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INCOME TAXES | 12 Months Ended
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Dec. 31, 2015
INCOME TAXES |
INCOME TAXES | 15.INCOME TAXES The domestic and foreign components of the Company’s income (loss) before provision for income taxes are as follows:
|  | Year Ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |
Domestic* |  | $ | 859,039 |  | $ | 711,917 |  | $ | 596,899 |
Foreign* |  | 32,509 |  | 33,871 |  | (33,005) |
Income before provision for income taxes |  | $ | 891,548 |  | $ | 745,788 |  | $ | 563,894 |
*After intercompany royalties, management fees and interest charges from the Company’s domestic to foreign entities of $29.2 million, $34.9 million and $25.9 million for the years ended December 31, 2015, 2014 and 2013, respectively. Components of the provision for income taxes are as follows:
|  | Year Ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |
Current: |  |  |  |  |  |  |
Federal |  | $ | 548,018 |  | $ | 228,348 |  | $ | 191,596 |
State |  | 88,671 |  | 36,633 |  | 36,662 |
Foreign |  | 10,634 |  | 7,467 |  | 4,052 |
|  | 647,323 |  | 272,448 |  | 232,310 |
Deferred: |  |  |  |  |  |  |
Federal |  | (255,422) |  | (8,473) |  | (7,441) |
State |  | (40,446) |  | (442) |  | (1,443) |
Foreign |  | (5,420) |  | 3,476 |  | (9,694) |
|  | (301,288) |  | (5,439) |  | (18,578) |
Valuation allowance |  | (1,220) |  | (4,406) |  | 11,501 |
|  | $ | 344,815 |  | $ | 262,603 |  | $ | 225,233 |
The differences in the total provision for income taxes that would result from applying the 35% federal statutory rate to income before provision for income taxes and the reported provision for income taxes are as follows:
|  | Year Ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |
U.S. Federal tax expense at statutory rates |  | $ | 312,042 |  | $ | 261,025 |  | $ | 197,363 |
State income taxes, net of federal tax benefit |  | 31,046 |  | 23,859 |  | 22,640 |
Permanent differences |  | 8,488 |  | 4,816 |  | 936 |
Domestic production deduction |  | - |  | (20,607) |  | (16,039) |
Other |  | (127) |  | (1,267) |  | 266 |
Foreign rate differential |  | (5,414) |  | (817) |  | 8,566 |
Valuation allowance |  | (1,220) |  | (4,406) |  | 11,501 |
|  | $ | 344,815 |  | $ | 262,603 |  | $ | 225,233 |
Major components of the Company’s deferred tax assets (liabilities) at December 31 are as follows:
|  | 2015 |  | 2014 |
Deferred Tax Assets: |  |  |  |  |
Reserve for sales returns |  | $ | 242 |  | $ | 289 |
Reserve for doubtful accounts |  | 18 |  | 36 |
Reserve for inventory obsolescence |  | 1,126 |  | 3,030 |
Reserve for marketing development fund |  | 10,118 |  | 9,118 |
Capitalization of inventory costs |  | 1,927 |  | 2,527 |
State franchise tax - current |  | 15,143 |  | 12,358 |
Accrued compensation |  | 1,584 |  | - |
Accrued other liabilities |  | 1,565 |  | 3,503 |
Deferred revenue |  | 152,777 |  | 47,319 |
Stock-based compensation |  | 24,488 |  | 25,268 |
Securities impairment |  | 289 |  | 288 |
Foreign net operating loss carryforward |  | 26,624 |  | 17,256 |
Prepaid supplies |  | 6,065 |  | 4,195 |
Distribution rights |  | 120,798 |  | - |
Termination payments |  | 81,896 |  | - |
Capital loss carryforward |  | 370 |  | - |
Gain on intercompany transfer |  | 7,809 |  | 8,347 |
Total gross deferred tax assets |  | $ | 452,839 |  | $ | 133,534 |
Deferred Tax Liabilities: |  |  |  |  |
Amortization of trademarks |  | $ | (12,078) |  | $ | (11,923) |
Intangibles |  | (134,021) |  | - |
State franchise tax - deferred |  | (18,359) |  | (4,198) |
Other deferred tax liabilities |  | (2,337) |  | (327) |
Depreciation |  | (7,543) |  | (5,022) |
Total gross deferred tax liabilities |  | (174,338) |  | (21,470) |
Valuation Allowance |  | (17,191) |  | (17,683) |
Net deferred tax assets |  | $ | 261,310 |  | $ | 94,381 |
During the years ended December 31, 2015, 2014 and 2013, the Company established full valuation allowances against certain deferred tax assets, resulting from cumulative net operating losses incurred by certain foreign subsidiaries of the Company. The effect of the valuation allowances and the subsequent related impact on the Company’s overall tax rate was to (decrease) increase the Company’s provision for income taxes by ($0.5) million, ($4.4) million and $10.8 million for the years ended December 31, 2015, 2014 and 2013, respectively. At December 31, 2015, the Company had net operating loss carryforwards of approximately $129.1 million. Of this amount, $112.3 million may be carried forward indefinitely. The remaining $16.9 million will begin to expire in 2017. The following is a roll-forward of the Company’s total gross unrecognized tax benefits, not including interest and penalties, for the years ended December 31, 2015, 2014 and 2013:
|  | Gross Unrealized Tax Benefits |
Balance at January 1, 2013 |  | $ | 926 |
Additions for tax positions related to the current year |  | - |
Additions for tax positions related to the prior year |  | 9 |
Decreases for tax positions related to prior years |  | - |
Balance at December 31, 2013 |  | $ | 935 |
Additions for tax positions related to the current year |  | - |
Additions for tax positions related to the prior year |  | - |
Decreases for tax positions related to prior years |  | - |
Balance at December 31, 2014 |  | $ | 935 |
Additions for tax positions related to the current year |  | - |
Additions for tax positions related to the prior year |  | - |
Decreases for tax positions related to prior years |  | (464 | )
Balance at December 31, 2015 |  | $ | 471 |
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s consolidated financial statements. As of December 31, 2015, the Company had accrued approximately $0.2 million in interest and penalties related to unrecognized tax benefits. If the Company were to prevail on all uncertain tax positions it would not have a significant impact on the Company’s effective tax rate. It is expected that the amount of unrecognized tax benefit change within the next 12 months will not be significant. The Company is subject to U.S. federal income tax as well as to income tax in multiple state and foreign jurisdictions. On August 7, 2015, the Internal Revenue Service (the “IRS”) began its examination of the Company’s U.S. federal income tax returns for the years ended December 31, 2012 and 2013. The Company is in various stages of examination with certain states and certain foreign jurisdictions. The 2012, 2013 and 2014 U.S. federal income tax returns are subject to examination by the IRS. State income tax returns are subject to examination for the 2011 through 2014 tax years.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 + Details
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