13.

Income Taxes

The following table sets forth the components of the provision for income taxes in the periods indicated:


	Year Ended December 31,
	2014			2013			2012
Current income tax expense:
U.S. federal	$	(21,345	)	$	39,279		$	126,585
State and local		(227	)		4,611			22,004

Total	$	(21,572	)	$	43,890		$	148,589
Deferred income tax (benefit):
U.S. federal	$	39,227		$	(46,345	)	$	(51,145	)
State and local		2,742			(7,757	)		(8,426	)

Total	$	41,969		$	(54,102	)	$	(59,571	)

Total provision (benefit) for income taxes	$	20,397		$	(10,212	)	$	89,018

We recognized approximately $5,687 of state income tax benefit in the year ended December 31, 2014, as a result of state operating losses.

We are not required to include the Consolidated VIEs in our consolidated income tax returns. Therefore, we did not recognize income tax expense or benefit for the Consolidated VIEs in the provision for income taxes included in our Consolidated Statements of Operations for the years ended December 31, 2014 and 2013. The effect of the exclusion of the Consolidated VIEs from our income tax provision is shown in the reconciliation of our effective income tax rate as a percentage of income shown below.

The following table sets forth the components of our deferred income tax assets (liabilities) as of the dates indicated:


	As of December 31,
	2014			2013
Deferral of book costs	$	(1,575	)	$	(1,748	)
Property and equipment		0			(1,807	)
Pension		(11,113	)		(10,566	)
Other		(1,972	)		(1,189	)

Gross deferred tax (liabilities)	$	(14,660	)	$	(15,310	)

Deferred revenue	$	10,082		$	10,902
Accounts receivable		910			3,551
Property and equipment		2,495			0
Legal accrual		5,796			3,455
Compensation and benefits		2,410			3,316
Stock-based compensation		19,394			20,794
Operating leases		2,189			2,386
Other assets		9,736			8,356
Other contingent liabilities		64,236			108,423

Gross deferred tax assets	$	117,248		$	161,183

Net deferred income tax asset	$	102,588		$	145,873

Our deferred tax assets decreased primarily due to the payments that we made under the PEAKS Guarantee and CUSO RSA, which are deductible for income tax purposes when paid. As a result of these tax-deductible payments, we expect to report a net operating loss on our federal income tax return for the year ended December 31, 2014, which will be carried back to a prior year to reduce the amount of federal taxable income and the income tax liability in that year.

The difference between the U.S. federal statutory income tax rate and our effective income tax rate as a percentage of income in the periods indicated is reconciled in the following table:


	Year Ended December 31,
	2014			2013			2012
U.S. federal statutory income tax rate		35.0	%		(35.0	%)		35.0	%
Rate differential on VIEs		0.8	%		11.9	%		0	%
State income taxes, net of federal benefit		3.1	%		(5.6	%)		3.4	%
Permanent book/tax differences		2.5	%		2.8	%		0.9	%
Other		(0.3	%)		(1.5	%)		(0.3	%)

Effective income tax rate		41.1	%		(27.4	%)		39.0	%

The following table sets forth the activity with respect to our unrecognized tax benefits in the period indicated:


	Year Ended December 31,
	2014			2013			2012
Balance as of January 1	$	22,291		$	20,690		$	22,050
Increases (decreases) from:
Tax positions taken during a prior period		5,620			1,675			195
Tax positions taken during the current period		537			870			759
Settlements with taxing authorities		(2,551	)		186			(1,027	)
Lapse of statute of limitations		(997	)		(1,130	)		(1,287	)

Balance as of December 31	$	24,900		$	22,291		$	20,690

The amount of unrecognized tax benefits that, if recognized, would have affected our effective tax rate as of December 31, 2014 was $11,109. We may resolve certain federal and state income tax matters presently under examination within the 12 months immediately following the date of this filing. As of December 31, 2014, we estimated that it was reasonably possible that unrecognized tax benefits, excluding interest and penalties, could decrease in an amount ranging from $0 to $6,932 in the 12 months immediately following the date of this filing due to the resolution of those matters. The amount of interest and penalties related to unrecognized tax benefits accrued on our Consolidated Balance Sheets was $6,135 as of December 31, 2014 and $6,371 as of December 31, 2013. In each of the years ended December 31, 2014, 2013 and 2012, the amount of interest expense and penalties related to our unrecognized tax benefits that we recognized in our Consolidated Statements of Operations was not significant.

We file income tax returns in the United States (federal) and in various state and local jurisdictions. As of December 31, 2014, our federal, state or local income tax returns were no longer subject to examination for tax years prior to 2010, except in nine states where our income tax returns are still subject to examinations for tax year 2009 and one state where our income tax return is still subject to examination for the tax year 2008.