Income Taxes

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Income Taxes

6.  Income Taxes

The components of U.S. and foreign income before income tax and a reconciliation between the federal income tax expense at statutory rates and the actual income tax expense is as follows:

	Three Months Ended       June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
(In millions)
Income (loss) before income tax:
U.S.		$    (142)		$    129		$    (103)		$    266
Foreign		(134)		166		22		134
Total		$    (276)		$    295		$      (81)		$    400
Income tax expense (benefit) at statutory rate		$      (97)		$    103		$      (28)		$    140
Increase (decrease) in income tax expense resulting from:
Exempt investment income		(33)		(29)		(64)		(58)
Foreign related tax differential		63		(32)		23		(5)
Valuation allowance		77				77
Amortization of deferred charges associated with intercompany rig sales to other tax jurisdictions				4				41
Taxes related to domestic affiliate		(2)		4		1		(6)
Partnership earnings not subject to taxes		(11)		(7)		(28)		(20)
Unrecognized tax benefit		5		2		10		5
Other		10		3		17		7
Income tax expense		$        12		$    48		$         8		$    104

The effective tax rate is impacted by the change in the relative components of earnings or losses generated in foreign tax jurisdictions with lower tax rates.

In the second quarter of 2016, a valuation allowance of $77 million was established for the future tax benefit of foreign tax credits in the U.S. which Diamond Offshore no longer expects to be able to realize prior to their expiration.