Income Taxes

Provision for income taxes for the years ended December 31 consists of the following (in thousands):



	2016			2015			2014
Current:
Federal	$	284,489		$	363,803		$	394,904
State	28,406			37,811			30,997
Foreign	19,017			12,826			20,429
	331,912			414,440			446,330
Deferred:
Federal	(4,250		)	(15,474		)	(5,743		)
State	7,038			(2,264		)	(3,155		)
Foreign	(2,953		)	1,254			1,277
	(165		)	(16,484		)	(7,621		)
Total	$	331,747		$	397,956		$	438,709

The components of income before income taxes for the years ended December 31 were as follows (in thousands):



	2016		2015		2014
Domestic	$	954,138	$	1,101,427	$	1,196,335
Foreign	69,773		48,736		86,985
Total	$	1,023,911	$	1,150,163	$	1,283,320

The provision for income taxes differs from the amount that would be provided by applying the statutory U.S. corporate income tax rate due to the following items for the years ended December 31:



	2016		2015		2014
Provision at statutory rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	1.8		1.8		1.7
Foreign rate differential	(0.6	)	(0.4	)	(0.6	)
Domestic manufacturing deduction	(2.1	)	(2.1	)	(2.1	)
Research and development credit	(0.4	)	(0.4	)	(0.4	)
Unrecognized tax benefits including interest and penalties	(1.3	)	1.1		0.2
Valuation allowance adjustments	0.1		(0.1	)	(0.1	)
Adjustments for previously accrued taxes	0.2		(0.1	)	(0.3	)
Other	(0.3	)	(0.2	)	0.8
Provision for income taxes	32.4	%	34.6	%	34.2	%

The principal components of the Company’s deferred tax assets and liabilities as of December 31 include the following (in thousands):



	2016			2015
Deferred tax assets:
Accruals not yet tax deductible	$	141,961		$	129,449
Pension and postretirement benefit plan obligations	88,741			126,952
Stock compensation	19,051			20,111
Net operating loss carryforward	33,587			38,250
Valuation allowance	(30,953		)	(20,659		)
Other, net	56,903			47,039
	309,290			341,142
Deferred tax liabilities:
Depreciation, tax in excess of book	(139,268		)	(136,340		)
Other	(2,293		)	(2,419		)
	(141,561		)	(138,759		)
Total	$	167,729		$	202,383

The Company reviews its deferred tax asset valuation allowances on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset is considered, along with any positive or negative evidence such as tax law changes. Since future financial results and tax law may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary.

At December 31, 2016, the Company had approximately $316.6 million state net operating loss carry-forwards expiring in 2031. At December 31, 2016 the Company also had Wisconsin research and development credit carryforwards of $12.7 million expiring in 2028. The Company had a deferred tax asset of $24.6 million as of December 31, 2016 for the benefit of these losses and credits. A valuation allowance of $4.6 million has been established against the deferred tax asset.

The Company has foreign net operating losses (NOL) totaling $9.0 million as of December 31, 2016. It has a valuation allowance of $26.3 million against both the NOLs and other deferred tax assets of $17.3 million. The valuation allowance on foreign net operating losses increased by $5.7 million, reflecting movement related to realizability assessment on additional earnings and loss, as well as movements related to foreign currency rates.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, were as follows (in thousands):



	2016			2015
Unrecognized tax benefits, beginning of period	$	73,100		$	64,200
Increase in unrecognized tax benefits for tax positions taken in a prior period	2,828			9,149
Decrease in unrecognized tax benefits for tax positions taken in a prior period	(21,061		)	(1,993		)
Increase in unrecognized tax benefits for tax positions taken in the current period	7,402			6,302
Statute lapses	(1,907		)	(2,465		)
Settlements with taxing authorities	(4,823		)	(2,093		)
Unrecognized tax benefits, end of period	$	55,539		$	73,100

The amount of unrecognized tax benefits as of December 31, 2016 that, if recognized, would affect the effective tax rate was $39.9 million.

The total gross amount of expense related to interest and penalties associated with unrecognized tax benefits recognized during 2016 in the Company’s Consolidated Statements of Income was $0.5 million.

The total gross amount of interest and penalties associated with unrecognized tax benefits recognized at December 31, 2016 in the Company’s Consolidated Balance Sheets was $28.1 million.

The Company does not expect a significant increase or decrease to the total amounts of unrecognized tax benefits related to continuing operations during the fiscal year ending December 31, 2017. However, the Company is under regular audit by tax authorities. The Company believes that it has appropriate support for the positions taken on its tax returns and that its annual tax provision includes amounts sufficient to pay any assessments. Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year.

The Company or one of its subsidiaries files income tax returns in the United States federal and Wisconsin state jurisdictions and various other state and foreign jurisdictions. The Company is no longer subject to income tax examinations for Wisconsin state income taxes before 2012 or for United States federal income taxes before 2014.