Income Taxes

Income taxes have been provided for based upon the tax laws and rates in countries in which our operations are conducted and income is earned. The Company received an assurance from the Bermuda Minister of Finance that it would be exempted from local income, withholding and capital gains taxes until March 2035. Consequently, the provision for income taxes relates to income earned by certain subsidiaries of the Company which are located in, or earn income in, jurisdictions that impose income taxes, primarily Ireland, Singapore and the United States.

The sources of income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investment for the three and nine months ended September 30, 2016 and 2015 were as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016		2015
U.S. operations	$	(92	)	$	597		$	1,652	$	1,817
Non-U.S. operations	28,182			(13,434		)	85,469		76,745
Total	$	28,090		$	(12,837	)	$	87,121	$	78,562

All of our aircraft-owning subsidiaries that are recognized as corporations for U.S. tax purposes are non-U.S. corporations. These non-U.S. subsidiaries generally earn income from sources outside the United States and typically are not subject to U.S. federal, state or local income taxes unless they operate within the U.S., in which case they may be subject to federal, state and local income taxes. The aircraft owning subsidiaries resident in Ireland, Mauritius and Singapore are subject to tax in those respective jurisdictions.

We have a U.S. based subsidiary which provides management services to our non-U.S. subsidiaries and is subject to U.S. federal, state and local income taxes. We also have Ireland and Singapore based subsidiaries which provide management services to our non-U.S. subsidiaries and are subject to tax in those respective jurisdictions.

The consolidated income tax expense for the three and nine months ended September 30, 2016 and 2015 was determined based upon estimates of the Company’s consolidated effective income tax rates for the years ending December 31, 2016 and 2015, respectively.

The Company’s effective tax rate for the three and nine months ended September 30, 2016 was 8.8% and 10.1%, respectively, compared to (21.1)% and 15.3% for the three and nine months ended September 30, 2015. Movements in the effective tax rates are generally caused by changes in the proportion of the Company’s pre-tax earnings in taxable and non-tax jurisdictions.

Differences between statutory income tax rates and our effective income tax rates applied to pre-tax income consisted of the following:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Notional U.S. federal income tax expense (benefit) at the statutory rate	$	9,831		$	(4,493	)	$	30,492		$	27,497
U.S. state and local income tax, net	14			57			139			167
Non-U.S. operations:
Bermuda	(6,025		)	6,696			(16,687		)	(9,199		)
Ireland	82			2,500			2,155			(407		)
Singapore	(823		)	(1,385		)	(4,874		)	(4,116		)
Other	(752		)	(860		)	(2,835		)	(2,439		)
Non-deductible expenses in the U.S.	133			205			418			566
Other	(2		)	(11		)	(26		)	(32		)
Income tax provision	$	2,458		$	2,709		$	8,782		$	12,037