Income Taxes

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



	2016			2015			2014
Current:
Federal	$	126.6		$	103.0		$	24.5
State	39.0			18.8			5.9
Foreign	86.8			19.4			19.2
Total current	252.4			141.2			49.6
Deferred	33.4			(7.2		)	39.3
Total provision	$	285.8		$	134.0		$	88.9
Total provision (benefit) — discontinued operations	$	(0.2	)	$	55.8		$	(0.2	)
Total provision — continuing operations	$	286.0		$	78.2		$	89.1

The non-U.S. component of income before income taxes was $480.4 million, $186.2 million and $163.3 million in 2016, 2015 and 2014, 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,:



	2016		2015		2014
Statutory rate	35.0	%	35.0	%	35.0	%
Add (deduct) effect of:
State income taxes, net of federal income tax effect	4.2		3.0		2.1
Foreign tax credit	1.3		(17.5	)	(5.5	)
Foreign rate differential	(9.8	)	(10.5	)	(7.0	)
Resolution of tax contingencies, net of increases	(2.1	)	1.2		(0.6	)
Valuation allowance reserve (decrease) increase	(3.3	)	0.2		(2.7	)
Manufacturing deduction	(2.2	)	(2.0	)	(1.5	)
Statutory tax rate change	(4.9	)	—		—
Tools outside basis difference	20.2		—		—
Venezuela deconsolidation	—		15.7		—
Other	(3.3	)	(1.9	)	(0.5	)
Effective rate	35.1	%	23.2	%	19.3	%

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



	2016			2015
Deferred tax assets:
Accruals not currently deductible for tax purposes	$	285.8		$	166.9
Inventory	83.9			4.8
Postretirement liabilities	44.0			28.6
Pension liabilities	149.8			113.5
Net operating losses	361.3			248.3
Foreign tax credits	34.0			—
Other	193.0			78.8
Total gross deferred tax assets	1,151.8			640.9
Less valuation allowance	(325.3		)	(291.0		)
Net deferred tax assets after valuation allowance	$	826.5		$	349.9
Deferred tax liabilities:
Accelerated depreciation	$	(159.5	)	$	(69.7	)
Amortizable intangibles	(5,300.5		)	(463.6		)
Outside basis differences	(319.0		)	—
Other	(35.0		)	(4.7		)
Total gross deferred tax liabilities	$	(5,814.0	)	$	(538.0	)
Net deferred tax liabilities	$	(4,987.5	)	$	(188.1	)

Noncurrent deferred income tax assets	$	95.3		$	38.5
Noncurrent deferred income tax liabilities	(5,082.8		)	(226.6		)
	$	(4,987.5	)	$	(188.1	)

The Company has $1,511.3 million of U.S., State, and foreign net operating losses, of which $811.3 million do not expire and $700.0 million expire between 2017 and 2036. $442.2 million are U.S. federal net operating losses which are subject to varying limitations on their use under Section 382 of the Internal Revenue Code of 1986, as amended. Of these U.S. federal net operating losses, $406.0 million are not reflected in the consolidated financial statements and approximately $31.0 million were utilized in the current year. The foreign tax credit carryforwards begin to expire in 2020.

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 realize 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, the ability to carryback net operating losses, 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.

As of December 31, 2016, the Company has a valuation allowance 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. A valuation allowance of $325.3 million and $291.0 million was recorded against certain deferred tax asset balances as of December 31, 2016 and 2015, respectively. For the year ended December 31, 2016, the Company recorded a net valuation allowance increase of $34.3 million which comprised of acquired valuation allowance from Jarden, a valuation allowance decrease of $17.9 million related to the Company’s UK operations for which the Company concluded the deferred tax assets were realizable; currency translation in foreign jurisdictions due to the strengthening of the U.S. dollar against the Euro, British Pound, and other currencies; and the increase in valuation allowance in the current year in certain jurisdictions that the Company previously determined were not more likely than not to be realized. For the year ended December 31, 2015, the Company recorded a net valuation allowance decrease of $54.3 million which is comprised of a valuation allowance reduction of $12.8 million for which the Company concluded the deferred tax assets were realizable; currency translation in foreign jurisdictions due to the strengthening of the U.S. dollar against the Euro and other currencies; and, the utilization of prior year net operating losses in the current year in certain jurisdictions that the Company previously determined were not more likely than not to be realized. For the year ended December 31, 2014, the Company recorded a net valuation allowance decrease of $30.2 million which comprised a valuation allowance reduction of $18.4 million related to various foreign jurisdictions in which the Company concluded the deferred tax assets were realizable; currency translation in foreign jurisdictions due to the strengthening of the U.S. dollar against the Euro, Yen, and other currencies; and the utilization of prior year net operating losses in the current year in certain jurisdictions that the Company previously determined were not more likely than not to be realized.

As of the acquisition date April 15, 2016, the Company analyzed the unremitted historical earnings of Jarden’s non-U.S. subsidiaries and recorded a deferred tax liability on the opening balance sheet of $120 million related to most of Jarden’s historical unremitted earnings. As of December 31, 2016, this deferred tax liability decreased to $79.9 million due to distributions and currency fluctuations. The remaining, unremitted non-U.S. subsidiary earnings of the Company at December 31, 2016 are $1,236.1 million. These earnings and profits are considered to be indefinitely reinvested and, accordingly, no U.S. federal or state deferred income taxes have been provided on this amount or any additional excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries. Earnings and profits is the most significant component of the basis difference which is indefinitely reinvested. 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, 2016 and 2015, the Company had unrecognized tax benefits of $367.9 million and $162.9 million, respectively. The Company recorded unrecognized tax benefit as a result of acquisitions of $216.4 million in 2016. If recognized, $359.9 million and $155.4 million as of December 31, 2016 and 2015, 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, 2015 and 2014, the Company had recorded accrued interest and penalties related to the unrecognized tax benefits of $21.2 million and $6.3 million, respectively. During 2016, the Company recognized income tax expense on interest and penalties of $3.4 million due to the accrual of current year interest on existing positions offset by the resolution of certain tax contingencies offset. In 2015, the Company recognized an income tax benefit on interest and penalties of $0.1 million due to the resolution of certain tax contingencies offset by an accrual of current year interest on existing positions.

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



	2016			2015
Unrecognized tax benefits balance at January 1,	$	162.9		$	101.4
Acquisition related	216.4			—
Increases in tax positions for prior years	4.8			63.1
Decreases in tax positions for prior years	(4.4		)	(19.4		)
Increases in tax positions for current year	30.0			21.5
Settlements with taxing authorities	(0.1		)	(2.6		)
Lapse of statute of limitations	(41.7		)	(1.1		)
Unrecognized tax benefits balance at December 31,	$	367.9		$	162.9

The Company anticipates approximately $39.6 million of unrecognized tax benefits will reverse within the next 12 months. It is reasonably possible due to activities of various worldwide taxing authorities, including proposed assessments of additional tax and possible settlement of audit issues that additional changes to the Company’s unrecognized tax benefits could occur. 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, 2012, and 2013 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 2011.The Company’s Canadian tax returns are subject to examination for years after 2010. With few exceptions, the Company is no longer subject to other income tax examinations for years before 2012.