11. INCOME TAXES

Earnings before income taxes for the years ended December 31 consist of:



(In thousands)	2015		2014		2013
Domestic	$	135,112	$	120,563	$	105,188
Foreign	140,082		126,381		95,862
	$	275,194	$	246,944	$	201,050

The provision for income taxes for the years ended December 31 consists of:



(In thousands)	2015			2014			2013
Current:
Federal	$	(6,741	)	$	70,609		$	29,323
State	6,175			9,065			5,629
Foreign	27,134			33,401			20,807
Total current	26,568			113,075			55,759

Deferred:
Federal	49,060			(29,683		)	7,002
State	7,390			(1,247		)	667
Foreign	(72		)	(5,150		)	(1,782		)
Total deferred	56,378			(36,080		)	5,887
Provision for income taxes	$	82,946		$	76,995		$	61,646

The effective tax rate varies from the U.S. federal statutory tax rate for the years ended December 31, principally:



	2015		2014		2013
U.S. federal statutory tax rate	35.0	%	35.0	%	35.0	%
Add (deduct):
State and local taxes, net of federal benefit	4.3		2.4		1.6
R&D tax credits	(1.3	)	(1.3	)	(1.5	)
Foreign earnings ⁽¹⁾	(6.2	)	(4.4	)	(3.7	)
All other, net	(1.7	)	(0.5	)	(0.7	)
Effective tax rate	30.1	%	31.2	%	30.7	%

⁽¹⁾ Foreign earnings primarily include the net impact of differences between local statutory rates and the U.S. Federal statutory rate, the cost of repatriating foreign earnings, and the impact of changes to foreign valuation allowances.

The components of the Corporation’s deferred tax assets and liabilities at December 31 are as follows:



(In thousands)	2015			2014
Deferred tax assets:
Pension plans	$	40,102		$	84,493
Environmental reserves	9,561			10,123
Inventories	20,041			18,496
Postretirement/postemployment benefits	13,272			13,326
Incentive compensation	12,369			16,140
Net operating loss	9,043			8,909
Capital loss carryover	10,141			17,555
Other	38,226			26,329
Total deferred tax assets	152,755			195,371
Deferred tax liabilities:
Depreciation	29,771			33,117
Goodwill amortization	89,276			74,555
Other intangible amortization	54,017			62,777
Other	12,280			9,452
Total deferred tax liabilities	185,344			179,901
Valuation allowance	17,895			23,478
Net deferred tax liabilities	$	(50,484	)	$	(8,008	)

Deferred tax assets and liabilities are reflected on the Corporation’s consolidated balance sheet at December 31 as follows:



(In thousands)	2015			2014
Net current deferred tax assets	$	41,737		$	44,311
Net current deferred tax liabilities	1,962			2,448
Net noncurrent deferred tax assets	856			1,683
Net noncurrent deferred tax liabilities	91,115			51,554
Net deferred tax liabilities	$	(50,484	)	$	(8,008	)

The Corporation has income tax net operating loss carryforwards related to international operations of approximately $20.3 million of which $9.2 million have an indefinite life and $11.1 million expire through 2023. The Corporation has federal and state income tax net loss carryforwards of approximately $91.4 million, of which $63.2 million are net operating losses which expire through 2035 and $28.2 million are capital loss carryforwards which expire in 2020. The Corporation has recorded a deferred tax asset of $19.2 million reflecting the benefit of the loss carryforwards.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2015 in certain of the Corporation’s foreign locations. Such objective evidence limits the ability to consider other subjective evidence such as projections for future growth. The Corporation decreased its valuation allowance by $5.6 million to $17.9 million, as of December 31, 2015, in order to measure only the portion of the deferred tax asset that more likely than not will be realized. This was principally as a result of the reduced benefit associated with the capital loss carryforward incurred from the sale of its discontinued operations offset by various state activities. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as projections for growth.

Income tax payments, net of refunds, of $4.9 million, $35.0 million, and $69.4 million were made in 2015, 2014, and 2013, respectively. We expect income tax payments, net of refunds, to be approximately $45 million to $55 million in 2016.

The amount of undistributed foreign subsidiaries earnings considered to be permanently reinvested for which no provision has been made for U.S. federal or foreign taxes at December 31, 2015 was $338.0 million. It is not practicable to estimate the amount of tax that would be payable if these amounts were repatriated to the United States; however, foreign tax credits may partiality offset any tax liability.

The Corporation has recognized a liability in Other liabilities for interest of $1.9 million and penalties of $1.2 million as of December 31, 2015.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



(In thousands)	2015			2014			2013
Balance at January 1,	$	11,560		$	10,623		$	11,301
Additions for tax positions of prior periods	359			1,421			1,511
Additions for tax positions related to the current year	2,026			1,738			1,768
Settlements	(1,414		)	(2,039		)	(3,868		)
Lapses of statute of limitations	—			(41		)	(140		)
Foreign currency translation	(117		)	(142		)	51
Balance at December 31,	$	12,414		$	11,560		$	10,623

In many cases the Corporation’s uncertain tax positions are related to tax years that remain subject to examination by tax authorities.

The following describes the open tax years, by major tax jurisdiction, as of December 31, 2015:



United States (Federal)	2012	-	present
United States (Various states)	1998	-	present
United Kingdom	2008	-	present
Canada	2009	-	present

The Corporation does not expect any significant changes to the estimated amount of liability associated with its uncertain tax positions through the next twelve months. Included in the total unrecognized tax benefits at December 31, 2015, 2014, and 2013 is $8.3 million, $8.0 million, and $7.6 million, respectively, which if recognized, would favorably affect the effective income tax rate.