NOTE 14—INCOME TAXES

The provision for income taxes consisted of:

	Year Ended December 31,
	2015		2014			2013
	(In thousands)
Other than U.S.:
Current	$	45,752	$	21,619		$	54,410
Deferred		6,211		(1,546	)		(5,359	)
Total provision for income taxes	$	51,963	$	20,073		$	49,051

The geographic sources of income before income taxes are as follows:

	Year Ended December 31,
	2015			2014			2013
	(In thousands)
U.S.	$	(101,746	)	$	(31,124	)	$	(151,904	)
Other than U.S.		144,870			(14,197	)		(288,955	)
Income before provision for income taxes	$	43,124		$	(45,321	)	$	(440,859	)

The following is a reconciliation of the Panama statutory federal tax rate to the consolidated effective tax rate:

	Year Ended December 31,
	2015			2014			2013
Panama federal statutory rate		25	%		25	%		25	%
Non-Panama operations		56	%		4	%		-16	%
Valuation allowance for deferred tax assets		15	%		-87	%		-19	%
Audit settlements and reserves		14	%		14	%		-1	%
Other		11	%		-			-
Effective tax rate attributable to continuing operations		121	%		-44	%		-11	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes, as well as operating loss and tax credit carryforwards.

Significant components of deferred tax assets and liabilities were as follows:

	December 31,
	2015			2014
	(In thousands)
Deferred tax assets:
Pension liability	$	12,033		$	10,976
Accrued liabilities for incentive compensation		21,640			19,015
Net operating loss carryforward		325,636			294,722
State net operating loss carryforward		24,367			21,296
Long-term contracts		4,312			39,817
Other		2,060			1,549
Total deferred tax assets		390,048			387,375
Valuation allowance for deferred tax assets		(336,146	)		(331,589	)
Deferred tax assets	$	53,902		$	55,786

Deferred tax liabilities:
Property, plant and equipment	$	34,419		$	28,815
Prepaid drydock		7,639			10,280
Investments in joint ventures and affiliated companies		14,960			13,583
Unrealized exchange gains and other		3,163			3,162
Total deferred tax liabilities	$	60,181		$	55,840

Net deferred tax liability	$	(6,279	)	$	(54	)

	December 31,
	2015			2014
	(In thousands)
Deferred tax assets and liabilities in the accompanying consolidated balance sheets include:
Current deferred tax assets	$	8,133		$	7,514
Noncurrent deferred tax assets		10,689			17,313
Total	$	18,822		$	24,827

Current deferred tax liabilities	$	17,273		$	19,753
Noncurrent deferred tax liabilities		7,828			5,128
Total	$	25,101		$	24,881

Net deferred tax liability	$	(6,279	)	$	(54	)

At December 31, 2015, we had a valuation allowance of $336 million for deferred tax assets that we expect cannot be realized through carrybacks, future reversals of existing taxable temporary differences or based on our estimate of future taxable income. We believe that our remaining deferred tax assets will more likely than not be realized through carrybacks, future reversals of existing taxable temporary differences and future taxable income. Any changes to our estimated valuation allowance could be material to our consolidated financial statements.

We have foreign net operating loss carryforwards of $440 million available to offset future taxable income in foreign jurisdictions. Of the foreign net operating loss carryforwards, $22 million is scheduled to expire in years 2016 to 2018. The foreign net operating losses have a valuation allowance of $105 million against the related deferred taxes. We have U.S. federal net operating loss carryforwards of approximately $624 million, which includes $17 million for which the benefit will be recorded in APIC when realized, and carry a $218 million valuation allowance against the related deferred taxes. The U.S. federal net operating loss carryforwards are scheduled to expire in years 2024 to 2035. We have state net operating losses of $469 million available to offset future taxable income in states where we operate. The state net operating loss carryforwards are scheduled to expire in years 2016 to 2029. We are carrying a valuation allowance of $24 million against the deferred tax asset related to the state loss carryforwards.

We have provided $18 million of taxes on earnings we intend to remit. All other earnings are considered permanently reinvested. We would be subject to withholding taxes if we were to distribute these permanently reinvested earnings from our U.S. subsidiaries and certain foreign subsidiaries. At December 31, 2015, the undistributed earnings of these subsidiaries were $198 million. Unrecognized deferred income tax liabilities, including withholding taxes, payable upon distribution of these earnings is under $1 million.

We conduct business globally and, as a result, we or one or more of our subsidiaries file income tax returns in a number of jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Malaysia, Australia, Indonesia, Singapore, Saudi Arabia, Kuwait, India and the United States. With few exceptions, we are no longer subject to tax examinations for years prior to 2010.

A reconciliation of unrecognized tax benefits is as follows:

	Year Ended December 31,
	2015			2014			2013
	(In thousands)
Balance at beginning of period	$	34,106		$	40,613		$	40,516
Increases based on tax positions taken in the current year		4,720			3,479			539
Increases based on tax positions taken in prior years		4,710			3,195			3,831
Decreases based on tax positions taken in prior years		(2,836	)		(863	)		(3,688	)
Decreases due to lapse of applicable statute of limitation		(4,347	)		(12,318	)		(585	)
Balance at end of period	$	36,353		$	34,106		$	40,613

The entire balance of unrecognized tax benefits at December 31, 2015 would reduce our effective tax rate if recognized.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. At December 31, 2015 and 2014 we had liabilities of approximately $16 million and $15 million, respectively, for the payment of tax-related interest and penalties.