NOTE 5 INCOME TAXES

Income before income taxes consists of:


Years Ended December 31,	2016		2015		2014
United States	$	55,278	$	73,492	$	31,681
International		225,219		221,079		254,620
Total	$	280,497	$	294,571	$	286,301

The provision (benefit) for income taxes is comprised of:


Years Ended December 31,	2016		2015		2014
Current:
U.S. Federal	$	24,045	$	19,749	$	14,023
State/Local		449		82		42
International		61,511		82,586		99,585
	$	86,005	$	102,417	$	113,650
Deferred:
U.S. Federal/State	$	(4,002)	$	1,605	$	(10,130)
International		(7,110)		(8,746)		(8,843)
	$	(11,112)	$	(7,141)	$	(18,973)
Total	$	74,893	$	95,276	$	94,677

The difference between the actual income tax provision and the tax provision computed by applying the statutory federal income tax rate of 35.0% in 2016, 2015 and 2014 to income before income taxes is as follows:


Years Ended December 31,	2016			2015			2014
Income tax at statutory rate	$	98,174		$	103,100		$	100,205
State income (benefits) taxes, net of federal (tax) benefit		(980)			(1,254)			770
Investment incentives		(6,413)			(3,082)			—
Tax resolutions		(7,205)			2,375			—
Provision for distribution of current foreign earnings		3,494			2,031			695
Rate differential on earnings of foreign operations		(12,037)			(5,688)			(5,478)
Other items, net		(140)			(2,206)			(1,515)
Actual income tax provision	$	74,893		$	95,276		$	94,677
Effective income tax rate		26.7	%		32.3	%		33.1	%

The state income tax provision for 2016 reflects a benefit of $1.6 million related to the reduction of valuation allowances mostly associated with U.S. state tax credits. The tax provision for 2016 also reflects benefits of $6.4 million associated with the exceptional depreciation allowances enacted in France and Italy. The $7.2 million related to tax resolutions includes an amount of $5.0 million related to dividends previously taxed in France. The remaining $2.2 million is a net amount related to uncertain tax positions in France, Italy and Germany. The $3.5 million charge pertaining to the distribution of earnings reflects $2.1 million of tax incurred in 2016 for income recognized under the U.S. deemed dividend provisions and $1.4 million for cash movements in Europe during 2016. The rate differential on earnings of foreign operations reflects a $4.7 million benefit due to the reduction in the corporate income tax rate in France from 38.00% to 34.43%. In addition, the rate differential on earnings of foreign operations reflects benefits of$2.0 million, $2.2 million, and $2.2 million due to reductions in the corporate income tax rates in Germany, Switzerland, and China, respectively.

The tax provision for 2015 reflects a benefit of $1.1 million related to the reduction of valuation allowances mostly associated with U.S. state tax credits. Additional benefits of $3.1 million associated with the exceptional depreciation allowances enacted in France during 2015 were partially offset by a $2.4 million charge for expected income tax assessments in France for a transfer pricing issue. While the Company expects to seek compensating offsets for this amount, no receivable has been recorded at this time. The $2.0 million charge pertaining to the distribution of earnings reflects $1.6 million of tax incurred in 2015 for income recognized under the U.S. deemed dividend provisions and $0.4 million for planned cash movements in Europe during 2016.

In 2014, we did not repatriate foreign earnings to the U.S., resulting in a reduced tax rate.

Significant deferred tax assets and liabilities as of December 31, 2016 and 2015 are comprised of the following temporary differences:


	2016		2015
Deferred Tax Assets:
Pension liabilities	$	27,087	$	27,155
Stock compensation		18,943		20,170
Foreign tax credit carryforward		10,813		7,471
Net operating loss carryforwards		5,150		5,053
U.S. state tax credits		8,103		8,554
Vacation		4,783		4,167
Workers compensation		3,575		4,693
Other		12,651		6,503
Total gross deferred tax assets		91,105		83,766
Less valuation allowance		(4,070)		(6,125)
Net deferred tax assets		87,035		77,641
Deferred Tax Liabilities:
Depreciation, amortization and leases		39,189		47,154
Acquisition related intangibles		30,417		15,720
Total gross deferred tax liabilities		69,606		62,874
Net deferred tax assets	$	17,429	$	14,767

The foreign tax credit carryforward will expire in the years 2023, 2024 and 2026. There is no expiration date on $4.7 million of the tax‑effected net operating loss carry forwards and $0.4 million (tax effected) will expire in the years 2019 to 2034. The U.S. state tax credit carryforwards of $8.1 million (tax effected) will expire in the years 2018 to 2031. No state tax credit carryforwards are expected to expire unused in 2017.

The Company evaluates the deferred tax assets and records a valuation allowance when it is believed it is more likely than not that the benefit will not be realized. The Company has established a valuation allowance of $2.2 million of the $5.2 million of tax effected net operating loss carry forwards. These losses are generally in start‑up jurisdictions or locations that have not produced an operating profit to date. A valuation allowance of $1.4 million has been established against the $8.1 million of U.S. state tax credit carry forwards. A valuation allowance of $0.5 million has been established related to other future tax deductions in non‑U.S. jurisdictions, the benefit of which management believes will not be realized.

As of December 31, 2016, the Company had $1.5 billion of unremitted earnings from non‑U.S. subsidiaries. We are planning to repatriate a total of $0.3 billion of unremitted earnings in 2017. The remaining $1.2 billion of unremitted earnings have been designated as permanently reinvested. The Company has not made a provision for U.S. or additional foreign taxes on the amount of unremitted earnings. However, we estimate the amount of additional tax that might be payable on these earnings to be in the range of $50 million to $60 million. These earnings will continue to be reinvested indefinitely and could become subject to the additional tax if they were remitted as dividends or lent to a U.S. affiliate, or if the Company should sell its stock in the subsidiaries. No provision for U.S. or additional foreign taxes has been made with respect to the planned remittance of the $0.3 billion to the U.S. in 2017, as no additional tax amounts are expected to be incurred on this repatriation under existing U.S. tax law.

The Company has not provided for taxes on certain tax‑deferred income of a foreign operation. The income arose predominately from government grants. Taxes of approximately $1.6 million would become payable in the event the terms of the grant are not fulfilled.

INCOME TAX UNCERTAINTIES

The Company provides a liability for the amount of tax benefits realized from uncertain tax positions. A reconciliation of the beginning and ending amount of income tax uncertainties is as follows:


	2016		2015		2014
Balance at January 1	$	7,934	$	6,408	$	7,988
Increases based on tax positions for the current year		270		255		113
Increases based on tax positions of prior years		1,283		2,684		228
Decreases based on tax positions of prior years		(1,472)		(518)		(1,073)
Settlements		(1,444)		(207)		(407)
Lapse of statute of limitations		(215)		(688)		(441)
Balance at December 31	$	6,356	$	7,934	$	6,408

The amount of income tax uncertainties that, if recognized, would impact the effective tax rate is close to $6.4 million. The Company estimates that it is reasonably possible that the liability for uncertain tax positions will decrease no more than $4.6 million in the next twelve months from the resolution of various uncertain positions as a result of the completion of tax audits, litigation and the expiration of the statute of limitations in various jurisdictions.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits as a component of income taxes. As of December 31, 2016, 2015 and 2014, the Company had approximately $1.5 million, $1.1 million and $0.7 million, respectively, accrued for the payment of interest and penalties, of which approximately $0.4 million, $0.4 million and ($0.2) million was recognized in income tax expense in the years ended December 31, 2016, 2015 and 2014, respectively.

The Company or its subsidiaries file income tax returns in the U.S. Federal jurisdiction and various state and foreign jurisdictions. The major tax jurisdictions the Company files in, with the years still subject to income tax examinations, are listed below:


		Tax Years
Major Tax		Subject to
Jurisdiction		Examination
United States — Federal		2013-2016
United States — State		2009-2016
France		2013-2016
Germany		2013-2016
Italy		2012-2016
China		2007-2016