

9.	Income Taxes

Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes. Significant components of the net deferred tax assets and net deferred tax liabilities as reflected on the Consolidated Balance Sheets are as follows:



	December 31,
	2016			2015
	(in thousands)
Deferred tax liabilities:
Prepaid assets	$	(7,133	)	$	(3,952	)
Depreciation	(936		)	(1,741		)
Software development costs	(3,960		)	(2,699		)
Total deferred tax liabilities	(12,029		)	(8,392		)

Deferred tax assets:
Accrued incentive compensation	8,590			8,818
Net operating loss carryforward	1,300			1,463
Workers’ compensation accruals	7,891			7,586
Accrued rent	1,092			1,229
Stock-based compensation	6,217			4,553
Intangibles	618			1,159
Minority investment impairment	1,021			1,016
Other	349			564
Total deferred tax assets	27,078			26,388
Valuation allowance	(1,024		)	(1,020		)
Total net deferred tax assets	26,054			25,368

Net deferred tax assets	$	14,025		$	16,976

The components of income tax expense are as follows:



	Year ended December 31,
	2016		2015			2014
	(in thousands)
Current income tax expense:
Federal	$	31,045	$	35,221		$	18,034
State	5,190		5,741			3,322
Total current income tax expense	36,235		40,962			21,356
Deferred income tax (benefit) expense:
Federal	2,641		(13,632		)	(1,764		)
State	310		(1,101		)	31
Total deferred income tax (benefit) expense	2,951		(14,733		)	(1,733		)
Total income tax expense	$	39,186	$	26,229		$	19,623

In the first quarter of 2016, we prospectively adopted ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting for calendar year 2016. In 2016, we recognized an income tax benefit of $1.5 million, or $0.07 per diluted related to excess tax benefits from the vesting of restricted stock awards and non-qualified stock options. Prior to the adoption of this pronouncement we recognized excess tax benefit as an increase in additional paid in capital of $2.2 million in 2015 and $0.5 million in 2014. Prior periods have not been adjusted, consistent with the provisions of the ASU.

The reconciliation of income tax expense computed at U.S. federal statutory tax rates to the reported income tax expense from continuing operations is as follows:



	Year ended December 31,
	2016			2015			2014
	(in thousands)
Expected income tax expense at 35%	$	36,812		$	22,967		$	16,670
State income taxes, net of federal benefit	3,684			2,696			2,204
Nondeductible expenses	1,669			1,669			1,939
Section 199 benefits	(686		)	(627		)	(592		)
Equity compensation	(1,338		)	—			—
Research and development credit	(751		)	(530		)	(455		)
Other, net	(204		)	54			(143		)
Reported total income tax expense	$	39,186		$	26,229		$	19,623

At December 31, 2016, we have net operating loss carryforwards totaling approximately $3.4 million that expire from 2022 to 2030 related to our acquisition of ExpensAble.

We recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2016, 2015 and 2014, we made no provisions for interest or penalties related to uncertain tax positions. The tax years 2013 through 2015 remain open to examination by the Internal Revenue Service of the United States. The tax years 2012 through 2015 remain open to examination by various state tax authorities.