Income Taxes

Earnings before income taxes consist of the following:



	Years Ended December 31,
	2016		2015			2014
U.S.	$	25,746	$	(141	)	$	19,205
Non-U.S.	31,499		12,402			20,143
Total	$	57,245	$	12,261		$	39,348

Significant components of income tax provision/(benefit) are as follows:



	Years Ended December 31,
	2016			2015			2014
Current:
U.S.	$	(1,312	)	$	329		$	945
Non-U.S.	13,729			12,482			6,981
Total Current	12,417			12,811			7,926
Deferred:
U.S.	13,245			(15,795		)	3,590
Non-U.S.	(2,797		)	8,291			1,310
Total Deferred	10,448			(7,504		)	4,900
Total provision for income taxes	$	22,865		$	5,307		$	12,826

Significant components of our deferred tax assets and liabilities are as follows:



	As of December 31,
	2016			2015
Post-retirement benefits	$	1,798		$	1,837
Inventory reserves	1,834			1,797
Loss carry-forwards	7,279			9,387
Credit carry-forwards	22,743			35,082
Nondeductible accruals	11,629			12,406
Research expenditures	31,380			30,465
Stock compensation	2,681			2,070
Foreign exchange loss	1,780			2,522
Other	648			1,231
Gross deferred tax assets	81,772			96,797
Depreciation and amortization	9,960			9,814
Pensions	16,024			11,868
Subsidiaries' unremitted earnings	1,292			7,461
Gross deferred tax liabilities	27,276			29,143
Net deferred tax assets	54,496			67,654
Deferred tax asset valuation allowance	(11,024		)	(10,266		)
Total net deferred tax assets	$	43,472		$	57,388

The long-term deferred tax assets and long-term deferred tax liabilities are as follows below:



	As of December 31,
	2016		2015
Non-current deferred tax assets	45,839		63,809
Non-current deferred tax liabilities	(2,367	)	(6,421	)
Total net deferred tax assets	43,472		57,388

In 2016, we elected to early adopt ASU 2015-17 "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes", on a retrospective basis allowing for all deferred tax items to be classified as non-current. The non-current deferred tax assets and non-current deferred tax liabilities were not netted since these items relate to different tax jurisdictions. Non-current deferred tax liabilities are included as a component of Other long-term obligations, on our Consolidated Balance Sheets at December 31, 2016 and 2015.

At each reporting date, we weigh all available positive and negative evidence to assess whether it is more-likely-than-not that the Company's deferred tax assets, including deferred tax assets associated with accumulated loss carryforwards and tax credits in the various jurisdictions in which it operates, will be realized. As of December 31, 2016 and 2015, we recorded deferred tax assets related to certain U.S. state and non-U.S. income tax loss carryforwards of $7,279 and $9,387, respectively, and U.S. and non-U.S. tax credits of $22,743 and $35,082, respectively. The deferred tax assets expire in various years primarily between 2017 and 2035.

Generally, we assess if it is more-likely-than-not that our net deferred tax assets will be realized during the available carry-forward periods. However, we have determined that valuation allowances of $11,024 and $10,266 should be provided for certain deferred tax assets at December 31, 2016 and 2015, respectively. As of December 31, 2016, the valuation allowances relate to certain U.S. state and non-U.S. loss carry-forwards and certain U.S. state tax credits that management does not anticipate will be utilized. The increase in the valuation allowance from December 31, 2015, to December 31, 2016, is primarily due to the June 2016 restructuring activities and changes in management's judgment regarding realizability of the related assets.

No valuation allowance was recorded in 2016 against the U.S. federal foreign tax credit carryforwards of $19,375, which expire in varying amounts between 2019 and 2025, research and development tax credits of $4,311. which expire in varying amounts between 2024 and 2035, and the alternative minimum tax credit carryforwards of $882, which have no expiration. We assessed the anticipated realization of those tax credits utilizing future taxable income projections. Based on those projections, management believes it is more-likely-than-not that we will realize the benefits of these carryforwards.

The following table reconciles taxes at the U.S. federal statutory rate to the effective income tax rate:



	Years Ended December 31,
	2016		2015		2014
Taxes at the U.S. statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal income tax benefit	1.4	%	(0.1	)%	0.7	%
Non-U.S. income taxed at rates different than the U.S. statutory rate	(7.5	)%	(16.7	)%	(7.6	)%
Foreign source income, net of associated foreign tax credits	5.3	%	6.9	%	3.5	%
Benefit of tax credits	(1.0	)%	(4.6	)%	(1.3	)%
Non-deductible expenses	0.7	%	1.3	%	2.8	%
Adjustment to valuation allowances	3.8	%	37.8	%	(0.4	)%
Benefit from prior period foreign tax credits	—	%	(133.0	)%	—	%
Change in unrecognized tax benefits	3.3	%	59.5	%	—	%
Impacts of unremitted foreign earnings	0.6	%	60.8	%	—	%
Other	(1.7	)%	(3.6	)%	(0.1	)%
Effective income tax rate	39.9	%	43.3	%	32.6	%

During 2015, we changed our position regarding the U.S. federal tax treatment of foreign taxes paid. We claimed a foreign tax credit on our 2014 and 2015 U.S. federal income tax returns and filed amended tax returns for 2006 through 2013 in order to claim non-U.S. taxes paid as a credit against income tax, rather than as a deduction. The filing of the amended returns reduced the deferred tax asset for federal loss carryforwards by $8,214, and increased our available foreign tax credit carryforward by $24,519, resulting in a net tax benefit of $16,305, recorded in 2015.

In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those operations. However, during 2015, we determined that as a result of changes in the business, the foreign earnings of our subsidiaries in Canada and the U.K. were no longer permanently reinvested. Therefore, a provision for the expected taxes on repatriation of those earnings was recorded. In addition, although we plan to permanently reinvest the earnings of our Chinese facilities outside the U.S., we have determined that we will not maintain those earnings in China in order to mitigate future currency risk. As a result of these changes, we recorded a tax expense of $7,461 in 2015. Management intends to continue to permanently reinvest all other remaining current and prior earnings in jurisdictions located outside of the U.S. As of December 31, 2016, no provision has been made for U.S. income taxes on approximately $133,074 of foreign earnings, which are permanently reinvested outside of the U.S. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to U.S. income taxes net of related foreign tax credits, state income taxes, and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. tax liability is not practical because of complexities such as potential foreign tax credits, local restrictions on distributions, and treaty implications associated with the related calculation.

We recognize the financial statement benefit of a tax position when it is more-likely-than-not, based on its technical merits, that the position will be sustained upon examination. A tax position that meets the more-likely-than-not threshold is then measured to determine the amount of benefit recognized in the financial statements. As of December 31, 2016, we have approximately $12,347 of unrecognized tax benefits, which if recognized, would impact the effective tax rate. We do not anticipate any significant changes in our unrecognized tax benefits within the next 12 months.

A reconciliation of the beginning and ending unrecognized tax benefits is provided below:



	2016		2015
Balance at January 1	$	11,008	$	3,890
Increase related to current year tax positions	1,088		1,406
Increase related to prior year tax positions	251		5,728
Decrease as a result of lapse of statute of limitations	—		(16		)
Balance at December 31	$	12,347	$	11,008

Our continuing practice is to recognize interest and/or penalties related to unrecognized tax benefits as income tax expense. As of December 31, 2016, and 2015, $1,772 and $1,206, respectively, of interest and penalties were accrued.

We are subject to taxation in the U.S., various states, and in non-U.S. jurisdictions. Our U.S. income tax returns are primarily subject to examination from 2012 through 2015; however, U.S. tax authorities also have the ability to review prior tax years to the extent loss carryforwards and tax credit carryforwards are utilized. The open years for the non-U.S. tax returns range from 2008 through 2015 based on local statutes.