Income Taxes

Income (losses) before income taxes consisted of the following:



	Year ended December 31,
	2014			2013			2012
United States	$	329,633		$	249,311		$	224,029
Foreign	(27,994		)	(10,911		)	(17,846		)
Total	$	301,639		$	238,400		$	206,183

Income tax expense (benefit) from continuing operations consisted of the following for the years ended December 31:



	United States		State and Local			Foreign			Total
2014
Current	$	43,565	$	3,326		$	8,009		$	54,900
Deferred	$	51,581	$	3,979		$	(8,839	)	$	46,721
2013
Current	$	52,118	$	5,176		$	5,255		$	62,549
Deferred	$	31,020	$	1,562		$	(5,029	)	$	27,553
2012
Current	$	48,632	$	3,460		$	18,681		$	70,773
Deferred	$	22,560	$	(1,301	)	$	17,442		$	38,701

The reconciliation between the income tax computed by applying the U.S. federal statutory rate and the reported effective tax rate on income from continuing operations is as follows:



	Year ended December 31,
	2014		2013		2012
Federal statutory rate	35.0	%	35.0	%	35.0	%
State income taxes (net of federal income tax benefit)	1.6		1.9		1.0
Foreign income tax rate differential	1.1		0.8		16.8
Revaluation of deferred tax assets for tax rate changes and blending differences, net	(0.1	)	—		(0.5	)
Research and development credit	(0.6	)	—		—
Domestic production exclusions	(4.0	)	—		—
Other	0.7		0.1		0.8
Effective tax rate	33.7	%	37.8	%	53.1	%

The tax effects of temporary differences in the recognition of income and expense for tax and financial reporting purposes that give rise to significant portions of the deferred tax assets and the deferred tax liabilities are presented below:



	December 31,
	2014			2013
Deferred assets related to:
Reserve for credit losses	$	5,484		$	4,193
Foreign tax credit	4,399			3,303
Stock-based compensation, net	11,455			9,111
Net operating loss carryforwards	36,768			11,765
Other assets	5,399			4,588
Unrealized losses, primarily related to fuel price derivatives	—			1,862
Intangibles, net	—			52,328
Total	63,505			87,150
Deferred tax liabilities related to:
Unrealized gains, primarily related to fuel price derivatives	15,554			—
Other liabilities	1,540			1,379
Property, equipment and capitalized software	11,159			9,042
Intangibles, net	71,030			—
Total	99,283			10,421
Valuation allowance primarily on net operating loss carryfowards	2,210			1,292
Deferred income taxes, net	$	(37,988	)	$	75,437

Net deferred tax (liabilities) assets by jurisdiction are as follows:



	December 31,
	2014			2013
United States	$	(34,963	)	$	87,940
Australia	(7,078		)	(9,438		)
New Zealand	185			45
The Netherlands	238			89
United Kingdom	5,607			57
Brazil	(1,977		)	(3,256		)
Total	$	(37,988	)	$	75,437

The deferred tax assets and deferred tax liabilities are included in deferred income taxes, net on the consolidated balance sheet where a right of offset exists.

The Company’s primary tax jurisdictions are the United States and Australia. The Company had approximately $645,132 of state, $53,099 of federal and $53,609 of foreign net operating loss carry forwards at December 31, 2014 and approximately $561,469 of state and $31,489 of foreign net operating loss carry forwards at December 31, 2013. These U.S. losses expire at various times through 2034. Certain federal and state net operating loss carryforwards were acquired during the year in conjunction with the Evolution1 acquisition. These net operating losses were acquired and are therefore may be subject to limitations which may affect their utilizations. The Company expects to complete the review of the utilization of these net operating losses with the finalization of the purchase price allocation. The Company utilized $7,363 of U.S. federal operating losses during 2014.

The Company has not finalized the purchase accounting for the acquisition of Evolution1. Foreign losses in Brazil and the UK have indefinite carry forward periods.

The Company has established valuation allowances for the following items: (i) acquired net operating losses in the UK (ii) Evolution1’s equity investment in its minority-owned subsidiaries, and (iii) state tax credits, and in each case the Company has determined it is more likely than not that the benefits will not be utilized. No other valuation allowances have been established for any other deferred assets as the Company believes it is more likely than not that its deferred tax assets will be utilized within the carry forward periods.

Undistributed earnings of certain foreign subsidiaries of the Company amounted to $7,733 at December 31, 2014, and $4,665 at December 31, 2013. These earnings are considered to be indefinitely reinvested, and accordingly, no U.S. federal and state income taxes have been provided thereon. Upon distribution of these earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. The Company has determined that the amount of taxes attributable to these undistributed earnings is not practicably determinable.

During the third quarter of 2014, the Company completed a strategic tax review project which resulted in a change in estimate to reflect the tax impacts of the domestic production activities deduction and research and development credits in the Company's income tax provision. The Company has amended prior year tax returns as a result of this change in estimate which reduced the third quarter's tax expense by approximately $11,300. In addition, the current year to date tax provision was reduced by $2,400 as a result of the change in estimate.

Current accounting guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This accounting guidance also provides guidance on derecognition, classification, interest and penalties, accounting in the interim periods, disclosure, and transition.

The Company files a consolidated federal income tax return in the United States, as well as consolidated or separate income tax returns in most states. The Company also files consolidated or separate income tax returns in non-U.S. jurisdictions where required. In the normal course of business, the Company is no longer subject to income tax examination for the years prior to 2010.

A reconciliation of the beginning and ending amount of unrecognized tax benefits excluding interest and penalties is as follows:



	Year ended December 31,
	2014			2013			2012
Beginning balance	$	5,283		$	6,176		$	6,059
Increases related to prior year tax position	—			—			—
(Decreases) increases related to prior year tax positions, due to foreign currency exchange	(427		)	(893		)	117
Ending balance	$	4,856		$	5,283		$	6,176

At December 31, 2014, the Company had $6,844 of net unrecognized tax benefits. If recognized, $6,844 would reduce the Company’s effective tax rate. The Company does not anticipate settling any unrecognized tax benefit within the next 12 months.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company has accrued $1,988 as of December 31, 2014, $1,625 as of December 31, 2013 and $1,313 as of December 31, 2012, for penalties and interest related to uncertain tax positions.

On June 29, 2012, tax legislation was enacted in Australia that affected the tax deductibility of certain intangible assets acquired as part of the 2010 acquisition of Wright Express Australia. The Company performed a review of the legislation to determine which of these intangible assets would be impacted. Based upon this review the Company recorded a tax charge of $31,432 in June of 2012 to reflect these impacts. The Company wrote-off an associated refund claim payable to the former shareholder of RD Card Holding Australia for $9,750, included in non-operating income. This payable was contingent on the receipt of the tax refunds generated by tax deductions associated with the amortization of above mentioned intangible assets.

During 2012, the Company recorded an impairment charge related to goodwill in the amount of $17,508. This charge did not result in any tax provision benefit. The Company also recorded a tax charge of approximately $2,400 due to the impact of a retroactive tax legislation enacted on September 8, 2012 in Australia. This legislation impacted the potential deductibility of intercompany interest expense allowable in past and future tax years and hence resulted in a discrete charge in our recorded tax expense in the current year and a higher Australian effective tax rate in future periods.