Income taxes

The provision for income taxes in the consolidated statements of operations represents an effective tax rate different than the Canadian enacted statutory rate of 26.5% (2014 - 26.5%). The differences are as follows:



	2015			2014
Expected income tax expense at Canadian statutory rate	$	34,516		$	19,199
Increase (decrease) resulting from:
Recognition of deferred credit	(2,448		)	(5,763		)
Effect of differences in tax rates on transactions in and within foreign jurisdictions and change in tax rates	(3,855		)	(1,677		)
Non-taxable corporate dividend	(3,311		)	(2,618		)
Non-controlling interests share of income	12,511			8,824
Production tax credit	(254		)	(339		)
Allowance for equity funds used during construction	(935		)	(746		)
State taxes	733			604
Adjustment relating to prior periods	2,431			—
CRA Settlement	2,709			—
Other	1,616			(677		)
Income tax expense	$	43,713		$	16,807

For the years ended December 31, 2015 and 2014, earnings from continuing operations before income taxes consist of the following:



	2015		2014
Canadian operations	$	28,481	$	11,930
U.S. operations	101,768		60,519
	$	130,249	$	72,449


19.	Income taxes (continued)

Income tax expense (recovery) attributable to income (loss) consists of:



	Current			Deferred			Total
Year ended December 31, 2015
Canada	$	5,272		$	1,959		$	7,231
United States	2,038			34,444			36,482
	$	7,310		$	36,403		$	43,713
Year ended December 31, 2014
Canada	$	5,660		$	(3,538	)	$	2,122
United States	(1,986		)	16,671			14,685
	$	3,674		$	13,133		$	16,807

The tax effect of temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2015 and 2014 are presented below:



	2015			2014
Deferred tax assets:
Non-capital loss, investment tax credits, currently non-deductible interest expenses, and financing costs	$	396,727		$	319,056
Pension and OPEB	57,969			54,458
Acquisition-related costs	6,035			5,168
Environmental obligation	28,230			28,555
Production tax credit	3,027			2,098
Reserves not currently deductible	2,503			2,315
Other	4,970			3,988
Total deferred income tax assets	499,461			415,638
Less valuation allowance	(17,478		)	(15,534		)
Total deferred tax assets	481,983			400,104
Deferred tax liabilities:
Property, plant and equipment	(544,616		)	(387,931		)
Intangible assets	(2,760		)	(2,752		)
Outside basis in partnership	(32,221		)	(15,194		)
Regulatory accounts	(28,270		)	(49,399		)
Financial derivatives	(31,806		)	(15,013		)
Total deferred tax liabilities	(639,673		)	(470,289		)
Net deferred tax liabilities	$	(157,690	)	$	(70,185	)
Consolidated Balance Sheets Classification:
Deferred tax assets	$	18,109		$	64,275
Deferred tax liabilities	(175,799		)	$	(134,460	)
Net deferred tax liabilities	$	(157,690	)	$	(70,185	)


19.	Income taxes (continued)

The valuation allowance for deferred tax assets as at December 31, 2015 was $17,478 (2014 - $15,534). The valuation allowance primarily relates to operating losses that, in the judgment of management, are not more likely than not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment.

As of December 31, 2015, the Company had non-capital losses carried forward available to reduce future year’s taxable income, which expire as follows:



Year of expiry	Non-capital loss carryforwards
2016	$	—
2017 and onwards	967,499
	$	967,499

On June 26, 2015, the Company entered into an agreement with the Canada Revenue Agency (“CRA”) regarding a CRA’s proposal to reassess APUC’s 2009 through 2013 income tax filings in relation to a unit exchange transaction that occurred on October 27, 2009. The agreement resulted in a $16,042 reduction in the APUC’s deferred tax assets and a proportional reduction of $13,333 in its deferred credits (note 13(f)). Consequently, the Company’s results for 2015 reflect a $2,709 net non-cash charge to deferred income tax expense.

The Company has provided for deferred income taxes for the estimated tax cost of distributed earnings of its subsidiaries. Deferred income taxes have not been provided on approximately $64,678 of undistributed earnings of certain foreign subsidiaries, as the Company has concluded that such earnings are indefinitely reinvested and should not give rise to additional tax liabilities. A determination of the amount of the unrecognized tax liability relating to the remittance of such undistributed earnings is not practicable.