Income Taxes

Consolidated income before taxes and noncontrolling interests for domestic and foreign operations is as follows (in thousands):



	Year Ended December 31,
	2014		2013		2012
Foreign	$	3,799,941	$	3,109,982	$	2,089,243
Domestic	32,770		33,530		(26,667		)
Total income before income taxes	$	3,832,711	$	3,143,512	$	2,062,576

The components of the income tax expense are as follows (in thousands):



	Year Ended December 31,
	2014			2013			2012
Foreign:
Current	$	252,476		$	195,154		$	163,199
Deferred	(1,369		)	(6,318		)	17,848
Federal:
Current	(4,601		)	(2,073		)	12,379
Deferred	(1,866		)	2,073			(12,660		)
State:
Current	—			—			(3		)
Deferred	—			—			—
Total income tax expense	$	244,640		$	188,836		$	180,763

The reconciliation of the statutory federal income tax rate and the Company’s effective tax rate is as follows:



	Year Ended December 31,
	2014		2013		2012
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
Increase (decrease) in tax rate resulting from:
U.S. foreign tax credits	(80.3	)%	(19.0	)%	(162.1	)%
Repatriation of foreign earnings	53.6	%	14.6	%	110.5	%
Change in valuation allowance	26.7	%	6.0	%	54.3	%
Foreign and U.S. tax rate differential	(20.9	)%	(21.1	)%	(20.8	)%
Tax exempt income of foreign subsidiary (Macao)	(8.5	)%	(9.6	)%	(10.0	)%
Change in uncertain tax positions	—	%	—	%	0.7	%
Other, net	0.8	%	0.1	%	1.2	%
Effective tax rate	6.4	%	6.0	%	8.8	%

The Company’s foreign and U.S. tax rate differential reflects the fact that income earned and reinvested in Singapore and Macao is taxed at local rates, which are lower than U.S. tax rates. The Company received a 5-year income tax exemption in Macao that exempts the Company from paying corporate income tax on profits generated by gaming operations. The Company will continue to benefit from this tax exemption through the end of 2018. Had the Company not received the income tax exemption in Macao, consolidated net income attributable to Las Vegas Sands Corp. would have been reduced by $219.8 million, $207.7 million and $139.8 million, and diluted earnings per share would have been reduced by $0.27, $0.25 and $0.17 per share for the years ended December 31, 2014, 2013 and 2012, respectively. In May 2014, the Company entered into an agreement with the Macao government, effective through the end of 2018 that provides for an annual payment of 42.4 million patacas (approximately $5.3 million at exchange rates in effect on December 31, 2014) that is a substitution for a 12% tax otherwise due from VML shareholders on dividend distributions paid from VML gaming profits. In September 2013, the Company and the Internal Revenue Service ("IRS") entered into a Pre-Filing Agreement providing that the Macao special gaming tax (35% of gross gaming revenue) qualifies as a tax paid in lieu of an income tax and could be claimed as a U.S. foreign tax credit.

The primary tax affected components of the Company’s net deferred tax liabilities are as follows (in thousands):



	December 31,
	2014			2013
Deferred tax assets:
U.S. foreign tax credit carryforwards	$	2,257,048		$	1,280,121
Net operating loss carryforwards	255,623			245,652
Pre-opening expenses	32,773			39,409
Stock-based compensation	31,565			46,952
Accrued expenses	31,563			36,746
Deferred gain on the sale of The Grand Canal Shoppes and The Shoppes at The Palazzo	31,412			33,008
Allowance for doubtful accounts	30,861			26,392
State deferred items	12,361			14,109
Other tax credit carryforwards	2,059			181
Other	5,443			6,362
	2,690,708			1,728,932
Less — valuation allowances	(2,484,653		)	(1,519,268		)
Total deferred tax assets	206,055			209,664
Deferred tax liabilities:
Property and equipment	(319,354		)	(338,284		)
Prepaid expenses	(5,836		)	(8,966		)
Other	(50,602		)	(35,113		)
Total deferred tax liabilities	(375,792		)	(382,363		)
Deferred tax liabilities, net	$	(169,737	)	$	(172,699	)

The Company recognizes tax benefits associated with stock-based compensation directly to stockholders’ equity only when realized. Accordingly, deferred tax assets are not recognized for net operating loss carryforwards or credit carryforwards resulting from windfall tax benefits. A windfall tax benefit occurs when the actual tax benefit realized upon an employee’s disposition of a share-based award exceeds the cumulative book compensation charge associated with the award. As of December 31, 2014 and 2013, the Company has windfall tax benefits of $354.6 million and $273.1 million, respectively, which are not reflected in deferred tax assets. The Company uses a with-and-without approach to determine if the excess tax deductions associated with compensation costs have reduced income taxes payable.

During the year ended December 31, 2014, certain wholly owned foreign subsidiaries paid dividends resulting in incremental U.S. taxable income. The receipt of the dividends did not result in a cash tax liability for the Company as the incremental U.S. taxable income was fully offset by the utilization of the U.S. foreign tax credits generated as a result of the dividends. In addition, the dividends generated excess U.S. foreign tax credits that will be available to be carried forward to tax years beyond 2014. The Company’s U.S. foreign tax credit carryforwards were $2.43 billion and $1.42 billion as of December 31, 2014 and 2013, respectively, which will begin to expire in 2021. The Company’s state net operating loss carryforwards were $251.2 million and $242.1 million as of December 31, 2014 and 2013, respectively, which will begin to expire in 2024. The Company’s U.S. general business credits were $2.1 million and $0.2 million as of December 31, 2014 and 2013, respectively, which will begin to expire in 2032. There was a valuation allowance of $2.27 billion and $1.30 billion as of December 31, 2014 and 2013, respectively, provided on certain net U.S. deferred tax assets, as the Company believes these assets do not meet the “more-likely-than-not” criteria for recognition. Net operating loss carryforwards for the Company’s foreign subsidiaries were $2.07 billion and $1.99 billion as of December 31, 2014 and 2013, respectively, which begin to expire in 2015. There are valuation allowances of $215.2 million and $217.8 million, as of December 31, 2014 and 2013, respectively, provided on the net deferred tax assets of certain foreign jurisdictions, as the Company believes these assets do not meet the “more-likely-than-not” criteria for recognition.

Undistributed earnings of subsidiaries are accounted for as a temporary difference, except that deferred tax liabilities are not recorded for undistributed earnings of foreign subsidiaries that are deemed to be indefinitely reinvested in foreign jurisdictions. The Company has a plan for reinvestment of the undistributed earnings of its foreign subsidiaries attributable to periods before January 1, 2014, which demonstrates such earnings will be indefinitely reinvested in the applicable jurisdictions. The Company does not consider current year's tax earnings and profits of certain of its foreign subsidiaries to be permanently reinvested. The Company has not provided deferred taxes for these foreign earnings as the Company expects there will be sufficient creditable foreign taxes to offset the U.S. income tax that would result from the repatriation of foreign earnings. As of December 31, 2014 and 2013, the amount of earnings and profits of foreign subsidiaries that the Company does not intend to repatriate was $6.07 billion and $5.94 billion, respectively. Should these earnings be distributed in the form of dividends or otherwise, the Company expects there will be sufficient creditable foreign taxes to offset the U.S. income taxes and other foreign taxes that would result from a distribution. The Company's cumulative temporary difference is less than its earnings and profits.

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



	December 31,
	2014			2013			2012
Balance at the beginning of the year	$	56,659		$	59,338		$	43,411
Additions to tax positions related to prior years	1,101			4,431			8,959
Reductions to tax positions related to prior years	(462		)	(12,063		)	—
Additions to tax positions related to current year	6,196			5,706			6,968
Settlements	—			(753		)	—
Lapse in statutes of limitations	(729		)	—			—
Balance at the end of the year	$	62,765		$	56,659		$	59,338

As of December 31, 2014 and 2013, unrecognized tax benefits of $50.6 million and $43.4 million, respectively, were recorded as reductions to the U.S. foreign tax credit deferred tax asset. As of December 31, 2014, 2013 and 2012, unrecognized tax benefits of $12.2 million, $13.3 million and $59.3 million, respectively, were recorded in other long-term liabilities.

Included in the unrecognized tax benefit balance as of December 31, 2014, 2013 and 2012, are $52.4 million, $47.3 million and $47.8 million, respectively, of uncertain tax benefits that would affect the effective income tax rate if recognized.

The Company’s major tax jurisdictions are the U.S., Macao, and Singapore. The Company is subject to examination for tax years beginning 2010 in the U.S., Macao and Singapore. The Inland Revenue Authority of Singapore is performing a compliance review of the Marina Bay Sands tax returns for tax years 2010 through 2012. The Company believes it has adequately reserved for its uncertain tax positions; however, there is no assurance that the taxing authorities will not propose adjustments that are different from the Company’s expected outcome and that will impact the provision for income taxes.

The Company recognizes interest and penalties, if any, related to unrecognized tax positions in the provision for income taxes in the accompanying consolidated statement of operations. No interest or penalties were accrued as of December 31, 2014 and 2013.