INCOME TAXES

The provision for income taxes consists of the following:



(millions)	2013			2012			2011
Income taxes
Current
Federal	$	96.4		$	79.4		$	76.5
State	10.3			10.1			10.5
International	42.2			26.0			17.6
	148.9			115.5			104.6
Deferred
Federal	(0.1		)	21.3			32.0
State	(0.4		)	4.0			4.1
International	(14.8		)	(1.0		)	1.9
	(15.3		)	24.3			38.0
Total income taxes	$	133.6		$	139.8		$	142.6

The components of income from consolidated operations before income taxes follow:



(millions)	2013		2012		2011
Pretax income
United States	$	351.2	$	366.2	$	338.7
International	148.2		159.9		152.7
	$	499.4	$	526.1	$	491.4

A reconciliation of the U.S. federal statutory rate with the effective tax rate follows:



	2013		2012		2011
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefits	1.2		1.7		1.9
International tax at different effective rates	(6.9	)	(6.5	)	(7.0	)
U.S. tax on remitted and unremitted earnings	—		(2.0	)	0.2
U.S. manufacturing deduction	(1.8	)	(1.6	)	(1.6	)
Changes in prior year tax contingencies	0.3		(0.1	)	(0.1	)
Other, net	(1.0	)	0.1		0.6
Total	26.8	%	26.6	%	29.0	%

Deferred tax assets and liabilities are comprised of the following:



(millions)	2013			2012
Deferred tax assets
Employee benefit liabilities	$	110.3		$	165.2
Other accrued liabilities	23.5			16.3
Inventory	11.1			14.9
Tax loss and credit carryforwards	42.1			49.7
Other	9.5			11.8
Valuation allowance	(21.2		)	(27.5		)
	175.3			230.4
Deferred tax liabilities
Depreciation	45.3			48.3
Intangible assets	178.9			158.8
Other	7.4			5.9
	231.6			213.0
Net deferred tax (liability) asset	$	(56.3	)	$	17.4

At November 30, 2013, our non-U.S. subsidiaries have tax loss carryforwards of $155.0 million, of which $2.8 million are from the excess tax benefits related to stock-based compensation deductions which will increase equity once the benefit is realized through a reduction of income taxes payable. Of these carryforwards, $43.8 million expire through 2016, $40.6 million from 2017 through 2025 and $70.6 million may be carried forward indefinitely.

At November 30, 2013, our non-U.S. subsidiaries have capital loss carryforwards of $6.2 million. All of these carryforwards may be carried forward indefinitely.

At November 30, 2013, we have tax credit carryforwards of $19.3 million, of which $5.2 million expire in 2020, $0.6 million in 2021 and $13.5 million in 2022.

A valuation allowance has been provided to record deferred tax assets at their net realizable value based on a more likely than not criteria. The $6.3 million net decrease in the valuation allowance was mainly due to to the recognition of deferred tax assets related to subsidiaries net operating losses which are now more likely than not to be realized, offset by additional valuation allowance related to losses generated in other subsidiaries in 2013 which may not be realized in future periods.

U.S. income taxes are not provided for unremitted earnings of international subsidiaries and affiliates where our intention is to reinvest these earnings permanently. Unremitted earnings of such entities were $1.1 billion at November 30, 2013. Upon distribution of these earnings, we could be subject to both U.S. income taxes and withholding taxes. Determination of the unrecognized deferred income tax liability is not practical because of the complexities involved with this hypothetical calculation.

The total amount of unrecognized tax benefits as of November 30, 2013 and November 30, 2012 were $58.0 million and $46.7 million, respectively. If recognized, $49.8 million of these tax benefits would affect the effective tax rate.

The following table summarizes the activity related to our gross unrecognized tax benefits for the years ended November 30:



(millions)	2013			2012			2011
Balance at beginning of year	$	46.7		$	33.2		$	20.7
Additions for current year tax positions	10.3			10.6			10.3
Additions for prior year tax positions	2.2			3.9			6.5
Reductions for prior year tax positions	—			—			(3.1		)
Statute expirations	(0.1		)	(1.2		)	(1.2		)
Foreign currency translation	(1.1		)	0.2			—
Balance at November 30	$	58.0		$	46.7		$	33.2

We record interest and penalties on income taxes in income tax expense. We recognized interest and penalty expense of $1.3 million, $1.4 million and $0.6 million for the years ended November 30, 2013, 2012 and 2011, respectively. As of November 30, 2013 and 2012, we had accrued $5.2 million and $4.0 million, respectively, of interest and penalties related to unrecognized tax benefits.

Tax settlements or statute of limitation expirations could result in a change to our uncertain tax positions. We believe that it is reasonably possible that the total amount of unrecognized tax benefits as of November 30, 2013 could decrease by approximately $4.2 million in the next 12 months as a result of various audit closures and/or tax settlements.

We file income tax returns in the U.S. federal jurisdiction and various state and non-U.S. jurisdictions. The open years subject to tax audits vary depending on the tax jurisdictions. In major jurisdictions, we are no longer subject to income tax audits by taxing authorities for years before 2006.

We are under normal recurring tax audits in several of our major operations outside the U.S. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our reserves for uncertain tax positions are adequate to cover existing risks and exposures.

In 2010, the Internal Revenue Service (IRS) commenced an examination of our U.S. federal income tax return for the 2007 and 2008 tax years. During the course of the examination, we have held discussions with the IRS on certain issues and, in October 2012, we received proposed adjustments for these tax years. In November 2012, we deposited $18.8 million with the IRS to stop any potential interest on these proposed adjustments. We disagree with certain of the proposed adjustments and, in December 2012, we filed a protest to initiate the IRS administrative appeals process. No further significant events occurred in 2013. We believe we have established appropriate tax accruals under US GAAP for these issues.