Note 7 — Income Taxes

We and our subsidiaries file a consolidated U.S. federal income tax return. We believe that our recorded assets and liabilities are reasonable; however, tax laws and regulations are subject to interpretation and tax litigation is inherently uncertain, and therefore our assessments can involve a series of complex judgments about future events and rely heavily on estimates and assumptions.

Components of income tax provision (benefit) on continuing operations reflected in the consolidated statements of operations consisted of the following (in thousands):


		Year Ended December 31,
		2014		2013		2012

Current	$	43,817	$	57,128	$	6,572
Deferred		23,154		(25,516)		(65,730)
	$	66,971	$	31,612	$	(59,158)


Domestic	$	29,613	$	11,615	$	(78,211)
Foreign		37,358		19,997		19,053
	$	66,971	$	31,612	$	(59,158)

Components of income (loss) before income taxes are as follows (in thousands):


		Year Ended December 31,
		2014		2013		2012

Domestic	$	73,700	$	36,176	$	(256,859)
Foreign		188,821		107,412		130,861
	$	262,521	$	143,588	$	(125,998)

Income taxes have been provided based on the U.S. statutory rate of 35% and at the local statutory rate for each foreign jurisdiction adjusted for items that are allowed as deductions for federal and foreign income tax reporting purposes, but not for book purposes. The primary differences between the statutory rate and our effective rate from continuing operations are as follows:


	Year Ended December 31,
	2014		2013		2012

Statutory rate	35.0	%	35.0	%	35.0	%
Foreign provision	(9.1)		(11.6)		11.2
Other	(0.4)		(1.4)		0.8
Effective rate	25.5	%	22.0	%	47.0	%

Deferred income taxes result from the effect of transactions that are recognized in different periods for financial and tax reporting purposes. The nature of these differences and the income tax effect of each as of December 31, 2014 and 2013 are as follows (in thousands):


		2014		2013
Deferred tax liabilities:
Depreciation	$	211,903	$	169,404
Original Issue Discount on 2032 Notes		16,269		14,720
Equity investments in production facilities		50,685		84,870
Prepaid and other		4,211		7,556
Total deferred tax liabilities	$	283,068	$	276,550

Deferred tax assets:
Net operating losses	$	(23,076)	$	(40,105)
Reserves, accrued liabilities and other		(53,973)		(44,999)
Total deferred tax assets		(77,049)		(85,104)
Valuation allowance		23,076		22,860

Net deferred tax liabilities	$	229,095	$	214,306

Deferred income tax is presented as:
Current deferred tax assets		(31,180)		(51,573)
Noncurrent deferred tax liabilities		260,275		265,879
Net deferred tax liabilities	$	229,095	$	214,306

At December 31, 2014, we had a $23.1 million valuation allowance related to certain non-U.S. deferred tax assets, primarily net operating losses generated in Australia, as management believes it is more likely than not that we will not be able to utilize the tax benefit. Additional valuation allowances may be made in the future if in management’s opinion it is more likely than not that the tax benefit will not be utilized.

We consider the undistributed earnings of our principal non-U.S. subsidiaries to be permanently reinvested. At December 31, 2014 and 2013, our principal non-U.S. subsidiaries had accumulated earnings and profits of approximately $338.0 million and $202.6 million, respectively. We have not provided deferred U.S. income tax on the accumulated earnings and profits as we consider them permanently reinvested.

We had no uncertain tax positions as of December 31, 2014. We account for tax-related interest in interest expense and tax penalties in selling, general and administrative expenses. We accrued $0.2 million for interest in each of 2012 and 2013, which brought our total liabilities for interest and penalties to $1.3 million in the accompanying consolidated balance sheet at December 31, 2013. At both December 31, 2013 and 2012, we had $3.4 million of unrecognized tax benefits that if recognized would have affected the annual effective rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):


		2014		2013		2012

Balance at January 1,	$	4,723	$	4,506	$	7,085
Additions for tax positions of prior years		-		217		206
Reductions for tax positions of prior years		(4,723)		-		(2,785)
Balance at December 31,	$	-	$	4,723	$	4,506

In 2012, we reversed a $2.8 million long-term liability originally recorded in 2011 related to an uncertain tax position that we ultimately did not take when the 2011 tax return was filed. In 2014, we recognized a $3.4 million tax benefit as a result of the completion of examination procedures for the 2006 through 2010 audit period by the U.S. Internal Revenue Service (“IRS”) (see below). In connection with the recognition of that benefit, we reversed approximately $1.3 million of accrued interest and penalties.

We file tax returns in the U.S. and in various state, local and non-U.S. jurisdictions. We anticipate that any potential adjustments to our state, local and non-U.S. jurisdiction tax returns by tax authorities would not have a material impact on our financial position. In June 2014, the IRS and the Joint Committee on Taxation completed the examination procedures including all appeals and administrative reviews that the taxing authorities are required and expected to perform for the 2006 through 2010 audit period, and in September 2014, we received an income tax refund in the amount of $35.2 million. The refund was primarily attributable to the utilization of a net operating loss carryback from 2010. The tax periods from 2006 through 2014 remain open to review and examination by the IRS. In non-U.S. jurisdictions, the open tax periods include 2009 through 2014.