Income Taxes

Income before income taxes for the Company’s domestic and foreign operations was as follows:



	Years Ended June 30,
($ in millions)	2016		2015		2014
Domestic	$	17.3	$	64.3	$	178.6
Foreign	4.2		24.8		17.8
Income before income taxes	$	21.5	$	89.1	$	196.4

The provision (benefit) for income taxes from continuing operations consisted of the following:



	Years Ended June 30,
($ in millions)	2016		2015			2014
Current:
Federal	$	4.7	$	(39.3	)	$	61.3
State	0.4		1.2			6.5
Foreign	4.3		8.1			5.5
Total current	9.4		(30.0		)	73.3
Deferred:
Federal	0.1		60.2			(8.0		)
State	0.5		0.1			(1.4		)
Foreign	0.2		0.1			(0.3		)
Total deferred	0.8		60.4			(9.7		)
Total income tax expense	$	10.2	$	30.4		$	63.6

The following is a reconciliation of income taxes computed at the U.S. Federal income tax rate to the Company’s effective income tax rates:



	Years Ended June 30,
(% of pre-tax income)	2016		2015		2014
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	2.2		2.2		2.5
Foreign tax rate differential	5.5		(1.6	)	(0.3	)
Domestic manufacturing deduction	(7.0	)	(2.7	)	(3.5	)
Law changes	(3.8	)	1.8		0.1
Increases (decreases) in valuation allowances	2.1		(0.3	)	(0.8	)
Unremitted earnings of foreign subsidiary	12.7		—		—
Non-deductible goodwill impairment	5.1		—		—
Research and development tax credit	(8.4	)	(0.9	)	(0.3	)
Other, net	4.0		0.6		(0.3	)
Effective income tax rate	47.4	%	34.1	%	32.4	%

Due to a change in business strategy for one of our foreign subsidiaries, the Company changed its intent with regard to the indefinite reinvestment of the foreign earnings for this subsidiary. As a result of this change, the Company recorded a tax charge of $2.8 million during fiscal year 2016.

Deferred taxes are recorded for temporary differences between the carrying amounts of assets and liabilities and their tax bases. The significant components of deferred tax assets and liabilities that are recorded in the consolidated balance sheet are summarized in the table below. A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. As of June 30, 2016, the Company had state net operating loss carryforwards of $325.2 million expiring between 2018 and 2036. The valuation allowances increased by $0.2 million during fiscal year 2016 primarily due to a decrease in the amount of future reversals of taxable temporary differences. A significant portion of the state net operating loss carryforwards are subject to an annual limitation that under current law is likely to limit future tax benefits to approximately $5 million.



	June 30,
($ in millions)	2016			2015
Deferred tax assets:
Pensions	$	193.5		$	125.1
Postretirement provisions	51.0			48.9
Net operating loss carryforwards	20.5			20.3
Derivatives and hedging activities	14.8			18.5
Other	37.4			32.6
Gross deferred tax assets	317.2			245.4
Valuation allowances	(17.7		)	(17.5		)
Total deferred tax assets	299.5			227.9
Deferred tax liabilities:
Depreciation	(333.0		)	(321.2		)
Intangible assets	(20.4		)	(26.1		)
Inventories	(27.4		)	(17.6		)
Other	(12.9		)	(6.2		)
Total deferred tax liabilities	(393.7		)	(371.1		)
Deferred tax liabilities	$	(94.2	)	$	(143.2	)

As of June 30, 2016, the Company had $106.5 million of indefinitely reinvested foreign earnings for which we have not provided deferred income taxes. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. income taxes and withholding taxes in various foreign tax jurisdictions. It is not practical to calculate these taxes due to the complex and hypothetical nature of the calculations.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for uncertain tax positions is as follows:



	Years Ended June 30,
($ in millions)	2016		2015		2014
Balance, beginning	$	—	$	—	$	1.4
Reductions as a result of a lapse of statute of limitations	—		—		(1.1		)
Reductions based on tax positions of prior year	—		—		(0.1		)
Reductions as a result of settlements with taxing authorities	—		—		(0.2		)
Balance, ending	$	—	$	—	$	—

The liability for unrecognized tax benefits was $0.0 million at June 30, 2016, June 30, 2015 and June 30, 2014. It is reasonably possible that the amount of the unrecognized tax benefits will change within the next twelve months; however, any such changes are not expected to have a significant impact on the Company’s consolidated financial statements.

It is the Company’s policy to classify interest and penalties recognized on uncertain tax positions as a component of income tax expense. The Company’s income tax expense included net benefits of $0.0 million, $0.0 million and $0.6 million related to interest and penalties for the years ended June 30, 2016, 2015 and 2014, respectively. In addition, no amounts were included in accrued income taxes for interest and penalties in the consolidated balance sheets as of June 30, 2016 and 2015.

All years prior to fiscal year 2013 have been settled with the Internal Revenue Service and with most significant state, local and foreign tax jurisdictions.