NOTE 19. INCOME TAXES

The domestic and foreign components of income before provision for income taxes are as follows (in thousands):

	Year ended June 30,
	2017		2016		2015
Domestic	$	231,982	$	207,641	$	187,332
Foreign		16,637		15,971		14,190
Income before income taxes	$	248,619	$	223,612	$	201,522

The components of income tax expense are as follows (in thousands):

	Year ended June 30,
	2017			2016			2015
Current:
Federal	$	54,425		$	54,507		$	37,159
State and local		11,334			9,401			8,080
Foreign		4,041			3,337			3,066
Total current		69,800			67,245			48,305
Deferred:
Federal		13,076			11,978			23,261
State and local		2,917			2,028			3,964
Foreign		(845	)		(438	)		(203	)
Total deferred		15,148			13,568			27,022
Total income tax expense	$	84,948		$	80,813		$	75,327

Income tax expense differs from the amounts computed by applying the statutory U.S. income tax rate of 35 percent as a result of the following (in thousands):

	Year ended June 30,
	2017			2016			2015
Expected tax expense computed at federal rate	$	87,017		$	78,264		$	70,533
State and local taxes, net of federal benefit		9,263			7,429			7,828
Nonincludible and nondeductible items, net		1,087			2,936			2,166
Effect of foreign tax rates		(2,320	)		(2,308	)		(2,135	)
R&D tax credit		(4,894	)		(135	)		(77	)
Other tax credits		(1,321	)		(1,744	)		(1,261	)
ASU 2016-09 share-based compensation		(1,390	)		(1,061	)		—
Domestic manufacturing deduction and other		(2,494	)		(2,568	)		(1,727	)
Total income tax expense	$	84,948		$	80,813		$	75,327

The tax effects of temporary differences that give rise to deferred taxes are presented below (in thousands):

	June 30,
	2017			2016
Deferred tax assets:
Deferred compensation and post-retirement obligations	$	37,257		$	35,724
Reserves and accruals		40,058			39,903
Stock-based compensation		13,599			9,833
Interest rate swap		—			8,505
Deferred rent		6,091			5,765
Other		2,000			8,353
Total deferred tax assets		99,005			108,083
Deferred tax liabilities:
Goodwill and other intangible assets		(337,849	)		(320,811	)
Unbilled revenue		(20,913	)		(18,740	)
Prepaid expenses		(4,554	)		(8,308	)
Interest rate swap		(963	)		—
Other		(8,046	)		(8,682	)
Total deferred tax liabilities		(372,325	)		(356,541	)
Net deferred tax liability	$	(273,320	)	$	(248,458	)

The Company is subject to income taxes in the U.S. and various state and foreign jurisdictions. Tax statutes and regulations within each jurisdiction are subject to interpretation and require the application of significant judgment. The Company's consolidated federal income tax returns through June 30, 2013 are no longer subject to audit. The Company is currently under examination by three state jurisdictions for years 2010 through 2016. The Company does not expect the resolution of these examinations to have a material impact on its results of operations, financial condition or cash flows.

During the years ended June 30, 2017 and 2016, the Company’s income tax expense was favorably impacted by non-taxable gains on assets invested in COLI policies, tax benefits related to deductions claimed for income from domestic production activities and the adoption of the share based payment accounting standard ASU 2016-09. For the year ended June 30, 2017, income tax expense was favorably impacted by research and development tax credits relating to the 2016 and 2017 tax years. Tax benefits realized from prior year state tax credits and the reinstatement of the work opportunity tax credit reduced income tax expense for the year ended June 30, 2016.

U.S. income taxes have not been provided for undistributed earnings of foreign subsidiaries that have been permanently reinvested outside the United States. As of June 30, 2017, the estimated deferred tax liability associated with these undistributed earnings is approximately $15.7 million.

The Company’s total liability for unrecognized tax benefits as of June 30, 2017, 2016 and 2015 was approximately $1.6 million, $0.4 million and $6.2 million, respectively. Of the unrecognized tax benefits at June 30, 2017, 2016 and 2015, $1.6 million, $0.4 million and $1.3 million, respectively, if recognized, would impact the Company’s effective tax rate. A reconciliation of the beginning and ending amount of unrecognized benefits is shown in the table below (in thousands):

	Year ended June 30,
	2017			2016			2015
Beginning of year	$	398		$	6,220		$	9,636
Additions based on current year tax positions		1,475			89			1,468
Reductions based on changes to prior year tax positions		—			—			(3,522	)
Lapse of statute of limitations		(234	)		(128	)		(1,344	)
Settlement with taxing authorities		—			(5,783	)		(18	)
End of year	$	1,639		$	398		$	6,220

The Company recognizes net interest and penalties as a component of income tax expense. Over the next 12 months, the Company does not expect a significant increase or decrease in the unrecognized tax benefits recorded at June 30, 2017. As of June 30, 2017, the entire balance of unrecognized tax benefits is included in other long-term liabilities.