NOTE 13—INCOME TAXES

The following table reflects loss from continuing operations before income taxes by domestic and foreign tax jurisdictions for the years ended December 31, 2016, 2015 and 2014:

	Year Ended December 31,
(In millions)	2016			2015			2014
U.S.	$	(103.4	)	$	(43.8	)	$	(8.5	)
Foreign		(0.4	)		3.0			—
Loss from continuing operations before income taxes	$	(103.8	)	$	(40.8	)	$	(8.5	)

The following table summarizes income tax benefit, within continuing operations, for the years ended December 31, 2016, 2015 and 2014:

	Year Ended December 31,
(In millions)	2016			2015			2014
Current income tax expense (benefit):
Federal	$	(1.5	)	$	(13.9	)	$	(3.1	)
State		0.2			0.4			(0.7	)
Foreign		3.2			6.5			—
Total current income tax expense (benefit)		1.9			(7.0	)		(3.8	)
Deferred income tax expense (benefit):
Federal		(1.6	)		1.3			(4.6	)
State		0.2			(0.1	)		—
Foreign		(1.1	)		(3.3	)		—
Total deferred income tax benefit		(2.5	)		(2.1	)		(4.6	)
Total income tax benefit	$	(0.6	)	$	(9.1	)	$	(8.4	)

The following table provides a reconciliation of the effective tax rates in the consolidated statements of operations from continuing operations for the years ended December 31, 2016, 2015 and 2014 with the statutory U.S. federal income tax rate of 34.0%:

	Year Ended December 31,
	2016			2015			2014
U.S. federal statutory rate		34.0	%		34.0	%		34.0	%
State income taxes		(0.3	)%		(0.6	)%		4.9	%
Foreign income taxes		(0.4	)%		(0.4	)%		0.0	%
Deferred tax valuation allowance		(24.6	)%		(26.5	)%		(131.3	)%
Fair value adjustments		0.0	%		(1.2	)%		14.7	%
Revisions to prior years		(0.1	)%		19.1	%		171.4	%
Goodwill impairment		(9.5	)%		0.0	%		0.0	%
Other permanent items		1.4	%		(2.1	)%		(0.1	)%
Other		0.0	%		0.0	%		4.7	%
Effective tax rate		0.5	%		22.3	%		98.3	%

The following table provides a summary of the activity in the amount of unrecognized tax benefits for the years ended December 31, 2016, 2015 and 2014:

	Year Ended December 31,
(In millions)	2016			2015		2014
Balance, beginning of period	$	0.3		$	—	$	0.3
Additions		0.1			0.3		0.3
Settlements		(0.3	)		—		(0.6	)
Balance, end of period	$	0.1		$	0.3	$	—

Unrecognized tax benefits as of December 31, 2016 and 2015, the recognition of which would impact the effective tax rate for each year, were $0.1 million and $0.3 million, respectively. Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense. For the years ended December 31, 2016 and 2015, the interest and penalty amounts were not significant.

The Company has not provided for U.S. income taxes on undistributed earnings of certain non-U.S. subsidiaries, as such amounts are considered permanently reinvested outside the U.S. To the extent foreign earnings previously treated as permanently reinvested are repatriated, the related U.S. tax liability may be reduced by any foreign income taxes paid on these earnings. It is not practicable to determine the U.S. federal income tax liability that would be payable, if any, should such earnings not be permanently reinvested. As of December 31, 2016, non-U.S. subsidiaries have cumulative unremitted earnings of $25.0 million.

Deferred income taxes are a component of continuing operations and include the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and for income tax reporting purposes. The components of the Company’s deferred tax assets, liabilities and valuation allowances as of December 31, 2016 and 2015 are summarized in the following table:

	December 31,
(In millions)	2016			2015
Deferred tax assets:
Net operating loss carryforwards	$	383.0		$	366.9
Alternative minimum tax credits		10.2			11.8
Repurchase reserve		—			0.2
Inventories		1.2			0.4
Compensation		3.4			1.1
Pension benefits		6.9			5.7
Intangible assets		13.1			—
Other		1.7			2.1
Total deferred tax assets		419.5			388.2
Deferred tax valuation allowance		(406.0	)		(382.4	)
Deferred tax assets, net of valuation allowance		13.5			5.8
Deferred tax liabilities:
Property, plant and equipment		(11.5	)		(11.4	)
Intangible assets		(3.0	)		(1.1	)
Other		(1.5	)		—
Total deferred tax liabilities		(16.0	)		(12.5	)
Net deferred tax liabilities	$	(2.5	)	$	(6.7	)

Management assesses deferred tax assets to consider whether it is more likely than not that the deferred tax assets will be realized. The ultimate realization of deferred tax assets depends on the ability to generate taxable income during the periods and in jurisdictions in which the temporary difference become deductible. As a result of generating losses since 2006, among other factors, we determined that sufficient uncertainty exists as to the realizability of our deferred tax assets and have placed a full valuation allowance on the U.S. deferred tax assets. Based on the Company’s analysis of estimated taxable income, including the NABCO sale and the Real Alloy Acquisition, $5.1 million of the deferred tax valuation allowance was released in the year ended December 31, 2014. The following table provides information about the activity of our deferred tax valuation allowance for the years ended December 31, 2016, 2015 and 2014:

	Year Ended December 31,
(In millions)	2016		2015			2014
Balance, beginning of period	$	382.4	$	385.6		$	375.0
Additions (reductions) recorded in the provision for income taxes		23.6		(5.8	)		10.6
Business acquired		—		2.6			—
Balance, end of period	$	406.0	$	382.4		$	385.6

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, as well as foreign jurisdictions located in Canada, Mexico, Germany, Norway, and the United Kingdom. With few exceptions, the 2010 through 2015 tax years remain open to examination. The activity in 2014 relates to an IRS examination of the Company’s 2003, 2004, 2005 and 2008 tax years, which was completed in March 2014. Due to the existing NOLs, the Company is still subject to audit for certain loss years prior to 2008 by the IRS and by various state taxing authorities as the NOLs for a particular year are utilized. In October 2016, the IRS notified the Company of its intention to audit Real Industry’s 2014 federal tax return. In December 2016, the Canada Revenue Agency notified the Company that it would be conducting a limited review of Real Alloy Canada Ltd’s 2014 corporate income tax return.

As of December 31, 2016, the Company has estimated U.S. federal NOLs of $916.0 million and non-U.S. NOLs of $30.4 million. The U.S. federal NOLs have a 20-year life and begin to expire after the 2027 tax year. Additionally, the Company has state NOLs in amounts that are comparable to the U.S. federal NOLs.