Income Tax

The provision for income taxes consists of the following components:



	Fiscal Year Ended March 31,
	2015			2014			2013
Current:
Federal taxes	$	18,055		$	8,673		$	30,382
State taxes	1,887			2,380			5,019
Foreign taxes	262			252			190
Total current taxes	20,204			11,305			35,591
Deferred:
Federal taxes	$	(9,804	)	$	(2,894	)	$	(8,469	)
State taxes	(1,771		)	(897		)	(742		)
Foreign taxes	(297		)	(193		)	(190		)
Total deferred taxes	(11,872		)	(3,984		)	(9,401		)
Provision for income taxes	$	8,332		$	7,321		$	26,190

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



	Fiscal Year Ended March 31,
	2015		2014		2013
Current:
Federal income tax statutory rate	35.0	%	35.0	%	35.0	%
Increase (decrease) resulting from:
State income taxes, net of Federal benefit	2.0		4.2		4.0
Research and development tax credits	(4.4	)	(5.3	)	(2.1	)
Qualified production activities income deduction	(5.4	)	(4.9	)	(4.6	)
Impairment of goodwill	—		5.7		7.5
Other non-recurring adjustments for State taxes	(1.8	)	—		—
Other	(2.0	)	(2.9	)	(1.8	)
Effective income tax rate	23.4	%	31.8	%	38.0	%

During the years ended March 31, 2015, 2014, and 2013, the Company recognized federal research and development tax credits of $1,560, $1,196 and $1,461, respectively, and state research and development tax credits of approximately $380, $251 and $145, respectively. The Internal Revenue Service (“IRS”) statute related to research and development credits expired on December 31, 2013 and was retroactively reinstated through December 31, 2014 in December 2014. The research and development credits claimed by the Company for the year ended March 31, 2015 represent credits for the nine-month period from April 1, 2014 through December 31, 2014.

The Company also claimed the qualified production activities deduction under Section 199 of the Internal Revenue Code (“IRC”) for $5,528, $3,189, and $9,032 (pre-tax) during the years ended March 31, 2015, 2014, and 2013, 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, 2015			March 31, 2014
Deferred tax assets:
Deferred revenue	$	11,970		$	10,144
Inventory valuation	56			46
Accrued compensation and benefits	7,744			5,219
Deferred compensation	2,342			1,941
Compensatory stock option expense	2,852			2,094
Allowance for doubtful accounts	4,944			6,791
Intangible assets	7,603			6,086
Research and development credit	1,988			2,434
Net operating loss	512			—
Other	3,561			2,992
Total deferred tax assets	43,572			37,747
Deferred tax liabilities:
Accelerated depreciation	$	(756	)	$	(1,582	)
Capitalized software	(8,728		)	(13,919		)
Prepaid expense	(1,321		)	(1,199		)
State income taxes	(730		)	(433		)
Total deferred tax liabilities	(11,535		)	(17,133		)
Valuation allowance	(1,840		)	(2,288		)
Deferred tax assets, net	$	30,197		$	18,326

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 within other noncurrent liabilities

in the Company’s consolidated balance sheet, is as follows:



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
Additions for prior year tax positions	3,106
Reductions for prior year tax positions	(218		)
Balance at March 31, 2015	$	3,763

During the year ended March 31, 2015, the Company recorded additional liabilities of $3,106 mostly related to various state tax planning benefits recorded in the current year for prior year tax positions. The total amount of unrecognized tax benefit that, if recognized, would decrease the income tax provision is $3,763.

The Company’s practice is to recognize estimated interest and/or penalties related to income tax matters in selling, general and administrative expenses. The Company had approximately $332 and $80 of accrued interest related to income tax matters at March 31, 2015 and 2014, respectively. No penalties were accrued.

The Company is no longer subject to U.S. federal income tax examinations for tax years before 2014. With a few exceptions, the Company is no longer subject to state or local income tax examinations for tax years before 2010. 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.