Income Tax

During the years ended March 31, 2013, 2012, and 2011, the Company recognized federal research and development tax credits of $1,461, $1,055 and $927, respectively, and state research and development tax credits of approximately $145, $165 and $119, respectively. The Internal Revenue Service (“IRS”) statute related to research and development credits expired on December 31, 2011 and was retroactively reinstated on January 2, 2013 for 2012 and 2013. The Company's research and development credits claimed for the year ended March 31, 2012 represent credits for the nine-month period from April 1, 2011 through December 31, 2011. The credit for the year ended March 31, 2013 includes the twelve month period from April 1, 2012 through March 31, 2013.

The Company also claimed the qualified production activities deduction under Section 199 of the Internal Revenue Code (“IRC”) for $9,032, $10,025, and $8,134 (pre-tax) during the years ended March 31, 2013, 2012, and 2011, respectively. The research and development credits and the qualified production activities income deduction calculated by the Company involve certain assumptions and judgments regarding qualification of expenses under the relevant tax code provisions.

The provision (benefit) for income taxes consists of the following components:



	Fiscal Year Ended March 31,
	2013			2012			2011
Current:
Federal taxes	$	30,382		$	36,109		$	28,979
State taxes	5,019			8,614			6,501
Foreign taxes	190			73			—
Total current taxes	35,591			44,796			35,480
Deferred:
Federal taxes	$	(8,469	)	$	(3,571	)	$	(2,168	)
State taxes	(742		)	(502		)	(502		)
Foreign taxes	(190		)	(73		)	—
Total deferred taxes	(9,401		)	(4,146		)	(2,670		)
Provision for income taxes	$	26,190		$	40,650		$	32,810

The provision for income taxes differs from the amount computed at the federal statutory rate as follows:



	Fiscal Year Ended March 31,
	2013		2012		2011
Current:
Federal income tax statutory rate	35.0	%	35.0	%	35.0	%
Increase (decrease) resulting from:
State income taxes, net of Federal benefit	4.0		4.5		4.1
Research and development tax credits	(2.1	)	(0.9	)	(1.0	)
Qualified production activities income deduction	(4.6	)	(3.0	)	(3.0	)
Impairment of goodwill	7.5		—		—
Other	(1.8	)	(0.6	)	(0.3	)
Effective income tax rate	38.0	%	35.0	%	34.8	%

The net deferred tax assets and liabilities in the accompanying consolidated balance sheets consist of the following:



	March 31, 2013			March 31, 2012
Deferred tax assets:
Deferred revenue	$	11,483		$	8,618
Inventory valuation	224			113
Accrued compensation and benefits	3,898			3,788
Deferred compensation	1,615			1,455
State income taxes	17			255
Compensatory stock option expense	2,291			1,828
Allowance for doubtful accounts	7,182			4,235
Other	3,207			4,813
Total deferred tax assets	29,917			25,105
Deferred tax liabilities:
Accelerated depreciation	$	(1,876	)	$	(2,319	)
Capitalized software	(7,717		)	(7,797		)
Intangibles assets	(4,124		)	(7,307		)
Prepaid expense	(1,859		)	(2,979		)
Other	—			73
Total deferred tax liabilities	(15,576		)	(20,329		)
Deferred tax assets (liabilities), net	$	14,341		$	4,776

The deferred tax assets and liabilities have been shown net in the accompanying consolidated balance sheets based on the long-term or short-term nature of the items that give rise to the deferred amount. No valuation allowance has been made against the deferred tax assets as management expects to receive the full benefit of the assets recorded.

Uncertain tax positions

A reconciliation of the beginning and ending amount of unrecognized tax benefits, which is recorded in income taxes payable in the Company’s consolidated balance sheet, is as follows:



Balance at March 31, 2011	$	672
Additions for prior year tax positions	26
Reductions for prior year tax positions	(285		)
Balance at March 31, 2012	$	413
Additions for current/prior year tax positions	455
Reductions for prior year tax positions	(135		)
Balance at March 31, 2013	$	733

The total amount of unrecognized tax benefit that, if recognized, would decrease the income tax provision is $733.

The Company’s continuing practice is to recognize estimated interest and/or penalties related to income tax matters in general and administrative expenses. The Company had approximately $118 and $75 of accrued interest related to income tax matters at March 31, 2013 and 2012, respectively. No penalties were accrued.

The Company is no longer subject to U.S. federal income tax examinations for tax years before 2012. With few exceptions, the Company is no longer subject to state or local income tax examinations for tax years before 2008. The Company does not anticipate that total unrecognized tax benefits will significantly change due to the settlement of audits or the expiration of statute of limitations within the next twelve months.