7. Income Taxes

The significant components of the company's deferred tax assets and liabilities as of December 31, 2013 and 2012 were (in thousands):

	December 31,
	2013			2012
Current Deferred Tax Assets (Liabilities):
U.S. federal and state net operating loss carryforwards	$	344		$	8,909
Capitalized research and development costs		10,507			8,921
Accruals, reserves and other		24,661			25,374
Valuation allowance		(5,358	)		(4,988	)
Current deferred tax assets (liabilities), net		30,154			38,216

Noncurrent Deferred Tax Assets (Liabilities):
State net operating loss carryforwards		432			1,136
Capitalized research and development costs		-			15,847
Tax credit/capital loss carryforwards and other		15,375			18,296
Excess tax depreciation and other		(40,591	)		(42,602	)
Valuation allowance		(1,827	)		(3,556	)
Noncurrent deferred tax (liabilities) assets, net		(26,611	)		(10,879	)
Total deferred tax assets, net	$	3,543		$	27,337

The company's income tax provisions for the years ended December 31, 2013, 2012 and 2011 were comprised of the following (in thousands):

	Years Ended December 31,
	2013			2012			2011
Current:
Federal	$	7,573		$	1,889		$	384
State		2,858			1,862			841
Foreign		61			102			115
Total current		10,492			3,853			1,340

Deferred:
Federal		25,667			29,264			29,558
State		(904	)		(2,339	)		(10,259	)
Total deferred		24,763			26,925			19,299
Total income tax provision	$	35,255		$	30,778		$	20,639

The company's income before income taxes included foreign income of $0.2 million, $0.3 million and $0.4 million in 2013, 2012 and 2011, respectively.

A reconciliation of the statutory federal income tax rate to the company's effective tax rate for the years ended December 31, 2013, 2012 and 2011 is as follows:

	2013		2012		2011
U.S. federal statutory rate		35.0%		35.0%		35.0%
State taxes		3.3		3.6		3.3
Domestic manufacturing deduction		(2.1)		-		-
Extraterritorial income exclusion		(1.0)		(3.1)		(8.7)
Research and development credits		(0.7)		(1.7)		(4.5)
Other, net		(0.5)		(0.3)		(1.7)
Effective rate		34.0%		33.5%		23.4%

The company recognized research and development tax credits in all periods presented that were primarily attributable to the company's Antares and COTS research and development programs that are further discussed in Note 1. In addition, the company recorded favorable income tax adjustments of $1.1 million, $2.8 million and $7.7 million in 2013, 2012 and 2011, respectively, pertaining to extraterritorial income exclusions.

At December 31, 2013, the company had U.S. capital loss carryforwards of $17.4 million, which expire beginning in 2015 through 2018. The deferred tax assets related to capital losses have been fully offset with a valuation allowance due to the uncertainty of realization. These capital loss carryforwards are subject to certain limitations and other restrictions.

At December 31, 2013, the company had no remaining U.S. federal net operating loss carryforwards.

Changes in the company's unrecognized tax benefits were as follows (in thousands):

	2013			2012			2011
Unrecognized tax benefits at beginning of year	$	18,200		$	16,732		$	12,386
Additions based on tax positions related to the current year		-			-			2,325
Additions for tax positions of prior years		646			1,548			2,351
Reduction resulting from lapse of statute of limitation		(10	)		(80	)		(330	)
Unrecognized tax benefits at end of year	$	18,836		$	18,200		$	16,732

All unrecognized tax benefits, if recognized, would lower the effective tax rate.

The company is subject to U.S. federal income tax and income tax in multiple state jurisdictions. The company has substantially concluded all income tax matters for years through 1989. In addition, the IRS completed an audit of the company's 2005 federal income tax return in 2008.

The company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. No interest or penalties have been recorded in the accompanying consolidated financial statements.