Income Taxes

The provision for income taxes consisted of the following (U.S. dollars in millions):



	Year ended
	January 1, 2016			December 26, 2014		December 27, 2013
Current:
U.S. federal income tax	$	4.7		$	3.1	$	4.6
State	0.5			0.9		1.0
Non-U.S.	7.6			5.6		8.9
	12.8			9.6		14.5
Deferred:
U.S. federal income tax	1.6			3.1		0.8
State	0.3			0.4		0.1
Non-U.S.	(1.0		)	1.2		1.8
	0.9			4.7		2.7
	$	13.7		$	14.3	$	17.2

Income (loss) before income taxes consisted of the following (U.S. dollars in millions):



	Year ended
	January 1, 2016			December 26, 2014		December 27, 2013
U.S.	$	(49.4	)	$	19.9	$	21.4
Non-U.S.	129.5			139.0		(38.1		)
	$	80.1		$	158.9	$	(16.7	)

10. Income Taxes (continued)

The differences between the reported provision for income taxes and income taxes computed at the U.S. statutory federal income tax rate are explained in the following reconciliation (U.S. dollars in millions):



	Year ended
	January 1, 2016			December 26, 2014			December 27, 2013
Income tax provision (benefit) computed at the U.S. statutory federal rate	$	28.0		$	55.6		$	(5.9	)
Effect of tax rates on non-U.S. operations	(112.9		)	(50.8		)	(33.5		)
Provision for uncertain tax positions	0.6			0.2			3.3
Non-deductible interest	—			(0.1		)	23.6
Foreign exchange	(17.2		)	(5.6		)	(6.6		)
Non-deductible intercompany charges	(0.3		)	0.4			0.2
Non-deductible differences	0.6			2.1			0.9
Non-taxable income/loss	(2.2		)	(2.4		)	(1.0		)
Non-deductible expenses	—			—			0.5
Non-deductible goodwill impairment	23.1			—			16.3
Adjustment to deferred balances	(1.2		)	(0.2		)	2.5
Other	(0.4		)	(1.2		)	0.1
Other taxes in lieu of income	1.3			—			2.3
Change in deferred rate	1.4			(0.8		)	1.4
Tax credits	—			(0.3		)	(2.0		)
Increase in valuation allowance ⁽¹⁾	92.9			17.4			15.1
Provision for income taxes	$	13.7		$	14.3		$	17.2

_____________

⁽¹⁾ The increase in valuation allowance includes effects of foreign exchange and adjustments to deferred tax balances which were fully offset by valuation allowance.

10. Income Taxes (continued)

Deferred income tax assets and liabilities consisted of the following (U.S. dollars in millions):



		January 1,			December 26,
Deferred tax liabilities:		2016			2014
Current:
	Allowances and other accrued liabilities	$	(0.9	)	$	(2.7	)
	Inventories	(14.0		)	(15.6		)
	Total current deferred tax liabilities	(14.9		)	(18.3		)

Noncurrent:
	Property, plant and equipment	(64.6		)	(64.7		)
	Equity in earnings of unconsolidated companies	(0.2		)	(0.2		)
	Pension	(2.9		)	(2.8		)
	Other noncurrent deferred tax liabilities	(6.4		)	(6.3		)

	Total noncurrent deferred tax liabilities	(74.1		)	(74.0		)
Total current and noncurrent deferred tax liabilities		$	(89.0	)	$	(92.3	)

Deferred tax assets:
Current:
	Net operating loss carryforwards	$	6.8		$	6.4
	Allowances and other accrued assets	11.3			13.2
	Inventories	5.0			4.8
	Total current deferred tax assets	23.1			24.4
	Valuation allowance	(11.2		)	(12.1		)
Total net current deferred tax assets		11.9			12.3

Noncurrent:
	Pension liability	21.1			22.1
	Property, plant and equipment	2.0			2.4
	Post-retirement benefits other than pension	0.7			0.3
	Net operating loss carryforwards	209.1			158.8
	Capital loss carryover	3.0			3.5
	Other noncurrent assets	21.3			26.1
	Total noncurrent deferred tax assets	257.2			213.2
	Valuation allowance	(214.6		)	(167.4		)
Total net noncurrent deferred tax assets		42.6			45.8

Total deferred tax assets, net		$	54.5		$	58.1

Net deferred tax liabilities		$	(34.5	)	$	(34.2	)

The valuation allowance increased by $46.3 million in 2015 and decreased by $0.9 million in 2014. The increase in 2015 relates primarily to valuation allowance on additional net operating loss carryforwards offset by the effect of a change in judgment about our ability to realize deferred tax assets in future years, due to our current and foreseeable operations. The decrease in 2014 related primarily to valuation allowance on reductions in net operating loss carryforwards offset by the effect of a change in judgment about our ability to realize deferred tax assets in future years, due to our current and foreseeable operations.

10. Income Taxes (continued)

At January 1, 2016, the valuation allowance includes $2.0 million for which subsequently recognized tax benefits will be recognized directly in contributed capital.

Except for earnings that are currently distributed, no additional provision has been made for U.S. or non-U.S. income taxes on the undistributed earnings of subsidiaries as such earnings are expected to be permanently reinvested. A liability could arise if amounts are distributed by such subsidiaries or if such subsidiaries are ultimately disposed. It is not practicable to estimate the additional income taxes related to permanently reinvested earnings or the basis differences related to investments in subsidiaries.

At January 1, 2016, we had approximately $765.4 million of federal and foreign tax operating loss carry-forwards expiring as follows (U.S. dollars in millions):



Expires:
2016	$	21.0
2017	29.3
2018	5.8
2019	0.5
2020 and beyond	31.3
No expiration	677.5
	$	765.4

A reconciliation of the beginning and ending amount of uncertain tax positions excluding interest and penalties is as follows (U.S. dollars in millions):



	January 1, 2016			December 26, 2014		December 27, 2013
Beginning balance	$	3.5		$	3.0	$	4.1
Gross decreases - tax position in prior period	—			—		(0.2		)
Gross increases - current-period tax positions	0.8			0.5		1.4
Settlements	—			—		(2.3		)
Lapse of statute of limitations	(0.4		)	—		—
Ending balance	$	3.9		$	3.5	$	3.0

We had accrued $3.5 million in 2015 and $3.0 million in 2014, for uncertain tax positions, that, if recognized would affect the effective income tax rate. Included in 2015 is an uncertain tax position of $0.7 million that is expected to reverse in the next 12 months.

The tax years 2012-2015 remain subject to examination by taxing authorities throughout the world in major jurisdictions, such as Costa Rica, Luxembourg, Switzerland and the United States.

We classify interest and penalties on uncertain tax positions as a component of income tax expense in the Consolidated Statements of Income. Accrued interest and penalties related to uncertain tax positions as of January 1, 2016 is $0.7 million and is included in other noncurrent liabilities.