Income Taxes

The provision for income taxes consists of the following for the years ended December 31, (in millions):



	2013		2012			2011
Current:
Federal	$	20.7	$	45.3		$	(36.7	)
State	10.5		(3.8		)	5.1
Foreign	30.2		57.1			58.1
Total current	61.4		98.6			26.5
Deferred	88.6		71.2			(4.7		)
Total provision	$	150.0	$	169.8		$	21.8
Total provision - discontinued operations	$	27.9	$	7.5		$	0.5
Total provision - continuing operations	$	122.1	$	162.3		$	21.3

The non-U.S. component of income before income taxes was $156.3 million, $228.8 million and $118.2 million in 2013, 2012 and 2011, respectively.

A reconciliation of the U.S. statutory rate to the effective income tax rate on a continuing basis is as follows for the years ended December 31,:



	2013		2012		2011
Statutory rate	35.0	%	35.0	%	35.0	%
Add (deduct) effect of:
State income taxes, net of federal income tax effect	1.7		0.6		1.6
Foreign tax credit	(3.8	)	(3.9	)	(8.9	)
Foreign rate differential	(2.7	)	(3.9	)	(14.0	)
Resolution of tax contingencies, net of increases	0.9		2.2		(14.8	)
Tax basis differential on goodwill impairment	—		—		19.2
Valuation allowance reserve (decrease) increase	(3.5	)	1.2		0.5
Stock compensation	—		0.2		1.0
Other	(5.1	)	(2.1	)	(9.4	)
Effective rate	22.5	%	29.3	%	10.2	%

The components of net deferred tax assets are as follows as of December 31, (in millions):



	2013			2012
Deferred tax assets:
Accruals not currently deductible for tax purposes	$	137.6		$	146.0
Postretirement liabilities	45.4			63.9
Pension liabilities	112.9			203.8
Foreign tax credit carryforward	54.4			94.6
Foreign net operating losses	297.9			314.6
Other	112.6			143.4
Total gross deferred tax assets	760.8			966.3
Less valuation allowance	(375.5		)	(429.4		)
Net deferred tax assets after valuation allowance	$	385.3		$	536.9
Deferred tax liabilities:
Accelerated depreciation	$	(59.6	)	$	(61.0	)
Amortizable intangibles	(286.8		)	(269.2		)
Other	(5.7		)	(5.3		)
Total gross deferred tax liabilities	$	(352.1	)	$	(335.5	)
Net deferred tax assets	$	33.2		$	201.4

Current deferred income tax assets	$	134.4		$	135.8
Current deferred income tax liabilities	(5.2		)	(3.7		)
Noncurrent deferred income tax assets	12.3			85.2
Noncurrent deferred income tax liabilities	(108.3		)	(15.9		)
	$	33.2		$	201.4

The foreign tax credit carryforwards expire from 2018 to 2020. The Company has $958.0 million of foreign net operating losses, of which $723.4 million do not expire and $234.6 million expire between 2014 and 2032.

The current year decrease in valuation allowance consists of the recognition of a $26.5 million deferred tax asset in the U.S. the Company determined was more likely than not to be realized. A change in the tax rate applied to deferred taxes recorded in the United Kingdom further reduced the valuation allowance, and the generation of current year net operating losses in certain jurisdictions that the Company determined were not more likely than not to be realized increased the valuation allowance.

The valuation allowance as of December 31, 2013 is recorded against foreign net operating losses and other deferred tax assets the Company believes are not more likely than not to be realized due to the uncertainty resulting from a lack of previous taxable income within the applicable tax jurisdictions. The Company routinely reviews valuation allowances recorded against deferred tax assets on a more likely than not basis as to whether the Company has the ability to recognize the deferred tax assets. In making such a determination, the Company takes into consideration all available and appropriate positive and negative evidence, including projected future taxable income, future reversals of existing taxable temporary differences and available tax planning strategies. Although realization is not assured, based on this existing evidence, the Company believes it is more likely than not that the Company will realize the benefit of existing deferred tax assets, net of the valuation allowances mentioned above.

As of December 31, 2013, the estimated amount of total unremitted non-U.S. subsidiary earnings is $659.9 million. Those earnings are considered to be indefinitely reinvested and, accordingly, no U.S. federal or state deferred income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. income taxes and withholding taxes payable in various non-U.S. jurisdictions, which could potentially be offset by foreign tax credits. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with its hypothetical calculation.

As of December 31, 2013 and 2012, the Company had unrecognized tax benefits of $103.3 million and $101.5 million, respectively. If recognized, $97.9 million and $97.0 million as of December 31, 2013 and 2012, respectively, would affect the effective tax rate. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. As of December 31, 2013 and 2012, the Company had recorded accrued interest and penalties related to the unrecognized tax benefits of $11.7 million and $11.2 million, respectively. During 2013 and 2012, the Company recognized income tax expense of $0.7 million and $4.0 million, respectively, due to the increase in the reserves for interest and penalties.

The following table summarizes the changes in gross unrecognized tax benefits for the years ended December 31, (in millions):



	2013			2012
Unrecognized tax benefits balance at January 1,	$	101.5		$	89.5
Increase in tax positions for prior years	3.3			—
Decreases in tax positions for prior years	(7.1		)	(3.8		)
Increases in tax positions for current year	12.8			25.2
Settlements with taxing authorities	(0.2		)	(0.8		)
Lapse of statute of limitations	(6.5		)	(8.6		)
Unrecognized tax benefits balance at December 31,	$	103.3		$	101.5

It is reasonably possible that there could be a change in the amount of the Company’s unrecognized tax benefits within the next 12 months due to activities of various worldwide taxing authorities, including proposed assessments of additional tax, possible settlement of audit issues, or the expiration of applicable statutes of limitations. The Company believes the possible change in unrecognized tax benefits is a decrease of no more than $9.6 million within the next 12 months. In the normal course of business, the Company is subject to audits by worldwide taxing authorities regarding various tax liabilities. The Company’s U.S. federal income tax returns for 2011 and 2012, as well as certain state and non-US income tax returns for various years, are under routine examination.

The Company files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The statute of limitations for the Company’s U.S. federal income tax returns has expired for years prior to 2010. The Company’s Canadian tax returns are subject to examination for years after 2008. With few exceptions, the Company is no longer subject to other income tax examinations for years before 2009.