INCOME TAXES

The Company is responsible for filing consolidated U.S., foreign and combined, unitary or separate state income tax returns. The Company is responsible for paying the taxes relating to such returns, including any subsequent adjustments resulting from the redetermination of such tax liabilities by the applicable taxing authorities.

The components of the income from operations before provision for income taxes for the Company’s domestic and foreign operations for the years ended December 31 are provided below:



	For the year ended December 31,
In thousands	2015		2014		2013
Domestic	$	461,394	$	343,180	$	285,395
Foreign	123,974		164,675		135,692
Income from operations before income taxes	$	585,368	$	507,855	$	421,087

Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $1,004.0 million at December 31, 2015. Those earnings are considered to be indefinitely reinvested; accordingly, no provision for U.S. federal and state income taxes has been provided thereon. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable due to the complexities associated with its hypothetical calculation.

The consolidated provision for income taxes included in the Statement of Income consisted of the following:



	For the year ended December 31,
In thousands	2015			2014			2013
Current taxes
Federal	$	141,245		$	108,782		$	70,459
State	16,072			17,091			13,173
Foreign	24,442			37,356			29,972
	181,759			163,229			113,604
Deferred taxes
Federal	9,606			2,287			11,146
State	770			1,404			1,375
Foreign	(5,395		)	(10,745		)	2,727
	4,981			(7,054		)	15,248
Total provision	$	186,740		$	156,175		$	128,852

A reconciliation of the United States federal statutory income tax rate to the effective income tax rate on operations for the years ended December 31 is provided below:



	For the year ended December 31,
In thousands	2015		2014		2013
U.S. federal statutory rate	35.0	%	35.0	%	35.0	%
State taxes	2.0	%	2.2	%	2.2	%
Tax reserves	(0.4	)%	0.3	%	—	%
Foreign	(2.1	)%	(4.2	)%	(3.9	)%
Research and development credit	(0.4	)%	(0.5	)%	(0.6	)%
Manufacturing deduction	(2.3	)%	(1.8	)%	(1.7	)%
Other, net	0.1	%	(0.2	)%	(0.4	)%
Effective rate	31.9	%	30.8	%	30.6	%

Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes. These deferred income taxes will be recognized as future tax benefits or costs when the temporary differences reverse.

Components of deferred tax assets and liabilities were as follows:



	December 31,
In thousands	2015			2014
Deferred income tax assets:
Accrued expenses and reserves	$	39,426		$	34,167
Warranty reserve	24,544			21,123
Deferred compensation/employee benefits	24,950			21,759
Pension and postretirement obligations	15,507			26,736
Inventory	18,664			13,570
Net operating loss carry forwards	25,636			5,036
Tax credit carry forwards	959			1,078
Gross deferred income tax assets	149,686			123,469
Valuation allowance	12,623			1,818
Total deferred income tax assets	137,063			121,651
Deferred income tax liabilities:
Property, plant & equipment	34,518			29,998
Intangibles	167,108			157,781
Other	2,243			144
Total deferred income tax liabilities	203,869			187,923
Net deferred income tax liability	$	(66,806	)	$	(66,272	)

A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2015, the valuation allowance for certain foreign carryforwards was $12.6 million primarily in Brazil and South Africa.

State tax credit carry-forwards of approximately $1.0 million expire in various periods from December 31, 2016 to December 31, 2030. Net operating loss carry-forwards in the amount of $25.6 million expire in various periods from December 31, 2016 to December 31, 2035.

As of December 31, 2015, the liability for income taxes associated with unrecognized tax benefits was $10.6 million, of which $4.3 million, if recognized, would favorably affect the Company’s effective income tax rate. As of December 31, 2014, the liability for income taxes associated with unrecognized tax benefits was $12.6 million, of which $5.5 million, if recognized, would favorably affect the Company’s effective tax rate. A reconciliation of the beginning and ending amount of the liability for income taxes associated with unrecognized tax benefits follows:



In thousands	2015			2014			2013
Gross liability for unrecognized tax benefits at beginning of year	$	12,596		$	10,531		$	11,267
Gross increases - unrecognized tax benefits in prior periods	—			30			55
Gross increases - current period unrecognized tax benefits	1,682			2,756			3,279
Gross decreases - unrecognized tax benefits in prior periods	—			(463		)	—
Gross decreases - audit settlement during year	(3,027		)	(77		)	(2,515		)
Gross decreases - expiration of audit statute of limitations	(694		)	(181		)	(1,555		)
Gross liability for unrecognized tax benefits at end of year	$	10,557		$	12,596		$	10,531

The Company includes interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2015, the total interest and penalties accrued was approximately $2.0 million and $0.2 million, respectively. As of December 31, 2014, the total interest and penalties accrued was approximately $1.9 million and $1.3 million, respectively.

With limited exception, the Company is no longer subject to examination by various U.S. and foreign taxing authorities for years before 2012. At this time, the Company believes that it is reasonably possible that unrecognized tax benefits of approximately $2.1 million may change within the next 12 months due to the expiration of statutory review periods and current examinations.