Income Taxes

U.S. and foreign components of income before provision for income taxes is as follows (in thousands):



	Year Ended July 31,
	2016		2015		2014
U.S.	$	231,756	$	142,190	$	45,895
Foreign	10,863		7,138		(1,823		)
Income before income taxes	$	242,619	$	149,328	$	44,072

The Company has NOL carryforwards totaling $34.1 million which are primarily comprised of state net operating loss (“NOL”) carryforwards that expire by the year ending July 31, 2031. As of July 31, 2016, the Company recorded a valuation allowance on $29.2 million of these NOL carryforwards as the Company has determined that it is more likely than not that these NOL carryforwards will not be realized. Additionally, the Company has foreign tax credit carryforwards of $0.9 million which expire by the year ending July 31, 2026. As of July 31, 2016, the Company has recorded a valuation allowance of $0.9 million on foreign tax credit carryforwards as the Company has determined that it is more likely than not that these foreign tax credit carryforwards will not be realized.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Significant components of the Company’s deferred tax liabilities and assets are as follows (in thousands):



	July 31,
	2016			2015
Deferred income tax liabilities:
Fixed assets	$	180,267		$	173,908
Intangible assets	59,009			53,654
Total	239,276			227,562
Deferred income tax assets:
Canyons obligation	18,984			18,687
Deferred private club membership revenue	16,247			18,085
Deferred compensation and other accrued benefits	17,426			12,590
Stock-based compensation	17,287			15,896
Unfavorable lease obligation, net	10,904			11,510
Real estate and other investments	7,987			7,771
Net operating loss carryforwards and other tax credits	3,779			3,610
Other, net	20,309			23,066
Total	112,923			111,215
Valuation allowance for deferred income taxes	(3,641		)	(3,487		)
Deferred income tax assets, net of valuation allowance	109,282			107,728
Net deferred income tax liability	$	129,994		$	119,834

Significant components of the provision (benefit) for income taxes are as follows (in thousands):



	Year Ended July 31,
	2016			2015			2014
Current:
Federal	$	70,553		$	12,668		$	8,082
State	10,555			5,501			1,565
Foreign	4,431			3,581			—
Total current	85,539			21,750			9,647
Deferred:
Federal	7,603			11,534			5,470
State	1,051			1,623			749
Foreign	(1,028		)	(189		)	—
Total deferred	7,626			12,968			6,219
Provision for income taxes	$	93,165		$	34,718		$	15,866

A reconciliation of the income tax provision from continuing operations and the amount computed by applying the United States federal statutory income tax rate to income before income taxes is as follows:



	Year Ended July 31,
	2016		2015		2014
At U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State income tax, net of federal benefit	3.1	%	3.2	%	3.4	%
Nondeductible meals or entertainment	0.1	%	0.2	%	0.7	%
General business credits	(0.4	)%	(0.5	)%	(1.7	)%
IRS settlement on NOL utilization	—	%	(16.0	)%	—	%
Domestic production deduction	(0.4	)%	(0.7	)%	(1.4	)%
Change in valuation allowance	0.1	%	0.5	%	—	%
Other	0.9	%	1.5	%	—	%
Effective tax rate	38.4	%	23.2	%	36.0	%

A reconciliation of the beginning and ending amount of unrecognized tax benefits associated with uncertain tax positions, excluding associated deferred tax benefits and accrued interest and penalties, if applicable, is as follows (in thousands):



	Year Ended July 31,
	2016		2015			2014
Balance, beginning of year	$	38,572	$	46,973		$	26,205
Additions based on tax positions related to the current year	—		—			21,082
Additions for tax positions of prior years	18,460		17,443			—
Reductions for tax positions of prior years	—		(21,574		)	—
Lapse of statute of limitations	—		—			(314		)
Settlements	—		(4,270		)	—
Balance, end of year	$	57,032	$	38,572		$	46,973

As of July 31, 2016, the Company’s unrecognized tax benefits associated with uncertain tax positions relate to the treatment of the Talisker lease payments as payments of debt obligations and that the tax basis in Canyons goodwill is deductible, and are included within “other long-term liabilities” in the accompanying Consolidated Balance Sheets.

The Company had federal NOL carryforwards that expired in the year ended July 31, 2008 and were limited in deductibility each year under Section 382 of the Internal Revenue Code. The Company had only been able to use these NOL carryforwards to the extent of approximately $8.0 million per year through December 31, 2007. However, during the year ended July 31, 2005, the Company amended previously filed tax returns (for tax years 1997-2002) in an effort to remove the restrictions under Section 382 of the Internal Revenue Code on approximately $73.8 million of NOL carryforwards to reduce future taxable income. As a result, the Company requested a refund related to the amended returns in the amount of $6.2 million and reduced its federal tax liability in the amount of $19.6 million in subsequent returns. These NOL carryforwards relate to fresh start accounting from the Company’s reorganization in 1992. During the year ended July 31, 2006, the Internal Revenue Service (“IRS”) completed its examination of the Company’s filing position in these amended returns and disallowed the Company’s request for refund and its position to remove the restrictions under Section 382 of the Internal Revenue Code. The Company appealed the examiner’s disallowance of these NOL carryforwards to the Office of Appeals. In December 2008, the Office of Appeals denied the Company’s appeal, as well as a request for mediation. The Company disagreed with the IRS interpretation disallowing the utilization of the NOL’s and in August 2009, the Company filed a complaint in the United States District Court for the District of Colorado against the United States of America seeking a refund of approximately $6.2 million in federal income taxes paid, plus interest. On July 1, 2011, the District Court granted the Company summary judgment, concluding that the IRS’s decision disallowing the utilization of the NOLs was inappropriate. The computations themselves, however, remained in dispute, and the District Court’s ruling was subject to appeal by the IRS. Subsequently, the District Court proceedings were continued pending settlement discussions between the parties.

The Company also filed two related tax proceedings in the United States Tax Court regarding calculation of NOL carryover deductions for tax years 2006, 2007 and 2008. The two proceedings involved substantially the same issues as the litigation in the District Court for tax years 2000 and 2001 in which the Company disagreed with the IRS as to the utilization of NOLs. Like the District Court proceedings, the Tax Court proceedings were continued pending settlement discussions between the parties.

On January 29, 2015, the parties completed the execution of a comprehensive settlement agreement resolving all issues and computations in the above mentioned pending proceedings, which allowed the Company to utilize a significant portion of the NOLs. As a result, the Company reversed $27.7 million of other long-term liabilities related to uncertain tax benefits, and recorded income tax benefits of $23.8 million for the utilization of the NOLs, including the reversal of accrued interest and penalties, within its Consolidated Statements of Operations for the year ended July 31, 2015.

The Company does not anticipate a significant change to its unrecognized tax benefits recorded as of July 31, 2016 during the twelve months ending July 31, 2017. As of July 31, 2016 and 2015, accrued interest and penalties, net of tax, was $1.6 million and $0.5 million, respectively. For the years ended July 31, 2016, 2015 and 2014, the Company recognized as income tax expense (benefit) $1.1 million, $(1.4) million and $0.1 million of interest expense (income) and penalties, net of tax, respectively.

The Company’s major tax jurisdictions in which it files income tax returns is the U.S. federal jurisdiction, various state jurisdictions and Australia. As discussed above, on January 29, 2015, all issues and computations were resolved upon the completion of a comprehensive settlement agreement with the IRS in regards to the federal NOL carryforward dispute. The Company is no longer subject to U.S. federal examinations for tax years prior to 2013. With few exceptions, the Company is no longer subject to examination by various state jurisdictions for tax years prior to 2011.