NOTE 5 – INCOME TAXES

The U.S. and International components of income before income taxes consisted of the following for the years ended December 31, 2016, 2015 and 2014:

In thousands
	2016			2015		2014
United States	$	381,100		$	378,815	$	441,029
Foreign		(52,955	)		32,092		46,539
Total income before income taxes	$	328,145		$	410,907	$	487,568

Significant components of our income tax expense for the years ended December 31, 2016, 2015 and 2014 are as follows:

In thousands
	2016			2015			2014
Current
United States - federal	$	102,050		$	105,941		$	118,217
United States - state and local		11,615			15,544			13,023
Foreign		10,601			16,512			14,930
		124,266			137,997			146,170
Deferred
United States - federal		19,052			23,762			29,730
United States - state and local		(2,466	)		2,504			948
Foreign		(20,606	)		(21,369	)		(15,339	)
Foreign - changes in statutory rates		—			—			(2,087	)
		(4,020	)		4,897			13,252
Total provision	$	120,246		$	142,894		$	159,422

A reconciliation of the income tax provision computed at the federal statutory rate to the effective tax rate for the years ended December 31, 2016, 2015 and 2014 are as follows:

	2016			2015			2014
Federal statutory income tax rate		35.0	%		35.0	%		35.0	%
Effect of:
State and local taxes, net of federal tax effect		1.6	%		3.1	%		1.9	%
Foreign tax rates		2.1	%		(0.4	)%		(0.5	)%
Change in deferred tax assets from an increase in tax basis of foreign assets		—			(2.2	)%		(1.8	)%
Other		(2.1	)%		(0.7	)%		(1.9	)%
Effective tax rate		36.6	%		34.8	%		32.7	%

Cash payments for income taxes were $111.5 million, $125.1 million, and $128.1 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Our deferred tax liabilities and assets at December 31, 2016 and 2015 were as follows:

In thousands
	2016			2015
Deferred tax liabilities:
Property, plant and equipment	$	(78,478	)	$	(44,914	)
Goodwill and intangibles		(690,387	)		(719,789	)
Other		(7,906	)		(5,747	)
Total deferred tax liabilities		(776,771	)		(770,450	)
Deferred tax assets:
Accrued liabilities		93,706			69,895
Stock based compensation		17,861			74,794
Net operating tax loss carry-forwards		38,254			37,976
Less: valuation allowance		(15,392	)		(17,585	)
Total deferred tax assets		134,429			165,080
Net deferred tax liabilities	$	(642,342	)	$	(605,370	)

At December 31, 2016, net operating loss carry-forwards for U.S. federal and state income tax purposes have been fully utilized, excluding net operating loss carry-forwards related to our acquisitions. The net operating loss carry-forwards from foreign and domestic acquisitions are approximately $121.7 million and certain of these net operating loss carry-forwards begin to expire in 2017. The tax benefit of these net operating losses is approximately $38.2 million at December 31, 2016, on which a valuation allowance of $15.4 million was recorded offsetting such tax benefit.

Undistributed earnings of foreign subsidiaries are considered permanently reinvested, and therefore no deferred taxes are recorded thereon. The cumulative amounts of such earnings are approximately $542.2 million at December 31, 2016, and it is not practicable to estimate the amount of tax that may be payable upon distribution assuming repatriation.

We and our subsidiaries file U.S. federal income tax returns and income tax returns in various states and foreign jurisdictions. With a few exceptions, we are no longer subject to U.S. federal, state, local, or non-U.S. income tax examinations by tax authorities for years before 2011. In 2014, the Internal Revenue Service concluded an audit of our 2010 Corporate Income Tax return with no significant adjustments.

The Company has recorded accruals to cover certain unrecognized tax positions. Such unrecognized tax positions relate to additional taxes that the Company may be required to pay in various tax jurisdictions. During the course of examinations by various taxing authorities, proposed adjustments may be asserted. The Company evaluates such items on a case-by-case basis and adjusts the accrual for unrecognized tax positions as deemed necessary. The estimated amount of the liability associated with the Company’s unrecognized tax positions that may significantly increase or decrease within the next twelve months cannot be reasonably estimated.

The total amount of unrecognized tax positions at December 31, 2016 is $26.7 million. Acquisition activity has contributed to this amount. The amount of unrecognized tax positions that, if recognized, would affect the effective tax rate is approximately $21.4 million. We recognized interest and penalties accrued related to income tax reserves in the amount of $1.3 million and $0.7 million, for the years ended December 31, 2016 and 2015, respectively, as a component of income tax expense.

The following table summarizes the changes in unrecognized tax positions during the years ended December 31, 2016 and 2015:

In thousands
Unrecognized tax positions, January 1, 2015	$	15,095
Gross increases - tax positions in prior periods		7,239
Gross decreases - tax positions in prior periods		(793	)
Gross increases - current period tax positions		5,976
Settlement		(200	)
Lapse of statute of limitations		(2,375	)
Unrecognized tax positions, December 31, 2015	$	24,942
Gross increases - tax positions in prior periods		809
Gross increases - current period tax positions		2,876
Settlement		(218	)
Lapse of statute of limitations		(1,751	)
Unrecognized tax positions, December 31, 2016	$	26,658

The table above includes amounts that relate to acquired uncertain tax positions. The securities purchase agreement provides that the seller is liable for and has indemnified Stericycle against all income tax liabilities for periods prior to the acquisition. Stericycle will be responsible for unrecognized tax benefits and related interest and penalties for periods after the acquisition.