12. INCOME TAXES

The components of income before income taxes for the years ended December 31, 2012, 2013 and 2014 are as follows (in thousands):

	2012		2013		2014
Domestic	$	26,249	$	13,697	$	57,767
Foreign		18,547		32,776		28,401

Total	$	44,796	$	46,473	$	86,168

The following is a reconciliation from the tax computed at statutory income tax rates to the Company's income tax expense for the years ended December 31, 2012, 2013, and 2014 (in thousands):

	2012			2013			2014
Tax computed at statutory U.S. federal income tax rates	$	15,679		$	16,270		$	30,160
Income taxes in excess (below) statutory U.S. tax rates:
Guyana		812			701			(130	)
Bermuda and Turks & Caicos		503			(3,203	)		(4,712	)
Turks & Caicos intercompany note receivable write-down		—			(8,572	)		—
Valuation allowance		832			711			(887	)
Foreign tax reserve		2,359			2,081			2,095
State taxes		906			1,032			1,813
Research and development credit		(1,971	)		—			—
Other, net		1,711			516			(191	)

Income tax expense	$	20,831		$	9,536		$	28,148

The components of income tax expense (benefit) for the years ended December 31, 2012, 2013 and 2014 are as follows (in thousands):

	2012			2013			2014
Current:
United States—Federal	$	4,812		$	1,703		$	14,761
United States—State		2,418			895			1,347
Foreign		11,099			11,787			12,153

Total current income tax expense	$	18,329		$	14,385		$	28,261

Deferred:
United States—Federal	$	4,050		$	(5,273	)	$	5,205
United States—State		(1,011	)		169			466
Foreign		(537	)		255			(5,784	)

Total deferred income tax expense (benefit)		2,502			(4,849	)		(113	)

Consolidated:
United States—Federal	$	8,862		$	(3,570	)	$	19,966
United States—State		1,407			1,064			1,813
Foreign		10,562			12,042			6,369

Total income tax expense	$	20,831		$	9,536		$	28,148

The significant components of deferred tax assets and liabilities are as follows as of December 31, 2013 and 2014 (in thousands):

	2013			2014
Deferred tax assets:
Receivables reserve	$	1,225		$	1,321
Temporary differences not currently deductible for tax		6,690			8,001
Deferred compensation		1,702			2,019
Foreign tax credit carryforwards		13,575			10,576
Pension		—			436
Net operating losses		2,822			4,171
Valuation allowance		(16,312	)		(13,763	)

Total deferred tax asset		9,702			12,761

Deferred tax liabilities:
Property, plant and equipment, net	$	23,866		$	27,681
Intangible assets, net		11,245			12,021
Tax on foreign earnings		—			1,050
Pension		205			—

Total deferred tax liabilities		35,316			40,752

Net deferred tax liabilities	$	25,614		$	27,991

Deferred tax assets and liabilities are reflected in the accompanying consolidated balance sheets as follows (in thousands):

	2013		2014
Deferred tax assets:
Current	$	1,994	$	2,588
Long term		—		—

Total deferred tax asset	$	1,994	$	2,588

Deferred tax liabilities:
Current	$	1,601	$	213
Long term		26,007		30,366

Total deferred tax liabilities	$	27,608	$	30,579

Net deferred tax liabilities	$	25,614	$	27,991

As of December 31, 2014, the Company estimated that it had gross state and foreign net operating loss ("NOL") carryforwards of $32.1 million and $8.7 million respectively. The state NOL's will expire at various dates between 2015 and 2028. The foreign NOL consists of $6.1 million from Aruba, which will expire between 2015 and 2019. The remaining foreign NOL is from Guyana, and has no expiration. The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing NOL deferred tax assets. A significant piece of negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2014. On the basis of this evaluation, the Company believes it is more likely than not that the benefit from these state and foreign NOL carryforwards will not be realized. In recognition of this risk at December 31, 2014, the Company provided a valuation allowance of $1.7 million and $1.4 million for the state and foreign NOL carryforwards, respectively. At December 31, 2013 our state and foreign NOL carryforward valuation allowance was $1.1 million and $1.6 million, respectively.

As of December 31, 2014 and 2013, the Company had $10.5 million and $13.6 million of foreign tax credits. During the years ended December 31, 2014 and 2013, $3.0 million and $1.8 million foreign tax credit carryforwards expired. The remaining amounts that will expire in 2015 and 2016. Similar to prior years, the Company examined its projected mix of foreign source and U.S.-source earnings and concluded it is more likely than not that it will not generate enough foreign source income to utilize its existing foreign tax credits prior to their expiration date. As a result, the Company has continued to maintain a full valuation allowance against these credits through December 31, 2014.

The Company has approximately $131.6 million of undistributed earnings of its foreign subsidiaries that as of December 31, 2014 are considered to be indefinitely reinvested and, accordingly, no U.S. federal and state income taxes have been provided thereon. Determination of the amount of unrecognized deferred U.S. income tax liability is not practical because of the complexities associated with its hypothetical calculation.

The Company had net unrecognized tax benefits of $10.3 million as of December 31, 2012, $14.0 million as of December 31, 2013 and $16.5 million as of December 31, 2014. The net increase of the reserve during the year ended December 31, 2014 was attributable to additions to uncertain tax positions taken in the current and prior years and reductions resulting from the lapse of statute of limitation in one jurisdiction and the settlement of interest related to a prior Internal Revenue Service audit. The following shows the activity related to unrecognized tax benefits during the three years ended December 31, 2014 (in thousands):

Gross unrecognized tax benefits at December 31, 2011	$	6,952
Increase in uncertain tax positions		3,384
Lapse in statute of limitations		—

Gross unrecognized tax benefits at December 31, 2012		10,336
Increase in uncertain tax positions		4,137
Lapse in statute of limitations		—
Settlements		(423	)

Gross unrecognized uncertain tax benefits at December 31, 2013		14,050
Increase in uncertain tax positions		1,675
Lapse in statute of limitations		(226	)
Settlements		—

Gross unrecognized uncertain tax benefits at December 31, 2014	$	15,499

The Company's accounting policy is to classify interest and penalties related to income tax matters as part of income tax expense. The accrued amounts for interest and penalties are $1.0 million as of December 31, 2014, and $0.4 million as of December 31, 2013, and $0.5 million as of December 31, 2012.

All $16.5 million of unrecognized tax benefits would affect the effective tax rate if recognized. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes, if material.

The Company and its subsidiaries file income tax returns in the U.S. and in various state and local jurisdictions. The statute of limitations related to the consolidated U.S. federal income tax return is closed for all tax years up to and including 2010. The expiration of the statute of limitations related to the various state income tax returns that the Company and subsidiaries file varies by state. The Company does not expect that the amount of unrecognized tax benefits relating to U.S. tax matters will change significantly within the next 12 months.

The Company also files an income tax return in Guyana. See Note 14 relating to certain tax matters pertaining to those filings. There is no expected settlement date of those matters and upon settlement, which might not occur in the near future, the payment may vary significantly from the amounts currently recorded. The Company will continue to update amounts recorded as new developments arise.