Income Taxes

Income (loss) before taxes consisted of the following (in millions):



	2016		2015		2014
United States	$	143.4	$	25.8	$	(11.2	)
Foreign	123.0		171.1		101.5
Total	$	266.4	$	196.9	$	90.3

The provision for income taxes is summarized as follows (in millions):



	2016			2015			2014
Current
Federal	$	23.1		$	13.5		$	37.8
State	3.5			0.2			1.5
Foreign	30.4			45.1			41.3
	$	57.0		$	58.8		$	80.6
Deferred
Federal	$	5.6		$	(2.0	)	$	(21.2	)
State	1.8			(0.9		)	(2.0		)
Foreign	(7.3		)	(7.5		)	(3.2		)
	0.1			(10.4		)	(26.4		)
Total	$	57.1		$	48.4		$	54.2

A reconciliation of the statutory federal income tax rate and the effective tax rate reflected in the consolidated statements of income follows:



	2016		2015		2014
Federal Statutory Rate	35.0	%	35.0	%	35.0	%
State Income Taxes, Net of Federal Benefit	1.5	%	(0.2	)%	(0.4	)%
Domestic Production Activities Deduction	(1.1	)%	(1.0	)%	(2.7	)%
Foreign Rate Differential - China	(2.0	)%	(3.3	)%	(7.7	)%
Foreign Rate Differential - All Other	(6.0	)%	(7.2	)%	(4.8	)%
Research and Development Credit	(2.3	)%	(4.1	)%	(7.4	)%
Goodwill Impairment	—	%	4.0	%	42.9	%
Valuation Allowance	—	%	—	%	4.2	%
Adjustments to Tax Accruals and Reserves	0.7	%	2.1	%	2.4	%
Write Down of Venezuelan Assets	—	%	2.3	%	—	%
Other	(4.4	)%	(3.0	)%	(1.5	)%
Effective Tax Rate	21.4	%	24.6	%	60.0	%

Deferred taxes arise primarily from differences in amounts reported for tax and financial statement purposes. The Company's net deferred tax liability was $(75.3) million as of December 31, 2016, classified on the consolidated Balance Sheet as a net non-current deferred tax asset of $22.4 million and a net non-current deferred income tax liability of $(97.7) million. As of January 2, 2016, the Company's net deferred tax liability was $(82.3) million classified on the consolidated Balance Sheet as a net non-current deferred income tax benefit of $18.6 million and a net non-current deferred income tax liability of $(100.9) million.

The components of this net deferred tax liability are as follows (in millions):



	December 31, 2016			January 2, 2016
Accrued Employee Benefits	$	75.1		$	72.9
Bad Debt Allowances	2.7			4.9
Warranty Accruals	5.5			4.9
Inventory	21.3			22.5
Accrued Liabilities	9.2			7.4
Derivative Instruments	25.9			30.3
Tax Loss Carryforward	12.4			14.4
Valuation Allowance	(6.8		)	(8.2		)
Other	5.0			4.7
Deferred Tax Assets	150.3			153.8
Property Related	(31.4		)	(46.1		)
Intangible Items	(194.2		)	(190.0		)
Deferred Tax Liabilities	(225.6		)	(236.1		)
Net Deferred Tax Liability	$	(75.3	)	$	(82.3	)

Following is a reconciliation of the beginning and ending amount of unrecognized tax benefits (in millions):



Unrecognized Tax Benefits, December 28, 2013	$	4.4
Gross Increases from Prior Period Tax Positions	0.1
Gross Increases from Current Period Tax Positions	3.6
Settlements with Taxing Authorities	(2.1		)
Lapse of Statute of Limitations	(0.2		)
Unrecognized Tax Benefits, January 3, 2015	$	5.8
Gross Increases from Prior Period Tax Positions	—
Gross Increases from Current Period Tax Positions	4.0
Settlements with Taxing Authorities	(1.3		)
Lapse of Statute of Limitations	(0.2		)
Unrecognized Tax Benefits, January 2, 2016	$	8.3
Gross Increases from Prior Period Tax Positions	—
Gross Increases from Current Period Tax Positions	2.0
Settlements with Taxing Authorities	—
Lapse of Statute of Limitations	(0.3		)
Unrecognized Tax Benefits, December 31, 2016	$	10.0

Unrecognized tax benefits as of December 31, 2016 amount to $10.0 million, all of which would impact the effective income tax rate if recognized.

Potential interest and penalties related to unrecognized tax benefits are recorded in income tax expense. During fiscal 2016, 2015 and 2014, the Company recognized approximately $0.2 million, $0.6 million and $(0.2) million in net interest (income) expense, respectively. The Company had approximately $1.9 million, $1.7 million and $1.1 million of accrued interest as of December 31, 2016, January 2, 2016 and January 3, 2015, respectively.

Due to statute expirations, approximately $0.3 million of the unrecognized tax benefits, including accrued interest, could reasonably change in the coming year.

With few exceptions, the Company is no longer subject to US federal and state/local income tax examinations by tax authorities for years prior to 2011, and the Company is no longer subject to non-US income tax examinations by tax authorities for years prior to 2009.

At December 31, 2016, the Company had approximately $12.4 million of tax effected net operating losses in various jurisdictions with a portion expiring over a period of up to 15 years and the remaining without expiration. At January 2, 2016, the Company had approximately $14.4 million of tax effected net operating losses in various jurisdictions with a portion expiring over a period up to 15 years and the remaining without expiration.

Valuation allowances totaling $6.8 million and $8.2 million as of December 31, 2016 and January 2, 2016, respectively, have been established for deferred income tax assets primarily related to certain subsidiary loss carryforwards that may not be realized. Realization of the net deferred income tax assets is dependent on generating sufficient taxable income prior to their expiration. Although realization is not assured, management believes it is more-likely-than-not that the net deferred income tax assets will be realized. The amount of the net deferred income tax assets considered realizable, however, could change in the near term if future taxable income during the carryforward period fluctuates.

The Company has been granted tax holidays for some of its Chinese subsidiaries. These tax holidays expire in 2017 and are renewable subject to certain conditions with which the Company expects to comply. In 2016, these holidays decreased the Provision for Income Taxes by $2.2 million.

The Company considers the earnings of certain non-US subsidiaries to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and its specific plans for reinvestment of those subsidiary earnings. The Company has not recorded a deferred tax liability of approximately $130.5 million related to the US federal and state income taxes and foreign withholding taxes on approximately $721.9 million of undistributed earnings of foreign subsidiaries indefinitely invested outside the United States. Should the Company decide to repatriate the foreign earnings, it would need to adjust its income tax provision in the period it determined that the earnings will no longer be indefinitely invested outside the United States.