,080			11,456
Foreign		3,337			3,066			3,256
Total current		67,245			48,305			67,767
Deferred:
Federal		11,978			23,261			12,580
State and local		2,028			3,964			2,680
Foreign		(438	)		(203	)		299
Total deferred		13,568			27,022			15,559
Total income tax expense	$	80,813		$	75,327		$	83,326

Income tax expense differs from the amounts computed by applying the statutory U.S. income tax rate of 35 percent as a result of the following (in thousands):

	Year ended June 30,
	2016			2015			2014
Expected tax expense computed at federal rate	$	78,264		$	70,533		$	76,525
State and local taxes, net of federal benefit		7,429			7,828			9,188
Nondeductible items		2,936			2,166			1,150
Effect of foreign tax rates		(2,308	)		(2,135	)		(1,885	)
Other		(5,508	)		(3,065	)		(1,652	)
Total income tax expense	$	80,813		$	75,327		$	83,326

The tax effects of temporary differences that give rise to deferred taxes are presented below (in thousands):

	June 30,
	2016			2015
Deferred tax assets:
Deferred compensation and post-retirement obligations	$	35,724		$	34,963
Reserves and accruals		39,903			25,498
Stock-based compensation		9,833			7,242
Interest rate swap		8,505			4,616
Deferred rent		5,765			4,886
Other		8,353			11,760
Total deferred tax assets		108,083			88,965
Deferred tax liabilities:
Goodwill and other intangible assets		(320,811	)		(258,498	)
Unbilled revenue		(18,740	)		(15,652	)
Prepaid expenses		(8,308	)		(5,452	)
Other		(8,682	)		(9,600	)
Total deferred tax liabilities		(356,541	)		(289,202	)
Net deferred tax liability	$	(248,458	)	$	(200,237	)

The Company is subject to income taxes in the U.S. and various state and foreign jurisdictions. Tax statutes and regulations within each jurisdiction are subject to interpretation and require the application of significant judgment. The Company's consolidated federal income tax returns through June 30, 2012 are no longer subject to audit. The Company is currently under examination by one state jurisdiction for years ended June 30, 2013 and June 30, 2014. The Company does not expect the resolution of these examinations to have a material impact on its results of operations, financial condition or cash flows.

During the years ended June 30, 2016 and 2015, the Company’s income tax expense was favorably impacted by non-taxable gains on assets invested in corporate-owned life insurance (COLI) policies, and tax benefits related to deductions claimed for income from domestic production activities.

U.S. income taxes have not been provided for undistributed earnings of foreign subsidiaries that have been permanently reinvested outside the United States. As of June 30, 2016, the estimated deferred tax liability associated with these undistributed earnings is approximately $13.3 million.

The Company’s total liability for unrecognized tax benefits as of June 30, 2016, 2015 and 2014 was approximately $0.4 million, $6.2 million and $9.6 million, respectively. Of the unrecognized tax benefits at June 30, 2016, 2015 and 2014, $0.4 million, $1.3 million and $2.4 million, respectively, if recognized, would impact the Company’s effective tax rate. A reconciliation of the beginning and ending amount of unrecognized benefits is shown in the table below (in thousands):

	Year ended June 30,
	2016			2015			2014
Beginning of year	$	6,220		$	9,636		$	8,184
Additions based on current year tax positions		89			1,468			2,023
Reductions based on changes to prior year tax positions		—			(3,522	)		—
Lapse of statute of limitations		(128	)		(1,344	)		(426	)
Settlement with taxing authorities		(5,783	)		(18	)		(145	)
End of year	$	398		$	6,220		$	9,636

The Company recognizes net interest and penalties as a component of income tax expense. Over the next 12 months, the Company does not expect a significant increase or decrease in the unrecognized tax benefits recorded at June 30, 2016. As of June 30, 2016, approximately $0.2 million of the unrecognized tax benefits are included in other long-term liabilities, with the remainder included in other balance sheet accounts.