INCOME TAXES

Domestic and foreign income before income taxes for the three-year period ended September 30, 2015 is as follows:



(In thousands)	Fiscal 2015		Fiscal 2014			Fiscal 2013
Domestic income (loss)	$	22,788	$	(36,756	)	$	(17,823	)
Foreign income	456,182		434,049			422,624
Income before income taxes	$	478,970	$	397,293		$	404,801

The provision (benefit) for domestic and foreign taxes on income consists of the following:



(In thousands)	Fiscal 2015			Fiscal 2014			Fiscal 2013
Current—domestic	$	453		$	773		$	161
Deferred—domestic	(4,061		)	(980		)	(862		)
Current—foreign	48,691			56,968			55,233
Deferred—foreign	1,314			(290		)	45
Provision for income taxes	$	46,397		$	56,471		$	54,577

Deferred Taxes

The components of the deferred income tax assets (liabilities) as of September 30, 2015 and 2014 are as follows:



	September 30,
(In thousands)	2015			2014
Deferred tax assets:
Net operating loss carryforwards	$	22,930		$	35,935
Tax credit carryforwards	2,464			1,246
Stock option compensation expense	10,924			11,744
Debt issuance costs	221			—
Book accruals	3,064			3,274
	39,603			52,199
Deferred tax liabilities:
Difference in book and tax basis of equipment	(209		)	496
Deferred dividend withholding tax	(907		)	(784		)
Other timing differences	(1,422		)	—
	(2,538		)	(288		)
Net deferred tax assets (liabilities) before valuation allowance	37,065			51,911
Valuation allowance	(38,573		)	(52,105		)
Net deferred tax liabilities	$	(1,508	)	$	(194	)

As of September 20, 2015, the valuation allowance of $38.6 million primarily related to our United States net operating loss carryforward, stock option compensation expense, timing differences and federal tax credit carryforwards. Our net operating loss carryforwards which will begin to expire in 2025, total approximately $122.0 million. Our tax credit carryforwards, which begin to expire in 2016, total approximately $2.5 million .

We have approximately $19.8 million of windfall tax benefits from previous stock option exercises that have not been recognized as of September 30, 2015. This amount will not be recognized until the deduction would reduce our United States income taxes payable. At such time, the amount will be recorded as an increase to paid-in-capital. We apply the “with-and-without” approach when utilizing certain tax attributes whereby windfall tax benefits are used last to offset taxable income.

We do not record federal income taxes on the undistributed earnings of our foreign subsidiaries that we consider to be indefinitely reinvested in foreign operations. The cumulative amount of such undistributed earnings was approximately $2.7 billion at September 30, 2015. If these earnings were distributed, we estimate approximately $560 million in additional taxes would be incurred. These earnings could also become subject to additional taxes under the anti-deferral provisions within the U.S. Internal Revenue Code. However, we believe this is highly unlikely given our current structure and have not provided deferred income taxes on these foreign earnings as we consider them to be permanently invested abroad.

We record estimated accrued interest and penalties related to uncertain tax positions in income tax expense. As of September 30, 2015, we have approximately $13.8 million of reserves for uncertain tax positions, including estimated accrued interest and penalties of $3.5 million, which are included in Other Long Term Liabilities in the Consolidated Balance Sheet. All $13.8 million of the net uncertain tax liabilities would affect the effective tax rate if recognized.

A summary of activity related to the net uncertain tax positions including penalties and interest for fiscal year 2015 is as follows:



	Liability for Uncertain
(In thousands)	Tax Positions
Balance at October 1, 2014	$	12,298
Increases as a result of tax positions taken during the current period	1,387
Increases as a result of tax positions taken in prior periods	1,478
Decreases due to the lapse of the applicable statute of limitations	(1,388		)
Balance at September 30, 2015	$	13,775

We believe that it is reasonably possible that approximately $2.0 million of our remaining unrecognized tax benefits may be recognized by the end of fiscal year 2016 as a result of a lapse of the statute of limitations.

Our United States tax returns for fiscal year 2011 and subsequent years remain subject to examination by tax authorities. As we conduct business globally, we have various tax years remaining open to examination in our international tax jurisdictions, including tax returns in Australia for fiscal years 2009 through 2014, and tax returns in Equatorial Guinea for calendar years 2013 and 2014. Although we cannot predict the outcome of ongoing or future tax examinations, we do not anticipate that the ultimate resolution of these examinations will have a material impact on our consolidated financial position, results of operations or cash flows.

We have historically earned most of our operating income in certain nontaxable and deemed profit tax jurisdictions, which significantly reduced our effective tax rate for fiscal years 2015, 2014 and 2013 when compared to the United States statutory rate. There were no significant transactions that materially impacted our effective tax rates for fiscal years 2015, 2014 or 2013. The differences between the United States statutory and our effective income tax rate are as follows:



	Fiscal 2015		Fiscal 2014		Fiscal 2013
Statutory income tax rate	35	%	35	%	35	%
Resolution of prior period tax items	—		—		—
Increase in tax rate resulting from:
Valuation allowance	—		2		1
Increases to the reserve for uncertain tax positions	—		1		—
Decrease in tax rate resulting from:
Release of valuation allowance	(3	)	—		—
Foreign tax rate differentials, net of foreign tax credit utilization	(22	)	(24	)	(23	)
Effective income tax rate	10	%	14	%	13	%