11. INCOME TAXES

Consolidated income from continuing operations before taxes and noncontrolling interest for domestic and foreign operations is as follows:

	Year Ended June 30,

	2013			2012		2011
	(in 000s)
United States	$	220,439		$	161,043	$	131,668
Foreign		(4,164	)		3,416		11,725

Total	$	216,275		$	164,459	$	143,393

The components of the Company's income tax expense from continuing operations are as follows:

	Year Ended June 30,

	2013			2012			2011
	(in 000s)
Current:
Federal	$	73,441		$	61,115		$	12,614
State		8,623			9,085			5,585
Foreign		4,299			2,902			3,245

		86,363			73,102			21,444

Deferred:
Federal		(5,346	)		(7,169	)		23,984
State		(509	)		(1,383	)		(919	)
Foreign		(3,934	)		(1,001	)		673

		(9,789	)		(9,553	)		23,738

Income tax expense	$	76,574		$	63,549		$	45,182

The difference between the U.S. statutory federal income tax rate and the Company's effective income tax rate is as follows:

	Year Ended June 30,

	2013			2012			2011
U.S. federal statutory income tax rate		35.0	%		35.0	%		35.0	%
Change in income tax contingencies		1.4			2.1			(2.5	)
State income taxes, net of federal benefit		2.6			2.8			2.0
Foreign earnings subject to U.S. tax		(0.3	)		(0.3	)		2.9
Change in valuation allowance		—			(0.6	)		(0.2	)
Tax credits		(2.5	)		(1.2	)		(4.7	)
Domestic production activities deduction		(2.7	)		(2.7	)		(1.5	)
Foreign losses-no future benefit		0.9			2.0			—
Other, net		1.0			1.5			0.5

		35.4	%		38.6	%		31.5	%

The major components of the deferred tax assets and liabilities from continuing operations are as follows:

	June 30,

	2013			2012
	(in 000s)
Deferred tax assets:
Share-based compensation	$	11,421		$	11,838
Deferred revenue, net of deferred costs		15,947			14,145
Accruals not currently deductible for tax purposes		21,764			21,537
Inventory		5,250			5,518
Net operating loss carryforwards		5,949			2,988
Intangible assets		6,438			4,825
Allowance for doubtful accounts		2,708			4,132
Foreign tax credit carryforwards		—			1,588
Other tax credits		—			969
Interest rate swap agreement		3,515			5,043
Other		1,571			1,176

Total gross deferred tax assets		74,563			73,759
Less: Valuation allowance		(62	)		(68	)

Deferred tax assets	$	74,501		$	73,691

Deferred tax liabilities:
Property and equipment	$	18,322		$	22,955
Other		100			1,153

Total gross deferred tax liabilities	$	18,422		$	24,108

Net deferred tax assets	$	56,079		$	49,583

Current deferred income tax liabilities of $-0- and $21,000 of as of June 30, 2013 and 2012, respectively, are included in accrued and other liabilities, and noncurrent deferred income tax liabilities of $170,000 and $627,000 as of June 30, 2013 and 2012, respectively, are included in other liabilities in the accompanying Consolidated Balance Sheets.

The Company has not provided income taxes on approximately $15.2 million and $12.1 million of undistributed earnings as of June 30, 2013 and 2012, respectively, from certain foreign subsidiaries. The Company plans to permanently invest the earnings in the foreign subsidiaries and therefore has not recorded a deferred tax liability associated with the undistributed earnings. A determination of the potential deferred tax liability which would result from these earnings is not practicable at this time.

At June 30, 2013, the Company had net operating loss carryforwards for U.S. federal income tax purposes of approximately $4.5 million. The entire amount of the net operating loss carryforwards are subject to limitations under Section 382 of the Internal Revenue Code. Section 382 limits the amount of carryforwards available per year for use against future taxable income. Based on the Company's recent history of taxable income and projections of taxable income in the future, the Company expects to utilize all of its federal net operating loss carryforwards. The Company also has net operating losses in several foreign jurisdictions totaling approximately $16.7 million. Based on the Company's recent history of taxable income and projections of taxable income in the future, the Company expects to utilize all of its foreign net operating loss carryforwards and, therefore, no valuation allowance has been established for these losses.

The Company's subsidiary in India operated under a tax holiday that expired in March 2011.

The Company recorded $20.4 million and $6.4 million as an increase to stockholder's equity for certain tax benefits from employee share-based compensation for the years ended June 30, 2013 and 2012, respectively.

The Company had $15.6 million and $12.7 million of liabilities for unrecognized tax benefits as of June 30, 2013 and 2012, respectively. Of these amounts, $15.5 million and $12.7 million, respectively, if recognized, would impact the Company's effective tax rate. The Company recognizes interest and penalties related to unrecognized tax benefits as tax expense. As of June 30, 2013 and 2012, the Company had accrued interest and penalties of $2.1 million and $1.7 million, respectively. The Company increased the accrual of interest and penalties by $0.4 million and $0.4 million during the years ended June 30, 2013 and 2012, respectively.

Changes to the balance of unrecognized tax benefits are as follows:

	June 30,

	2013			2012
	(in 000s)
Balance, beginning of year	$	12,707		$	8,364
Additions based on tax provisions related to current year		2,361			3,099
Additions for tax positions of prior years		578			1,461
Reductions for tax positions of prior years		—			(128	)
Lapse of statute of limitations		(75	)		(36	)
Foreign currency translation adjustment		7			(53	)

Balance, end of year	$	15,578		$	12,707

The Internal Revenue Service ("IRS') commenced examination of the Company's United States federal income tax returns for 2006 through 2009 during fiscal year 2011. The IRS completed its field examination of the open tax years and issued a Revenue Agent's Report in January 2012. The Company filed a formal protest regarding certain unagreed adjustments in March 2012 and the case was assigned to the IRS Appeals Office in Laguna Niguel, California. In June 2013, the Company agreed to settle all remaining issues with the IRS which was approved by the Joint Committee on Taxation in July 2013. Consequently, the Company expects to receive a refund of approximately $7.1 million and will reduce unrecognized tax benefits by approximately $8.0 million with a corresponding reduction to the income tax provision of approximately $3.6 million in the first quarter of fiscal 2014.

Including the IRS case described above, it is reasonably possible that the Company's amount of unrecognized tax benefits may decrease within the next twelve months by a range up to $9.5 million.

The Company files numerous consolidated and separate income tax returns in the United States and various state and foreign jurisdictions. The Company is currently under examination in certain states and foreign jurisdictions. With few exceptions, the Company is no longer subject to United States federal, state and local, or foreign income tax examinations for years before fiscal year 2006.