13) INCOME TAXES

The U.S. and foreign components of earnings from continuing operations before income taxes and equity in loss of investee companies were as follows:



Year Ended December 31,	2014		2013		2012
United States	$	1,790	$	2,283	$	2,030
Foreign	374		382		327
Total	$	2,164	$	2,665	$	2,357

The components of the provision for income taxes were as follows:



Year Ended December 31,	2014			2013		2012
Current:
Federal	$	(14	)	$	310	$	236
State and local	22			74		61
Foreign	62			61		62
	70			445		359
Deferred	692			433		453
Provision for income taxes	$	762		$	878	$	812

In addition, included in discontinued operations was an income tax provision of $26 million, $6 million, and $62 million in 2014, 2013, and 2012, respectively.

The equity in loss of investee companies is shown net of tax on the Company’s Consolidated Statements of Operations. The tax benefits relating to losses from equity investments in 2014, 2013, and 2012 were $30 million, $31 million, and $23 million, respectively, which represented an effective tax rate of 38.7% for 2014 and 38.8% for each of 2013 and 2012.

In 2014 and 2013, the Company realized tax benefits from the exercise of stock options and vesting of RSUs and PSUs of $322 million and $210 million, respectively.

The difference between income taxes expected at the U.S. federal statutory income tax rate of 35% and the provision for income taxes is summarized as follows:



Year Ended December 31,	2014			2013			2012
Taxes on income at U.S. federal statutory rate	$	758		$	933		$	825
State and local taxes, net of federal tax benefit	93			101			84
Effect of foreign operations	(90		)	(92		)	(67		)
Audit settlements, net	(7		)	(17		)	(3		)
Other, net ^(a)	8			(47		)	(27		)
Provision for income taxes	$	762		$	878		$	812

(a) For 2013 and 2012, amounts primarily reflect the Company’s domestic production deduction.

The following table summarizes the components of deferred income tax assets and liabilities.



At December 31,	2014			2013
Deferred income tax assets:
Reserves and other accrued liabilities	$	743		$	798
Pension, postretirement and other employee benefits	794			697
Tax credit and loss carryforwards	628			664
Other	113			151
Total deferred income tax assets	2,278			2,310
Valuation allowance	(575		)	(634		)
Deferred income tax assets, net	1,703			1,676
Deferred income tax liabilities:
Intangible assets	(2,432		)	(2,305		)
Unbilled licensing receivables	(532		)	(345		)
Property, equipment and other assets	(151		)	(176		)
Total deferred income tax liabilities	(3,115		)	(2,826		)
Deferred income tax liabilities, net	$	(1,412	)	$	(1,150	)

In addition to the deferred income taxes reflected in the table above, included in the assets and liabilities of discontinued operations on the Consolidated Balance Sheets is a net deferred income tax asset of $38 million at December 31, 2014 and a net deferred income tax liability of $182 million at December 31, 2013.

At December 31, 2014, the Company had net operating loss carryforwards for federal, state and local, and foreign jurisdictions of approximately $925 million, the majority of which expire in various years from 2015 through 2034.

The 2014 and 2013 deferred income tax assets were reduced by a valuation allowance of $575 million and $634 million, respectively, principally relating to income tax benefits from capital losses and net operating losses in foreign jurisdictions which are not expected to be realized.

The Company’s share of the undistributed earnings of foreign subsidiaries not included in its consolidated federal income tax return that could be subject to additional income taxes if remitted was approximately $3.99 billion at December 31, 2014 and $4.08 billion at December 31, 2013. No provision has been recorded for the U.S. or foreign taxes that could result from the remittance of such undistributed earnings since the Company intends to distribute only the portion of such earnings which would be offset by U.S. foreign tax credits or remitted in tax-free transactions, and intends to reinvest the remainder outside the U.S. indefinitely. The determination of the unrecognized U.S. federal deferred income tax liability for undistributed earnings is not practicable.

The following table sets forth the change in the reserve for uncertain tax positions, excluding related accrued interest and penalties.



At January 1, 2012	$	189
Additions for current year tax positions	12
Additions for prior year tax positions	10
Reductions for prior year tax positions	(32		)
Cash settlements	(5		)
Statute of limitations lapses	(2		)
At December 31, 2012	172
Additions for current year tax positions	11
Additions for prior year tax positions	14
Reductions for prior year tax positions	(40		)
Cash settlements	(17		)
Statute of limitations lapses	(1		)
At December 31, 2013	139
Additions for current year tax positions	14
Additions for prior year tax positions	31
Reductions for prior year tax positions	(26		)
Cash settlements	(16		)
Statute of limitations lapses	(2		)
At December 31, 2014	$	140

At December 31, 2014 and 2013, $48 million and $53 million, respectively, of the reserve for uncertain tax positions were included in “Liabilities of discontinued operations” on the Consolidated Balance Sheets.

The reserve for uncertain tax positions of $140 million at December 31, 2014 includes $111 million which would affect the Company’s effective income tax rate, including discontinued operations, if and when recognized in future years.

The Company recognizes interest and penalty charges related to the reserve for uncertain tax positions as income tax expense. For the years ended December 31, 2014, 2013 and 2012, the Company recognized interest and penalties of $14 million, $12 million and $13 million, respectively, in the Consolidated Statements of Operations. As of December 31, 2014 and 2013, the Company has recorded liabilities for accrued interest and penalties of $50 million and $56 million, respectively, on the Consolidated Balance Sheets.

The Company is currently under examination by the IRS for the years 2011 and 2012 and expects to settle the audit in the first quarter of 2015. In addition, during the next six months, the Company expects a decrease to its reserve for uncertain tax positions related to an audit in a foreign jurisdiction of a previously disposed business that is accounted for as a discontinued operation. Various tax years are currently under examination by state and local and other foreign tax authorities. With respect to open tax years in all jurisdictions, the Company currently believes that it is reasonably possible that the reserve for uncertain tax positions will decrease within the next twelve months; however, as it is difficult to predict the final outcome of any particular tax matter, an estimate of any related impact to the reserve for uncertain tax positions cannot currently be determined.