The components of the provision for income taxes for the years ended May 31 were as follows (in millions):

			2015		2014		2013
Current provision (benefit)
	Domestic:
		Federal	$	795	$	624	$	512
		State and local		102		56		86
	Foreign			214		194		170
				1,111		874		768
Deferred provision (benefit)
	Domestic:
		Federal		(474)		360		802
		State and local		(47)		82		93
	Foreign			(13)		18		(41)
				(534)		460		854
			$	577	$	1,334	$	1,622

Pre-tax earnings (loss) of foreign operations for 2015, 2014 and 2013 were $773 million, $412 million and $(55) million, respectively. These amounts represent only a portion of total results associated with international shipments and accordingly, do not represent our international results of operations.

A reconciliation of total income tax expense (benefit) and the amount computed by applying the statutory federal income tax rate (35%) to income before taxes for the years ended May 31 is as follows (in millions):

			2015		2014		2013
Taxes computed at federal statutory rate			$	569	$	1,280	$	1,518
Increases (decreases) in income tax from:
	State and local income taxes,
		net of federal benefit		36		90		117
	Foreign operations			(43)		(38)		(21)
	Other, net			15		2		8
			$	577	$	1,334	$	1,622

Effective Tax Rate				35.5%		36.5%		37.4%

The significant components of deferred tax assets and liabilities as of May 31 were as follows (in millions):

		2015				2014
		Deferred Tax Assets		Deferred Tax Liabilities		Deferred Tax Assets		Deferred Tax Liabilities
Property, equipment,
	leases and intangibles	$	93	$	3,872	$	120	$	3,730
Employee benefits			2,029		13		1,464		11
Self-insurance accruals			607		-		555		-
Other			477		414		368		366
Net operating loss/credit
	carryforwards		326		-		333		-
Valuation allowances			(224)		-		(245)		-
		$	3,308	$	4,299	$	2,595	$	4,107

The net deferred tax liabilities as of May 31 have been classified in the balance sheets as follows (in millions):

		2015		2014
	Current deferred tax assets	$	606	$	522
	Noncurrent deferred tax assets⁽¹⁾		150		80
	Noncurrent deferred tax liabilities		(1,747)		(2,114)
		$	(991)	$	(1,512)

^⁽¹⁾	Noncurrent deferred tax assets are included in the line item Other Assets in our Consolidated Balance Sheet.

We have $968 million of net operating loss carryovers in various foreign jurisdictions and $589 million of state operating loss carryovers. The valuation allowances primarily represent amounts reserved for operating loss and tax credit carryforwards, which expire over varying periods starting in 2016. As a result of this and other factors, we believe that a substantial portion of these deferred tax assets may not be realized. We establish valuation allowances if it is not likely we will realize our deferred income tax assets. In making this determination, we consider all available positive and negative evidence and make certain assumptions. We consider, among other things, our future projections of sustained profitability, deferred income tax liabilities, the overall business environment, our historical financial results and potential current and future tax planning strategies. If we were to identify and implement tax planning strategies to recover these deferred tax assets or generate sufficient income of the appropriate character in these jurisdictions in the future, it could lead to the reversal of these valuation allowances and a reduction of income tax expense. We believe that we will generate sufficient future taxable income to realize the tax benefits related to the remaining net deferred tax assets in our consolidated balance sheets.

Permanently reinvested earnings of our foreign subsidiaries amounted to $1.9 billion at the end of 2015 and $1.6 billion at the end of 2014. We have not recognized deferred taxes for U.S. federal income tax purposes on those earnings. In 2015, our permanent reinvestment strategy with respect to unremitted earnings of our foreign subsidiaries provided an approximate $48 million benefit to our provision for income taxes. Were the earnings to be distributed, in the form of dividends or otherwise, these earnings could be subject to U.S. federal income tax and non-U.S. withholding taxes. Unrecognized foreign tax credits potentially could be available to reduce a portion of any U.S. tax liability. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable due to uncertainties related to the timing and source of any potential distribution of such funds, along with other important factors such as the amount of associated foreign tax credits. Cash in offshore jurisdictions associated with our permanent reinvestment strategy totaled $478 million at the end of 2015 and $471 million at the end of 2014.

In 2015, approximately 75% of our total enterprise-wide income was earned in U.S. companies of FedEx that are taxable in the United States, a reduction from 2014 due to our adoption of MTM accounting. As a U.S. airline, our FedEx Express unit is required by Federal Aviation Administration and other rules to conduct its air operations, domestic and international, through a U.S. company. However, we serve more than 220 countries and territories around the world, and are required to establish legal entities in many of them. Most of our entities in those countries are operating entities, engaged in picking up and delivering packages and performing other transportation services. We are continually expanding our global network to meet our customers' needs, which requires increasing investment outside the U.S. We typically use cash generated overseas to fund these investments and have a foreign holding company which manages our investments in several foreign operating companies.

We are subject to taxation in the U.S. and various U.S. state, local and foreign jurisdictions. The IRS is currently examining our 2012 and 2013 tax returns. It is reasonably possible that certain income tax return proceedings will be completed during the next 12 months and could result in a change in our balance of unrecognized tax benefits. The expected impact of any changes would not be material to our consolidated financial statements.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):

		2015		2014		2013

Balance at beginning of year		$	38	$	47	$	51
	Increases for tax positions taken in the current year		1		1		1
	Increases for tax positions taken in prior years		6		3		3
	Decreases for tax positions taken in prior years		(2)		(3)		(3)
	Settlements		(2)		(6)		(9)
	Increases due to acquisitions		-		-		4
	Decrease from lapse of statute of limitations		-		(3)		(2)
	Changes due to currency translation		(5)		(1)		2

Balance at end of year		$	36	$	38	$	47

Our liabilities recorded for uncertain tax positions include $31 million at May 31, 2015 and $33 million at May 31, 2014 associated with positions that if favorably resolved would provide a benefit to our effective tax rate. We classify interest related to income tax liabilities as interest expense and, if applicable, penalties are recognized as a component of income tax expense. The balance of accrued interest and penalties was $19 million on May 31, 2015 and May 31, 2014. Total interest and penalties included in our consolidated statements of income are immaterial.

It is difficult to predict the ultimate outcome or the timing of resolution for tax positions. Changes may result from the conclusion of ongoing audits, appeals or litigation in state, local, federal and foreign tax jurisdictions, or from the resolution of various proceedings between the U.S. and foreign tax authorities. Our liability for uncertain tax positions includes no matters that are individually or collectively material to us. It is reasonably possible that the amount of the benefit with respect to certain of our unrecognized tax positions will increase or decrease within the next 12 months, but an estimate of the range of the reasonably possible changes cannot be made. However, we do not expect that the resolution of any of our uncertain tax positions will have a material effect on us.