Income Tax

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



	Fiscal Year Ended March 31,
	2014			2013			2012
Current:
Federal taxes	$	8,673		$	30,382		$	36,109
State taxes	2,380			5,019			8,614
Foreign taxes	252			190			73
Total current taxes	11,305			35,591			44,796
Deferred:
Federal taxes	$	(2,894	)	$	(8,469	)	$	(3,571	)
State taxes	(897		)	(742		)	(502		)
Foreign taxes	(193		)	(190		)	(73		)
Total deferred taxes	(3,984		)	(9,401		)	(4,146		)
Provision for income taxes	$	7,321		$	26,190		$	40,650

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



	Fiscal Year Ended March 31,
	2014		2013		2012
Current:
Federal income tax statutory rate	35.0	%	35.0	%	35.0	%
Increase (decrease) resulting from:
State income taxes, net of Federal benefit	4.2		4.0		4.5
Research and development tax credits	(5.3	)	(2.1	)	(0.9	)
Qualified production activities income deduction	(4.9	)	(4.6	)	(3.0	)
Impairment of goodwill	5.7		7.5		—
Other	(2.9	)	(1.8	)	(0.6	)
Effective income tax rate	31.8	%	38.0	%	35.0	%

During the years ended March 31, 2014, 2013, and 2012, the Company recognized federal research and development tax credits of $1,196, $1,461 and $1,055, respectively, and state research and development tax credits of approximately $251, $145 and $165, respectively. The Internal Revenue Service (“IRS”) statute related to research and development credits expired on December 31, 2011 and was retroactively reinstated through December 31, 2013 in January 2013. The Company's research and development credits claimed for the year ended March 31, 2014 represent credits for the nine-month period from April 1, 2013 through December 31, 2013.

The Company also claimed the qualified production activities deduction under Section 199 of the Internal Revenue Code (“IRC”) for $3,189, $9,032, and $10,025 (pre-tax) during the years ended March 31, 2014, 2013, and 2012, 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 net deferred tax assets and liabilities in the accompanying consolidated balance sheets consist of the following:



	March 31, 2014			March 31, 2013
Deferred tax assets:
Deferred revenue	$	10,144		$	11,483
Inventory valuation	46			224
Accrued compensation and benefits	5,219			3,898
Deferred compensation	1,941			1,615
State income taxes	—			17
Compensatory stock option expense	2,094			2,291
Allowance for doubtful accounts	6,791			7,182
Intangible assets	6,086			—
Research and development credit	2,434			2,003
Other	2,992			3,207
Total deferred tax assets	37,747			31,920
Deferred tax liabilities:
Accelerated depreciation	$	(1,582	)	$	(1,876	)
Capitalized software	(13,919		)	(7,717		)
Intangible assets	—			(4,124		)
Prepaid expense	(1,199		)	(1,859		)
State income taxes	(433		)	—
Total deferred tax liabilities	(17,133		)	(15,576		)
Valuation allowance	(2,288		)	(2,003		)
Deferred tax assets, net	$	18,326		$	14,341

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. The Company expects to receive the full benefit of the deferred tax assets recorded with the exception of a specific state tax credit for which the Company has recorded a valuation allowance.

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, 2012	$	413
Additions for prior year tax positions	455
Reductions for prior year tax positions	(135		)
Balance at March 31, 2013	$	733
Additions for current/prior year tax positions	405
Reductions for prior year tax positions	(263		)
Balance at March 31, 2014	$	875

The total amount of unrecognized tax benefit that, if recognized, would decrease the income tax provision is $875.

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 $80 and $118 of accrued interest related to income tax matters at March 31, 2014 and 2013, respectively. No penalties were accrued.

The Company is no longer subject to U.S. federal income tax examinations for tax years before 2013. With a few exceptions, the Company is no longer subject to state or local income tax examinations for tax years before 2009. 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.