Income Taxes

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



	Year Ended December 31,
	2015			2014			2013
	(in millions)
Current:
Federal	$	271.2		$	322.7		$	141.8
State	19.6			19.4			13.7
Foreign	18.6			18.5			3.1
Total current	309.4			360.6			158.6
Deferred:
Federal	117.4			(4.0		)	44.3
State	(0.3		)	1.2			2.3
Foreign	(0.5		)	(3.0		)	(0.8		)
Total deferred	116.6			(5.8		)	45.8
Provision	$	426.0		$	354.8		$	204.4

The provision for income taxes results in effective tax rates that differ from the statutory rates. The following is a reconciliation between the statutory U.S. federal income tax rate and the Company’s effective income tax rate on income from continuing operations:



	Year Ended December 31,
	2015		2014		2013
Statutory rate	35.0	%	35.0	%	35.0	%
State taxes	1.2		1.4		2.1
Domestic production activities deduction	(1.4	)	(2.0	)	(1.4	)
Noncontrolling interest in partially-owned subsidiaries	(0.8	)	(1.1	)	(0.9	)
Changes in valuation allowances and reserves	—		0.1		(0.8	)
Other, net	—		(0.1	)	0.6
Effective rate	34.0	%	33.3	%	34.6	%

Income from continuing operations before income taxes for the years ended December 31, 2015, 2014, and 2013 was $1,241.1 million, $1,051.4 million, and $571.2 million, respectively, for U.S. operations, and $10.9 million, $12.6 million, and $19.3 million, respectively, for foreign operations, principally Mexico. The Company provides deferred income taxes on the unrepatriated earnings of its foreign operations where it results in a deferred tax liability. Our effective tax rate reflects the current tax benefit available for U.S. manufacturing activity.

Deferred income taxes represent the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax liabilities and assets are as follows:



	December 31,
	2015			2014
	(in millions)
Deferred tax liabilities:
Depreciation, depletion, and amortization	$	711.6		$	627.1
Partially-owned subsidiaries basis difference	144.0			101.9
Convertible debt	125.2			114.8
Total deferred tax liabilities	980.8			843.8
Deferred tax assets:
Workers compensation, pensions, and other benefits	73.7			68.6
Warranties and reserves	11.4			12.3
Equity items	52.4			53.3
Tax loss carryforwards and credits	25.7			25.1
Inventory	34.1			29.2
Accrued liabilities and other	8.3			4.3
Total deferred tax assets	205.6			192.8
Net deferred tax liabilities before valuation allowances	775.2			651.0
Valuation allowances	10.1			9.6
Net deferred tax liabilities before reserve for uncertain tax positions	785.3			660.6
Deferred tax assets included in reserve for uncertain tax positions	(50.5		)	(45.6		)
Adjusted net deferred tax liabilities	$	734.8		$	615.0

At December 31, 2015, the Company had $30.7 million of federal consolidated net operating loss carryforwards and $5.3 million of tax-effected state loss carryforwards remaining. The federal net operating loss carryforwards were acquired as part of an acquisition of a company in 2010 and are subject to limitations on the amount that can be utilized in any one tax year. The federal net operating loss carryforwards are due to expire in 2028 and 2029. We have established a valuation allowance for federal, state, and foreign tax operating losses and credits that we have estimated may not be realizable.

Taxing authority examinations

The Internal Revenue Service ("IRS") field work for our 2006-2008 audit cycle and our 2009-2011 audit cycle have concluded and all issues have been agreed upon by us and the IRS. The issues that were a part of the mutual agreement process ("MAP"), previously disclosed have been agreed. As the cycles included years in which tax refunds were issued to us, the Joint Committee on Taxation is required to review the final revenue agent report before the issues are effectively settled. For this reason, we cannot determine when the 2006-2008 or the 2009-2011 cycle will close and all issues formally settled.

We have various subsidiaries in Mexico that file separate tax returns and are subject to examination by taxing authorities at different times. The 2007 tax year of one of our Mexican subsidiaries is still under review for transfer pricing purposes only, and its statute of limitations remains open through the later of the resolution of the MAP or July 2018. The remaining entities are generally open for their 2010 tax years and forward.

Unrecognized tax benefits

The change in unrecognized tax benefits for the years ended December 31, 2015, 2014, and 2013 was as follows:



	Year Ended December 31,
	2015			2014			2013
	(in millions)
Beginning balance	$	62.3		$	55.0		$	48.7
Additions for tax positions related to the current year	5.5			5.0			4.8
Additions for tax positions of prior years	—			2.5			2.8
Reductions for tax positions of prior years	(0.7		)	(0.1		)	—
Settlements	(1.9		)	—			(0.3		)
Expiration of statute of limitations	—			(0.1		)	(1.0		)
Ending balance	$	65.2		$	62.3		$	55.0

Additions for tax positions related to the current year in the amount of $5.5 million for the year ended December 31, 2015 were amounts provided for tax positions that will be taken for federal and state income tax purposes when we file the tax return. Additions for tax positions related to the current year in the amount of $5.0 million and $4.8 million for the years ended December 31, 2014 and 2013, respectively, were amounts provided for tax positions taken for federal, state, and Mexico income tax purposes.

Additions for tax positions of prior years in the amount of $2.5 million recorded in the year ended December 31, 2014 related to federal, state, and foreign tax positions. Additions for tax positions of prior years in the amount of $2.8 million recorded in the year ended December 31, 2013, were for federal, state, and Mexico tax positions taken on the prior year tax returns which the taxing authorities have previously identified.

The reduction in tax positions of prior years of $0.7 million for the year ended December 31, 2015 was related to changes to transfer pricing and state taxes and $0.1 million for the year ended December 31, 2014 was primarily related to changes in state taxes. Settlements during the twelve months ended December 31, 2015 were due to a state tax position effectively settled entering into a voluntary disclosure agreement to file tax returns with a state, and a settlement of an audit of one of our Mexican companies. Settlements during the twelve months ended December 31, 2013 relate to settled positions with the IRS for one of our subsidiaries as well as settled positions with Mexico taxing authorities in the settlement of the 2003 examination.

The total amount of unrecognized tax benefits including interest and penalties at December 31, 2015 and 2014, that would affect the Company’s overall effective tax rate if recognized was $13.9 million and $15.0 million, respectively. There is a reasonable possibility that unrecognized federal and state tax benefits will decrease by $4.3 million by December 31, 2016 due to settlements and lapses in statutes of limitations for assessing tax. We have entered into an agreement with the IRS to extend the statute of limitations to assess tax on our 2006-2011 tax years through December 31, 2017.

Trinity accounts for interest expense and penalties related to income tax issues as income tax expense. Accordingly, interest expense and penalties associated with an uncertain tax position are included in the income tax provision. The total amount of accrued interest and penalties as of December 31, 2015 and 2014 was $12.4 million and $11.6 million, respectively. Income tax expense for the years ended December 31, 2015, 2014, and 2013 included increases of $0.8 million, $0.8 million, and $0.5 million, respectively, with regard to interest expense and penalties related to uncertain tax positions.