6. Income Taxes

Income before taxes is summarized as follows:



	Year Ended December 31,
(in thousands)	2016		2015		2014
United States Operations	$	128,072	$	69,822	$	170,517
Foreign Operations		21,043		4,017		16,921
Total	$	149,115	$	73,839	$	187,438

The provision for income taxes is as follows:



	Year Ended December 31,
(in thousands)	2016		2015		2014
Current expense:
Federal	$	43,850	$	5,465	$	45,074
State		13,039		(362)		11,174
Foreign		6,573		1,126		3,203
Total current		63,462		6,229		59,451

Deferred (benefit) expense:
Federal		(3,054)		19,583		9,992
State		(5,302)		2,735		10,059
Foreign		(1,813)		—		—
Total deferred		(10,169)		22,318		20,051
Total provision	$	53,293	$	28,547	$	79,502

The following table is a reconciliation of the Company’s provision for income taxes at the statutory rates to the provision for income taxes at the Company’s effective rate.




	Year Ended December 31,
	2016				2015				2014
(dollars in thousands)	Amount		Rate		Amount		Rate		Amount		Rate
Federal income expense at statutory tax rate	$	52,190	35.0	%	$	25,844	35.0	%	$	65,603	35.0	%
State income taxes, net of federal tax benefit		5,972	4.0			1,250	1.7			10,367	5.5
Officers' compensation		3,807	2.6			2,900	3.9			3,657	2.0
Domestic Production Activities Deduction		(4,018)	(2.7)			(1,499)	(2.0)			(5,170)	(2.8)
Impact of state tax rate changes on deferred taxes		(1,358)	(0.9)			2,435	3.3			3,245	1.7
Other		(3,300)	(2.3)			(2,383)	(3.2)			1,800	1.0
Provision for income taxes	$	53,293	35.7	%	$	28,547	38.7	%	$	79,502	42.4	%

The Company’s provision for income taxes and effective tax rate for the year ended December 31, 2016 were significantly impacted by rate changes associated with shifts of revenue affecting state apportionment as well as various return-to-provision and depreciation adjustments. The decrease in the state rate was applied to deferred tax balances, which further decreased the effective rate.

The following is a summary of the significant components of the deferred tax assets and liabilities:



	As of December 31,
(in thousands)	2016		2015
Deferred Tax Assets
Timing of expense recognition	$	36,055	$	23,580
Net operating losses		10,140		5,478
Other, net		33,507		29,342
Deferred tax assets		79,702		58,400
Valuation allowance		(460)		(460)
Net deferred tax assets		79,242		57,940
Deferred Tax Liabilities
Intangible assets, due primarily to purchase accounting		(34,679)		(37,157)
Fixed assets, due primarily to purchase accounting		(107,081)		(100,516)
Construction contract accounting		(12,564)		(9,197)
Joint ventures - construction		(29,609)		(29,949)
Other		(24,970)		(3,943)
Deferred tax liabilities		(208,903)		(180,762)

Net deferred tax liability	$	(129,661)	$	(122,822)

The net deferred tax liability is presented in the Consolidated Balance Sheets as follows:



	As of December 31,
(in thousands)	2016		2015
Deferred tax asset	$	1,346	$	—
Deferred tax liability		(131,007)		(122,822)
Net deferred tax liability	$	(129,661)	$	(122,822)

Subsequent to the issuance of our 2015 consolidated financial statements, the Company identified that certain immaterial classification adjustments, related to the offsetting of deferred assets and liabilities by tax jurisdiction, were necessary to properly present deferred tax assets and liabilities on its Consolidated Balance Sheet as of December 31, 2015. The accompanying Consolidated Balance Sheet as of December 31, 2015, the corresponding balance sheet amounts within the business segments footnote (Note 10) and the guarantor footnote (Note 13), have been corrected for the effect of this classification error. The Company has evaluated the effects of the classification adjustments as of December 31, 2015 based on the SEC’s guidance in Staff Accounting Bulletin No. 99, Materiality, and after consideration of both quantitative and qualitative factors, has concluded that the following adjustments are immaterial:



	As of December 31, 2015
(in thousands)	As Previously Reported		Adjustments		As Restated (a)
Total current assets	$	2,635,245	$	(24,889)	$	2,610,356
Other assets		202,125		(149,071)		53,054
Total assets		4,042,441		(173,960)		3,868,481
Accrued expenses and other current liabilities		(159,016)		24,889		(134,127)
Total current liabilities		(1,473,708)		24,889		(1,448,819)
Total liabilities		(2,622,214)		173,960		(2,448,254)
Total liabilities and stockholders' equity		(4,042,441)		173,960		(3,868,481)



	As of December 31, 2015
(in thousands)	As Previously Reported		Adjustments		As Restated (a)
Current deferred tax asset	$	26,306	$	(24,889)	$	1,417
Long-term deferred tax asset		149,071		(149,071)		—
Current deferred tax liability		(24,889)		24,889		—
Long-term deferred tax liability		(273,310)		149,071		(124,239)
Net deferred tax liability	$	(122,822)	$	—	$	(122,822)

(a)

The amounts reflected are prior to the Company's adoption of ASU 2015-03 (see discussion in Note 1) and ASU 2015-17, discussed below.

In addition to the immaterial classification adjustments reflected above, the Company identified certain immaterial classification errors within the disclosure of the significant components of deferred tax assets and liabilities as of December 31, 2015. The following is a revised summary of the significant components of deferred tax assets and liabilities to reflect adjustments for the immaterial classification errors as of December 31, 2015:



	As of December 31, 2015
(in thousands)	As Previously Reported		Adjustments		As Restated
Deferred Tax Assets
Timing of expense recognition	$	58,048	$	(34,468)	$	23,580
Net operating losses		3,564		1,914		5,478
Other, net		114,225		(84,883)		29,342
Deferred tax assets		175,837		(117,437)		58,400
Valuation allowance		(460)		—		(460)
Net deferred tax assets		175,377		(117,437)		57,940
Deferred Tax Liabilities
Intangible assets, due primarily to purchase accounting		(99,549)		62,392		(37,157)
Fixed assets, due primarily to purchase accounting		(101,022)		506		(100,516)
Construction contract accounting		(7,530)		(1,667)		(9,197)
Joint ventures - construction		(27,604)		(2,345)		(29,949)
Other		(62,494)		58,551		(3,943)
Deferred tax liabilities		(298,199)		117,437		(180,762)
Net deferred tax liability	$	(122,822)	$	—	$	(122,822)

The Company has also elected to early adopt ASU 2015-17, effective as of the beginning of the fourth quarter of 2016. As a result of the adoption of ASU 2015-17, the Company has retrospectively adjusted the Consolidated Balance Sheet as of December 31, 2015 to reflect the provisions of the ASU. The adoption of ASU 2015-17 resulted in a reclassification of $1.4 million of deferred tax assets classified as current to long-term as of December 31, 2015. Upon adoption of ASU 2015-17, the resulting long-term deferred asset of $1.4 million was offset against the Company’s net deferred tax liabilities within the same jurisdiction.

The Company had a valuation allowance of $0.5 million as of December 31, 2016 and 2015 for federal and state capital loss carryforwards as the ultimate utilization of this item was not likely.

The Company has not provided for deferred income taxes or foreign withholding tax on basis differences in its non-U.S. subsidiaries that result from undistributed earnings aggregating $19.7 million which the Company has the intent and the ability to reinvest in its foreign operations. Generally, the U.S. income taxes imposed upon repatriation of undistributed earnings would be reduced by foreign tax credits from foreign income taxes paid on the earnings. Determination of the deferred income tax liability on these basis differences is not reasonably estimable because such liability, if any, is dependent on circumstances existing if and when remittance occurs.

The Company’s policy is to record interest and penalties on unrecognized tax benefits as an element of income tax expense. The cumulative amounts related to interest and penalties are added to the total unrecognized tax liabilities on the balance sheet. The total amount of gross unrecognized tax benefits as of December 31, 2016 that, if recognized, would affect the effective tax rate is $7.6 million. During 2016, the Company recognized a net increase of $4.0 million in liabilities. The amount of gross unrecognized tax benefits as of December 31, 2015 was $3.6 million. During 2015, the Company recognized a net decrease of $4 million in liabilities. The amount of gross unrecognized tax benefits as of December 31, 2014 was $7.6 million in liabilities. During 2014, the Company recognized a net increase of $2.2 million in liabilities. The Company does not expect any significant release of unrecognized tax benefits within the next twelve months.

The Company accounts for its uncertain tax positions in accordance with GAAP. A reconciliation of the beginning and ending amounts of these tax benefits for the three years ended December 31, 2016 is as follows:



	As of December 31,
(in thousands)	2016		2015		2014
Beginning balance	$	3,612	$	7,636	$	5,459
Change in tax positions of prior years		3,543		(3,073)		426
Change in tax positions of current year		419		169		2,929
Reduction in tax positions for statute expirations		—		(1,120)		(1,178)
Ending Balance	$	7,574	$	3,612	$	7,636

We conduct business internationally and, as a result, one or more of our subsidiaries files income tax returns in U.S. federal, U.S. state and certain foreign jurisdictions. Accordingly, in the normal course of business, we are subject to examination by taxing authorities principally throughout the United States, Guam and Canada. We are no longer under examination by the taxing authority regarding any U.S. federal income tax returns for years before 2011 while the years open for examination under various state and local jurisdictions vary.