9.INCOME TAXES

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


	Year Ended December 31,
	2016		2015		2014
Earnings (loss) from continuing operations before income taxes:
United States	$	162.5	$	92.1	$	(216.6)
Foreign		253.0		264.5		226.4
Earnings before income taxes	$	415.5	$	356.6	$	9.8

Income tax expense (benefit) consists of the following:


	Year Ended December 31,
	2016		2015		2014
Current:
Federal	$	39.9	$	27.0	$	(83.8)
State		0.9		3.3		—
Foreign		61.5		44.7		39.4
	$	102.3	$	75.0	$	(44.4)
Deferred:
Federal		7.1		(5.2)		(6.6)
State		(3.3)		—		1.6
Foreign		(1.7)		1.1		1.5
		2.1		(4.1)		(3.5)
Total income tax expense (benefit)	$	104.4	$	70.9	$	(47.9)

The difference between income tax expense (benefit) 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,
	2016		2015		2014
Statutory federal income tax expense	$	145.3	$	124.8	$	3.4
U.S. state income taxes		3.3		3.2		(7.6)
Foreign tax rate differential		(33.9)		(48.5)		(39.9)
Non-deductible charges/losses and other		4.9		5.0		8.9
Research and development credit		(15.2)		(13.6)		(12.7)
	$	104.4	$	70.9	$	(47.9)

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


	December 31,
	2016		2015
Deferred tax assets:
Inventory reserves	$	12.9	$	11.0
Warranty reserves		22.9		19.6
Accrued liabilities		35.7		30.5
Net operating loss carryforward		3.3		3.5
Research and development credit carryforward		46.5		48.9
Alternative minimum tax credit carryforward		5.0		5.0
Other		—		6.8
	$	126.3	$	125.3

Deferred tax liabilities:
Book to tax revenue differences		(46.5)		(11.9)
Intangible assets		(171.3)		(171.1)
Depreciation		(10.3)		(17.9)
Other		(0.2)		—
		(228.3)		(200.9)
Deferred tax liability before valuation allowance		(102.0)		(75.6)
Valuation allowance		(24.0)		(17.1)
Net deferred tax liability	$	(126.0)	$	(92.7)

The Company has included $14.9 and $23.9 of income tax receivables in other current assets in the consolidated balance sheets as of December 31, 2016 and 2015.

The Company maintained a valuation allowance of $24.0 and $17.1 as of December 31, 2016 and 2015, respectively, primarily related to state net operating losses and research credits.

The difference between the deferred tax expense and the change in the deferred tax liability relates to the accounting treatment of an intercompany asset transfer.

As of December 31, 2016, the Company had state and foreign net operating loss carryforwards of approximately $25.8 and $5.7, respectively. The U.S. state net operating loss carryforwards began to expire in 2016. As of December 31, 2016, the Company had federal and U.S. state research and development tax credit carryforwards of $46.5, which expire from 2021 to 2031.

The Company has not provided for any residual U.S. income taxes on the approximately $857.7 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 2016, the Company recognized tax deductions of $4.9 related to restricted share vestings. Pursuant to ASC 718, these deductions are not deemed realized until they reduce taxes payable. During 2016, the Company recorded a credit to additional paid-in capital of $1.9 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:


	2016		2015		2014
Balance, beginning of the period	$	89.2	$	75.7	$	47.5
Additions for current year tax positions		13.0		16.1		38.1
Additions for tax positions of prior years		3.5		0.8		1.6
Settlements of tax positions		(26.2)		(2.7)		—
Impact of Spin-Off		—		—		(11.2)
Currency fluctuations		(0.6)		(0.7)		(0.3)
Balance, end of the period	$	78.9	$	89.2	$	75.7

The difference between the gross uncertain tax position of $78.9 and the liability for unrecognized tax benefits of $81.2 is due to the netting of certain items when calculating the liability for unrecognized tax benefits and interest relating to our gross uncertain tax positions. 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.

The Company is currently open to audit by the tax authorities for the eight tax years ended December 31, 2015. The Company is currently undergoing a U.S. federal income tax examination for the year 2013.

Estimated interest and penalties related to income tax are classified as income tax expense in the consolidated statement of earnings and comprehensive income and totaled $2.5, $2.3, and $0.5 for the years ended December 31, 2016, 2015, and 2014, respectively. Accrued interest and penalties were $5.3 and $2.8 as of December 31, 2016 and 2015, respectively.