Income Taxes

The income tax provision for continuing operations consisted of the following for the years ended December 31:



In millions	2015			2014			2013
Current:
Federal	$	3,065		$	2,581		$	2,623
State	555			495			437
	3,620			3,076			3,060
Deferred:
Federal	(180		)	(43		)	(115		)
State	(54		)	—			(17		)
	(234		)	(43		)	(132		)
Total	$	3,386		$	3,033		$	2,928

The following table is a reconciliation of the statutory income tax rate to the Company’s effective income tax rate for continuing operations for the years ended December 31:



	2015		2014		2013
Statutory income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	4.0		4.3		4.0
Other	0.3		0.2		(0.1	)
Effective income tax rate	39.3	%	39.5	%	38.9	%

The following table is a summary of the significant components of the Company’s deferred tax assets and liabilities as of December 31:



In millions	2015			2014
Deferred tax assets:
Lease and rents	$	378		$	396
Inventory	99			—
Employee benefits	359			311
Allowance for doubtful accounts	279			164
Retirement benefits	105			80
Net operating loss and capital loss carryforwards	115			74
Deferred income	83			261
Other	498			297
Valuation allowance	(115		)	(5		)
Total deferred tax assets	1,801			1,578
Deferred tax liabilities:
Inventories	—			(18		)
Depreciation and amortization	(6,018		)	(4,572		)
Total deferred tax liabilities	(6,018		)	(4,590		)
Net deferred tax liabilities	$	(4,217	)	$	(3,012	)

Net deferred tax assets (liabilities) are presented on the consolidated balance sheets as follows:



In millions	2015			2014
Deferred tax assets—current	$	1,220		$	985
Deferred tax assets—noncurrent (included in other assets)	—			39
Deferred tax liabilities—noncurrent	(5,437		)	(4,036		)
Net deferred tax liabilities	$	(4,217	)	$	(3,012	)

The Company assesses positive and negative evidence to determine whether it is more likely than not some portion of a deferred tax asset would not be realized. When it would not, a valuation allowance is established for such portion of a deferred tax asset. The Company's valuation allowance increased by $110 million in the current year, a majority of which relates to capital losses assumed in the Omnicare acquisition.

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



In millions	2015			2014			2013
Beginning balance	$	188		$	117		$	80
Additions based on tax positions related to the current year	57			32			19
Additions based on tax positions related to prior years	122			70			37
Reductions for tax positions of prior years	(11		)	(15		)	(1		)
Expiration of statutes of limitation	(13		)	(15		)	(17		)
Settlements	(5		)	(1		)	(1		)
Ending balance	$	338		$	188		$	117

The Company and most of its subsidiaries are subject to U.S. federal income tax as well as income tax of numerous state and local jurisdictions. The Company is a participant in the Compliance Assurance Process (“CAP”), which is a voluntary program offered by the Internal Revenue Service (“IRS”) under which participating taxpayers work collaboratively with the IRS to identify and resolve potential tax issues through open, cooperative and transparent interaction prior to the filing of their federal income tax. The IRS is currently examining the Company’s 2014 and 2015 consolidated U.S. federal income tax returns.

The Company and its subsidiaries are also currently under income tax examinations by a number of state and local tax authorities. As of December 31, 2015, no examination has resulted in any proposed adjustments that would result in a material change to the Company’s results of operations, financial condition or liquidity.

Substantially all material state and local income tax matters have been concluded for fiscal years through 2010. Although certain state exams will be concluded and certain state statutes will lapse in 2016, the change in the balance of our uncertain tax positions will be immaterial. In addition, it is reasonably possible that the Company’s unrecognized tax benefits could significantly change within the next twelve months due to the anticipated conclusion of various examinations with the IRS for various years. An estimate of the range of the possible change cannot be made at this time.

The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. The Company recognized interest of approximately $5 million during the year ended December 31, 2015, $6 million during the year ended December 31, 2014, and $4 million during the year ended December 31, 2013. The Company had approximately $16 million and $11 million accrued for interest and penalties as of December 31, 2015 and 2014, respectively.

There are no material uncertain tax positions as of December 31, 2015 the ultimate deductibility of which is highly certain but for which there is uncertainty about the timing. If there were, any such items would impact deferred tax accounting only, not the annual effective income tax rate, and would accelerate the payment of cash to the taxing authority to a period earlier than expected.

As of December 31, 2015, the total amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate is approximately $292 million, after considering the federal benefit of state income taxes.