9.INCOME TAXES

The components of earnings from continuing operations before incomes taxes were:


	Year Ended December 31,
	2014		2013		2012
Earnings/(loss) from continuing operations before income taxes
United States	$	(216.6)	$	65.9	$	(43.8)
Foreign		226.4		173.6		130.5
Earnings before income taxes	$	9.8	$	239.5	$	86.7

Income tax (benefit) expense consists of the following:


	Year Ended December 31,
	2014		2013		2012
Current:
Federal	$	(83.8)	$	19.5	$	(38.1)
State		-		-		-
Foreign		39.4		30.4		20.7
	$	(44.4)	$	49.9	$	(17.4)
Deferred:
Federal		(6.6)		(6.1)		22.7
State		1.6		(1.1)		(0.7)
Foreign		1.5		1.9		2.5
		(3.5)		(5.3)		24.5
Total income tax (benefit)/expense	$	(47.9)	$	44.6	$	7.1

The difference between income tax (benefit) expense and the amount computed by applying the statutory U.S. federal income tax rate (35%) to the pre-tax earnings consists of the following:


	Year Ended December 31,
	2014		2013		2012
Statutory federal income tax expense	$	3.4	$	83.8	$	30.3
U.S. state income taxes		(7.6)		2.3		(1.5)
Foreign tax rate differential		(39.9)		(30.6)		(28.6)
Non-deductible charges/losses and other		8.9		3.0		8.5
Research and development credit		(12.7)		(13.9)		(1.6)
	$	(47.9)	$	44.6	$	7.1

The tax effects of temporary differences and carryforwards that give rise to deferred income tax assets and liabilities consist of the following:


	December 31,
	2014		2013
Deferred tax assets:
Inventory reserves	$	11.4	$	20.8
Warranty reserves		16.6		14.1
Accrued liabilities		27.9		31.0
Net operating loss carryforward		2.8		24.0
Research and development credit carry forward		34.4		7.3
Alternative minimum tax credit carryforward		5.0		5.0
Other		2.4		10.0
	$	100.5	$	112.2

Deferred tax liabilities:
Book to tax revenue differences		(4.3)		(13.4)
Intangible assets		(160.9)		(168.4)
Depreciation		(14.9)		(34.4)
Other		(8.7)		-
Software development costs		(0.1)		(0.7)
		(188.9)		(216.9)
Deferred tax liability before valuation allowance		(88.4)		(104.7)
Valuation allowance		(12.9)		(31.1)
Net deferred tax liability	$	(101.3)	$	(135.8)

The above deferred income tax asset and liability balances for 2013 include discontinued operations. The Company has included $82.6 and $6.2 of income tax receivables in other current assets in the consolidated balance sheets as of December 31, 2014 and 2013.

The Company maintained a valuation allowance of $12.9 as of December 31, 2014 primarily related to state net operating losses and research credits. While the valuation allowance of $31.1 as of December 31, 2013 primarily related to foreign net operating losses.

As of December 31, 2014, the Company had state and foreign net operating loss carryforwards of approximately $33.9 and $7.0, respectively. The U.S. state net operating loss carryforwards begin to expire in 2015. As of December 31, 2014, the Company had federal and U.S. state research and development tax credit carryforwards of $34.4, which expire from 2015 to 2029.

The Company has not provided for any residual U.S. income taxes on the approximately $440 of earnings from its foreign subsidiaries because such earnings are intended to be indefinitely reinvested. It is not practicable to determine the amount of U.S. income and foreign withholding tax payable in the event all such foreign earnings are repatriated.

In 2014, the Company recognized tax deductions of $13.7 related to stock option exercises and restricted share vestings. Pursuant to ASC 718, these deductions are not deemed realized until they reduce taxes payable. During 2014, the Company recorded a credit to additional paid-in capital of $3.5 as these deductions reduced our current year tax liability.

A reconciliation of the beginning and ending amounts of gross uncertain tax positions is presented below:


	2014		2013		2012
Balance, beginning of the period	$	47.5	$	34.6	$	21.7
Additions for current year tax positions		38.1		10.8		10.6
Additions for tax positions of prior years		1.6		2.1		2.3
Impact of Spin-off		(11.2)		--		--
Currency fluctuations		(0.3)		--		--
Balance, end of the period	$	75.7	$	47.5	$	34.6

The difference between the gross uncertain tax position of $75.7 and the liability for unrecognized tax benefits of $73.2 is due to the netting of certain items when calculating the liability for unrecognized tax benefits. This liability, if recognized, would affect the Company’s effective tax rate. It is reasonably possible that the amount of liability for unrecognized tax benefits will change in the next twelve months; however, the Company does not expect the change to have a material impact on the Company’s consolidated financial statements.

With minor exceptions, the Company is currently open to audit by the tax authorities for the eight tax years ending December 31, 2014. There are currently no material income tax audits in progress.

The Company classifies interest and penalties related to income tax as income tax expense. The increase in the Company’s liability for unrecognized tax benefits for interest and penalties was less than $2.0 for the year ended December 31, 2014.