Income Taxes

The current income tax provision reflects the tax consequences of revenues and expenses currently taxable or deductible on various income tax returns for the year reported. The deferred income tax provision or benefit generally reflects the net change in deferred income tax assets and liabilities during the year, excluding any deferred income tax assets and liabilities of acquired businesses. The components of the provision for income taxes for the years ended December 31 are as follows:



(in millions)	2015			2014			2013
Current Provision:
Federal	$	4,155		$	3,883		$	3,004
State and local	281			271			237
Total current provision	4,436			4,154			3,241
Deferred (benefit) provision	(73		)	(117		)	1
Total provision for income taxes	$	4,363		$	4,037		$	3,242

The reconciliation of the tax provision at the U.S. federal statutory rate to the provision for income taxes and the effective tax rate for the years ended December 31 is as follows:



(in millions, except percentages)	2015					2014					2013
Tax provision at the U.S. federal statutory rate	$	3,581		35.0	%	$	3,380		35.0	%	$	3,120		35.0	%
Health insurance industry tax	627			6.1		469			4.8		—			—
State income taxes, net of federal benefit	145			1.4		154			1.6		126			1.4
Tax-exempt investment income	(44		)	(0.4	)	(49		)	(0.5	)	(53		)	(0.6	)
Non-deductible compensation	103			1.0		96			1.0		39			0.5
Other, net	(49		)	(0.5	)	(13		)	(0.1	)	10			0.1
Provision for income taxes	$	4,363		42.6	%	$	4,037		41.8	%	$	3,242		36.4	%

The higher tax rates for 2015 and 2014 were primarily due to the increase in the nondeductible Health Insurance Industry Tax.

Deferred income tax assets and liabilities are recognized for the differences between the financial and income tax reporting bases of assets and liabilities based on enacted tax rates and laws. The components of deferred income tax assets and liabilities as of December 31 are as follows:



(in millions)	2015			2014
Deferred income tax assets:
Accrued expenses and allowances	$	739		$	313
U.S. federal and state net operating loss carryforwards	139			172
Share-based compensation	124			141
Nondeductible liabilities	205			222
Medical costs payable and other policy liabilities	71			120
Non-U.S. tax loss carryforwards	244			257
Unearned revenues	94			90
Unrecognized tax benefits	69			38
Other-domestic	51			36
Other-non-U.S.	130			141
Subtotal	1,866			1,530
Less: valuation allowances	(44		)	(119		)
Total deferred income tax assets	1,822			1,411
Deferred income tax liabilities:
U.S. federal and state intangible assets	(2,951		)	(1,275		)
Non-U.S. goodwill and intangible assets	(397		)	(496		)
Capitalized software	(574		)	(506		)
Net unrealized gains on investments	(34		)	(129		)
Depreciation and amortization	(312		)	(272		)
Prepaid expenses	(205		)	(140		)
Other-non-U.S.	(76		)	(102		)
Total deferred income tax liabilities	(4,549		)	(2,920		)
Net deferred income tax liabilities	$	(2,727	)	$	(1,509	)

Valuation allowances are provided when it is considered more likely than not that deferred tax assets will not be realized. The valuation allowances primarily relate to future tax benefits on certain federal, state and non-U.S. net operating loss carryforwards. Federal net operating loss carryforwards of $122 million expire beginning in 2021 through 2035; state net operating loss carryforwards expire beginning in 2016 through 2035. Substantially all of the non-U.S. tax loss carryforwards have indefinite carryforward periods.

As of December 31, 2015, the Company had $459 million of undistributed earnings from non-U.S. subsidiaries that are intended to be reinvested in non-U.S. operations. Because these earnings are considered permanently reinvested, no U.S. tax provision has been accrued related to the repatriation of these earnings. It is not practicable to estimate the amount of U.S. tax that might be payable on the eventual remittance of such earnings.

A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 31 is as follows:



(in millions)	2015			2014			2013
Gross unrecognized tax benefits, beginning of period	$	92		$	89		$	81
Gross increases:
Current year tax positions	—			—			8
Prior year tax positions	55			4			5
Acquired reserves	89			—			—
Gross decreases:
Prior year tax positions	(2		)	—			—
Settlements	(1		)	—			—
Statute of limitations lapses	(9		)	(1		)	(5		)
Gross unrecognized tax benefits, end of period	$	224		$	92		$	89

The Company believes it is reasonably possible that its liability for unrecognized tax benefits will decrease in the next twelve months by $137 million as a result of audit settlements and the expiration of statutes of limitations in certain major jurisdictions.

The Company classifies interest and penalties associated with uncertain income tax positions as income taxes within its Consolidated Statement of Operations. During 2015, 2014, and 2013, the Company recognized $11 million, $6 million and $4 million of interest and penalties, respectively. The Company had $59 million and $33 million of accrued interest and penalties for uncertain tax positions as of December 31, 2015 and 2014, respectively. These amounts are not included in the reconciliation above.

The Company currently files income tax returns in the United States, various states and non-U.S. jurisdictions. The U.S. Internal Revenue Service (IRS) has completed exams on the consolidated income tax returns for fiscal years 2014 and prior. The Company’s 2015 tax year is under advance review by the IRS under its Compliance Assurance Program. With the exception of a few states, the Company is no longer subject to income tax examinations prior to the 2008 tax year. The Brazilian federal revenue service - Secretaria da Receita Federal (SRF) may audit the Company’s Brazilian subsidiaries for a period of five years from the date on which corporate income taxes should have been paid and/or the date when the tax return was filed.