Income Taxes

Income from continuing operations before taxes consisted of the following:



	Years Ended December 31,
	2016		2015		2014
U.S.	$	169,493	$	516,233	$	356,017
International	76,877		94,592		75,179
Total	$	246,370	$	610,825	$	431,196

The provision for income taxes from continuing operations consisted of the following:



	Years Ended December 31,
	2016			2015			2014
U.S. Federal:
Current	$	95,598		$	115,557		$	71,683
Deferred	(1,559		)	19,941			6,941
	94,039			135,498			78,624
U.S. State and Local:
Current	9,409			11,243			7,186
Deferred	4,757			16,094			(9,307		)
	14,166			27,337			(2,121		)
International:
Current	22,872			22,794			32,492
Deferred	742			4,149			3,820
	23,614			26,943			36,312

Total current	127,879			149,594			111,361
Total deferred	3,940			40,184			1,454
Total provision for income taxes	$	131,819		$	189,778		$	112,815

Effective tax rate	53.5		%	31.1		%	26.2		%

The effective tax rate for 2016 includes tax benefits of $15 million from the resolution of tax examinations, $58 million charge associated with the goodwill impairment and a $6 million charge from the establishment of a valuation allowance on tax attribute carryovers.

The effective tax rate for 2015 includes tax benefits of $20 million from the disposition of Imagitas and $3 million from the retroactive effect of 2015 tax legislation.

The effective tax rate for 2014 includes tax benefits of $22 million from the resolution of tax examinations and $5 million from the retroactive effect of 2014 U.S. tax legislation.

The items accounting for the difference between income taxes computed at the federal statutory rate and our provision for income taxes consist of the following:



	Years Ended December 31,
	2016			2015			2014
Federal statutory provision	$	86,229		$	213,789		$	150,920
State and local income taxes	9,208			17,769			(1,379		)
Other impact of foreign operations	(13,806		)	(6,492		)	(12,668		)
Tax incentives/credits/exempt income	(10,735		)	(12,130		)	(19,232		)
Release of other tax uncertainties	—			—			(5,856		)
Outside basis differences	—			(27,110		)	—
Goodwill impairments	58,022			—			—
Other, net	2,901			3,952			1,030
Provision for income taxes	$	131,819		$	189,778		$	112,815

Other impacts of foreign operations include income of foreign affiliates taxed at rates other than the 35% U.S. statutory rate, the accrual or release of tax uncertainty amounts related to foreign operations, the tax impacts of foreign earnings repatriation and the U.S. foreign tax credit impacts of foreign income taxed in the U.S.. The 2016 goodwill impairment significantly increased the 2016 tax rate as nearly all of the goodwill that was impaired had no tax basis.

Deferred tax liabilities and assets at December 31, 2016 and 2015 consisted of the following:



	December 31,
	2016			2015
Deferred tax liabilities:
Depreciation	$	(93,475	)	$	(69,622	)
Deferred profit (for tax purposes) on sale to finance subsidiary	(98,247		)	(108,061		)
Lease revenue and related depreciation	(137,665		)	(188,231		)
Intangible assets	(113,128		)	(119,453		)
Other	(27,340		)	(41,149		)
Gross deferred tax liabilities	(469,855		)	(526,516		)

Deferred tax assets:
Nonpension postretirement benefits	71,101			79,861
Pension	105,564			104,166
Inventory and equipment capitalization	13,318			14,934
Restructuring charges	6,980			14,238
Long-term incentives	17,923			22,111
Net operating loss	97,194			111,351
Tax credit carry forwards	53,181			54,183
Tax uncertainties gross-up	18,273			21,191
Other	79,799			96,412
Gross deferred tax assets	463,333			518,447
Less: Valuation allowance	(127,095		)	(132,624		)
Net deferred tax assets	336,238			385,823
Total deferred taxes, net	$	(133,617	)	$	(140,693	)

A valuation allowance is recognized to reduce the total deferred tax assets to an amount that will more-likely-than-not be realized. The valuation allowance relates primarily to certain foreign, state and local net operating loss and tax credit carryforwards that are more-likely-than-not to expire unutilized.

We have net operating loss carryforwards of $279 million as of December 31, 2016, of which, $225 million can be carried forward indefinitely and the remainder expire over the next 15 years. In addition, we have tax credit carryforwards of $53 million, of which $39 million can be carried forward indefinitely and the remainder expire over the next 10 to 15 years.

As of December 31, 2016 we have not provided for income taxes on $850 million of cumulative undistributed earnings of subsidiaries outside the U.S. as these earnings will be either indefinitely reinvested or remitted substantially free of additional tax. However, we estimate that withholding taxes on such remittances would be $12 million. Determination of the liability that would be incurred if these earnings were remitted to the U.S. is not practicable as there is a significant amount of uncertainty with respect to determining the amount of foreign tax credits and other indirect tax consequences that may arise from the distribution of these earnings.

Uncertain Tax Positions

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



	2016			2015			2014
Balance at beginning of year	$	139,249		$	132,495		$	172,594
Increases from prior period positions	—			7,637			9,090
Decreases from prior period positions	(21,207		)	(16,753		)	(33,692		)
Increases from current period positions	10,867			23,533			17,704
Decreases relating to settlements with tax authorities	(1,791		)	(3,831		)	(22,127		)
Reductions from lapse of applicable statute of limitations	(2,390		)	(3,832		)	(11,074		)
Balance at end of year	$	124,728		$	139,249		$	132,495

The amount of the unrecognized tax benefits at December 31, 2016, 2015 and 2014 that would affect the effective tax rate if recognized was $104 million, $117 million and $109 million, respectively.

On a regular basis, we conclude tax return examinations, statutes of limitations expire, and court decisions interpret tax law. We regularly assess tax uncertainties in light of these developments. As a result, it is reasonably possible that the amount of our unrecognized tax benefits will decrease in the next 12 months, and we expect this change could be up to 25% of our unrecognized tax benefits. We recognize interest and penalties related to uncertain tax positions in our provision for income taxes. We recognized interest and penalties of less than $1 million, $(4) million and $2 million related to uncertain tax positions in our provision for income taxes for the years ended December 31, 2016, 2015 and 2014, respectively. We had $9 million and $10 million accrued for the payment of interest and penalties at December 31, 2016 and 2015, respectively.

Other Tax Matters

As is the case with other large corporations, our tax returns are examined each year by tax authorities in the U.S. and other global taxing jurisdictions in which we have operations. The IRS examinations of our consolidated U.S. income tax returns for tax years prior to 2012 are closed to audit. Additionally, in the U.S. we are subject to examination on various post-2006 State and Local taxes. In Canada, the examination of our tax filings prior to 2011 are closed to audit, except for the pending application of legal principles to specific issues arising in earlier years. Other significant jurisdictions include France, closed through the end of 2012, Germany, closed through the end of 2011 and the U.K., closed through the end of 2011, except for an item under appeal. We have other less significant tax filings currently subject to examination.

We regularly assess the likelihood of tax adjustments in each of the tax jurisdictions in which we have operations and account for the related financial statement implications. We believe we have established tax reserves that are appropriate given the possibility of tax adjustments. However, determining the appropriate level of tax reserves requires judgment regarding the uncertain application of tax law and the possibility of tax adjustments. Future changes in tax reserve requirements could have a material impact, positive or negative, on our results of operations, financial position and cash flows.