7. Income Taxes

The difference between the U.S. federal statutory tax rate of 35% and the Company’s effective tax rates for the three months ended March 31, 2017 was primarily due to inclusion of excess tax benefits related tohe adoption of ASU No. 2016-09, Compensation—Stock Compensation (Topic 718), and state income taxes. For the three months ended March 31, 2017, $0.8 million in excess tax benefits related to stock compensation have been reflected as income tax benefit in the Consolidated Statement of Operations and Comprehensive Income; prior to adoption of ASU No. 2016-09, this amount would have been recorded to additional paid-in capital. Due predominately to the inclusion of the excess tax benefit the Company had a net tax benefit for the three months ended March 31, 2017. The tax benefit in three months ended March 31, 2017 represented 42.7% of pretax income, compared to the effective rate for the three months ended March 31, 2016 of 38.6%.The difference between the U.S. federal statutory tax rate and the Company’s effective tax rate for the three months ended March 31, 2016 was primarily due to state income taxes.

The Company had unrecognized tax benefits of approximately $0.3 million as of March 31, 2017 and December 31, 2016, which were included in other liabilities in the accompanying consolidated balance sheets.

The Company’s policy is to recognize interest and penalties related to income tax liabilities as a component of income tax expense in the consolidated statements of operations. The amount of interest and penalties charged to income tax expense because of the unrecognized tax benefits was not significant for the three months ended March 31, 2017 and 2016.

The Company is subject to taxation in various jurisdictions. The Company’s tax return for 2015 is subject to examination by U.S. federal authorities. The Company’s tax returns are subject to examination by various state authorities for the years 2012 through 2015.