INCOME TAXES

Domestic and foreign components of income before income taxes are shown below:



	Year Ended December 31,
(In millions)	2014		2013		2012
Domestic	$	353.2	$	150.7	$	125.5
Foreign	707.7		563.3		470.9
Income before income taxes attributable to FMC Technologies, Inc.	$	1,060.9	$	714.0	$	596.4

The provision for income taxes consisted of:



	Year Ended December 31,
(In millions)	2014			2013			2012
Current:
Federal	$	139.6		$	77.8		$	41.5
State	11.7			5.6			2.9
Foreign	227.8			149.6			131.8
Total current	379.1			233.0			176.2
Deferred:
Increase in the valuation allowance for deferred tax assets	34.1			0.5			0.5
Decrease of deferred tax liability for change in tax rates	(2.3		)	(4.3		)	(1.3		)
Other deferred tax (benefit) expense	(49.9		)	(16.6		)	(9.0		)
Total deferred	(18.1		)	(20.4		)	(9.8		)
Provision for income taxes	$	361.0		$	212.6		$	166.4

Significant components of our deferred tax assets and liabilities were as follows:



	December 31,
(In millions)	2014			2013
Deferred tax assets attributable to:
Accrued expenses	$	58.0		$	56.6
Non deductible interest	29.2			—
Foreign tax credit carryforwards	29.3			14.0
Accrued pension and other post-retirement benefits	91.8			26.5
Stock-based compensation	28.9			25.3
Net operating loss carryforwards	48.7			47.8
Inventories	31.7			25.9
Norwegian correction tax	50.4			61.9
Foreign exchange	40.2			3.7
Deferred tax assets	408.2			261.7
Valuation allowance	(38.9		)	(4.7		)
Deferred tax assets, net of valuation allowance	369.3			257.0
Deferred tax liabilities attributable to:
Revenue in excess of billings on contracts accounted for under the percentage of completion method	105.2			137.0
U.S. tax on foreign subsidiaries’ undistributed earnings not indefinitely reinvested	52.5			43.5
Property, plant and equipment, goodwill and other assets	142.8			137.2
Deferred tax liabilities	300.5			317.7
Net deferred tax assets (liabilities)	$	68.8		$	(60.7	)

At December 31, 2014 and 2013, the carrying amount of net deferred tax assets and the related valuation allowance included the impact of foreign currency translation adjustments. Included in our deferred tax assets at December 31, 2014 were U.S. foreign tax credit carryforwards of $29.3 million, which, if not utilized, will begin to expire after 2015. Realization of these deferred tax assets is dependent on the generation of sufficient U.S. taxable income prior to the above date. Based on long-term forecasts of operating results, management believes that it is more likely than not that domestic earnings over the forecast period will result in sufficient U.S. taxable income to fully realize these deferred tax assets. In its analysis, management has considered the effect of foreign deemed dividends and other expected adjustments to domestic earnings that are required in determining U.S. taxable income. Foreign earnings taxable to us as dividends, including deemed dividends for U.S. tax purposes, were $186.6 million, $196.2 million and $118.3 million, in 2014, 2013 and 2012, respectively.

Also included in deferred tax assets are tax benefits related to net operating loss carryforwards attributable to foreign entities. If not utilized, these net operating loss carryforwards will begin to expire in 2017. Management believes it is more likely than not that we will not be able to utilize certain of these operating loss carryforwards before expiration; therefore, we have established a valuation allowance against the related deferred tax assets.

Deferred tax assets also include tax benefits of $29.2 million related to certain intercompany interest costs which are not currently deductible, but which may be deductible in future periods. If not deducted, these costs will become permanently nondeductible beginning in 2025. Management believes that it is more likely than not that we will not be able to deduct these costs before expiration of the carry forward period; therefore, we have established a valuation allowance against the related deferred tax assets.

The following table presents a summary of changes in our unrecognized tax benefits and associated interest and penalties:



(In millions)	Federal, State and Foreign Tax			Accrued Interest and Penalties			Total Gross Unrecognized Income Tax Benefits
Balance at December 31, 2011	$	39.9		$	6.2		$	46.1
Additions for tax positions related to prior years	(0.1		)	2.1			2.0
Reductions for tax positions due to settlements	(9.3		)	(1.9		)	(11.2		)
Balance at December 31, 2012	$	30.5		$	6.4		$	36.9
Additions for tax positions related to prior years	3.1			0.4			3.5
Additions for tax positions related to current year	3.5			0.3			3.8
Balance at December 31, 2013	$	37.1		$	7.1		$	44.2
Additions for tax positions related to prior years	0.6			0.4			1.0
Reductions for tax positions due to settlements	(1.4		)	(0.3		)	(1.7		)
Balance at December 31, 2014	$	36.3		$	7.2		$	43.5

At December 31, 2014, 2013 and 2012, there were $43.1 million, $41.7 million and $36.4 million, respectively, of unrecognized tax benefits that if recognized would affect the annual effective tax rate.

It is reasonably possible that within twelve months unrecognized tax benefits related to certain tax reporting positions taken in prior periods could decrease by up to $41.0 million, due to either the expiration of the statute of limitations in certain jurisdictions or the resolution of current income tax examinations, or both.

Our U.S. federal income tax returns for our 2010 and 2011 tax years are under examination by the IRS. Management believes that we are adequately reserved for any matters that may arise from this examination.

In April 2013 we filed a protest with the IRS Appeals Office with respect to proposed adjustments to our federal income tax returns for our 2007, 2008 and 2009 tax years related to our treatment of intercompany transfer pricing. The ultimate outcome of this matter is uncertain. However, management believes we are adequately reserved for this matter as of December 31, 2014.

The following tax years and thereafter remain subject to examination: 2004 for Norway, 2009 for Brazil and 2007 for the United States.

The effective income tax rate was different from the statutory U.S. federal income tax rate due to the following:



	Year Ended December 31,
	2014		2013		2012
Statutory U.S. federal income tax rate	35	%	35	%	35	%
Net difference resulting from:
Foreign earnings subject to different tax rates	(8	)	(13	)	(12	)
Foreign earnings subject to U.S. tax	2		2		4
Non deductible Multi Phase Meters earn-out adjustments	—		1		2
Settlement of foreign audits	—		1		—
Foreign withholding taxes	2		3		—
Change in valuation allowance	3		—		—
Other	—		1		(1	)
Effective income tax rate	34	%	30	%	28	%

We have provided U.S. income taxes on $1,571.6 million of cumulative undistributed earnings of certain foreign subsidiaries where we have determined that the foreign subsidiaries’ earnings are not indefinitely reinvested. No provision for U.S. income taxes has been recorded on earnings of foreign subsidiaries that are indefinitely reinvested. The cumulative balance of foreign earnings with respect to which no provision for U.S. income taxes has been recorded was $1,619.2 million at December 31, 2014. The amount of applicable U.S. income taxes that would be incurred if these earnings were repatriated is approximately $491.5 million.

We benefit from income tax holidays in Singapore and Malaysia which will expire after 2018 for Singapore and 2015 and 2018 for Malaysia. For the years ended December 31, 2014 and 2013, these tax holidays reduced our provision for income taxes by $1.3 million, or $0.01 per share on a diluted basis, and $12.7 million, or $0.05 per share on a diluted basis, respectively.