21.

Income Taxes

Teekay and a majority of its subsidiaries are not subject to income tax in the jurisdictions in which they are incorporated because they do not conduct business or operate in those jurisdictions. However, among others, the Company’s U.K. and Norwegian subsidiaries are subject to income taxes.

The significant components of the Company’s deferred tax assets and liabilities are as follows:


	December 31,			December 31,
	2015			2014
	$			$
Deferred tax assets:
Vessels and equipment		43,289			43,268
Tax losses carried forward⁽¹⁾		310,019			360,547
Other		22,141			28,973

Total deferred tax assets		375,449			432,788

Deferred tax liabilities:
Vessels and equipment		10,577			12,514
Long-term debt		3,218			2,295
Other		15,090			19,954

Total deferred tax liabilities		28,885			34,763
Net deferred tax assets		346,564			398,025
Valuation allowance		(310,862	)		(385,431	)

Net deferred tax assets		35,702			12,594

Net deferred tax assets are presented in other non-current assets and other long term liabilities in the accompanying consolidated balance sheets.

(1)

Substantially all of the Company’s net operating loss carryforwards of $1.28 billion relate primarily to its Norwegian, U.K., and Spanish subsidiaries and, to a lesser extent, to its Australian ship-owning subsidiaries. These net operating loss carryforwards are available to offset future taxable income in the respective jurisdictions, and can be carried forward indefinitely. The Company also has $37.2 million in disallowed finance costs that relate to its Spanish subsidiaries and are available to offset future taxable income in Spain and can also be carried forward indefinitely.

The components of the provision for income taxes are as follows:


	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2015			2014			2013
	$			$			$
Current		(10,440	)		(6,460	)		2,742
Deferred		27,207			(3,713	)		(5,614	)

Income tax recovery (expense)		16,767			(10,173	)		(2,872	)

The Company operates in countries that have differing tax laws and rates. Consequently, a consolidated weighted average tax rate will vary from year to year according to the source of earnings or losses by country and the change in applicable tax rates. Reconciliations of the tax charge related to the relevant year at the applicable statutory income tax rates and the actual tax charge related to the relevant year are as follows:


	Year Ended			Year Ended			Year Ended
	December 31, 2015			December 31, 2014			December 31, 2013
	$			$			$
Net income before taxes		388,693			134,175			38,352
Net income (loss) not subject to taxes		252,604			(80,454	)		(267,665	)

Net income subject to taxes		136,089			214,629			306,017

At applicable statutory tax rates		32,750			39,382			12,719
Permanent and currency differences, adjustments to valuation allowances and uncertain tax positions		(49,789	)		(28,027	)		(8,173	)
Other		272			(1,182	)		(1,674	)

Tax (recovery) expense related to the current year		(16,767	)		10,173			2,872

The following is a roll-forward of the Company’s unrecognized tax benefits, recorded in other long-term liabilities, from January 1, 2013 to December 31, 2015:


	Year ended			Year ended			Year ended
	December 31,			December 31,			December 31,
	2015			2014			2013
	$			$			$
Balance of unrecognized tax benefits as at January 1		20,335			20,304			29,364
Increases for positions related to the current year		4,578			3,643			1,141
Changes for positions taken in prior years		(2,965	)		1,015			(1,284	)
Decreases related to statute of limitations		(3,558	)		(4,627	)		(8,917	)

Balance of unrecognized tax benefits as at December 31		18,390			20,335			20,304

The majority of the net decrease for positions for the year ended December 31, 2015 relates to a potential tax on freight income becoming statute barred.

The Company does not presently anticipate such uncertain tax positions will significantly increase or decrease in the next 12 months; however, actual developments could differ from those currently expected. The tax years 2010 through 2015 remain open to examination by some of the major jurisdictions in which the Company is subject to tax.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The interest and penalties on unrecognized tax benefits are included in the roll-forward schedule above and are approximately a reduction of $0.3 million in 2015, net of statute barred liabilities, and $1.6 million in 2014 and $7.2 million in 2013.