Income Taxes

The components of income before income taxes and equity earnings were as follows:



	2015		2014		2013
U.S.	$	18	$	78	$	116
Foreign	621		438		460
	$	639	$	516	$	576

The provision for income taxes consisted of the following:



	2015		2014			2013
Current tax:
U.S. federal	$	6	$	11		$	11
State and foreign	147		113			87
	$	153	$	124		$	98
Deferred tax:
U.S. federal	$	12	$	28		$	41
State and foreign	13		(111		)	9
	25		(83		)	50
Total	$	178	$	41		$	148

The provision for income taxes differs from the amount of income tax determined by applying the U.S. statutory federal income tax rate to pre-tax income as a result of the following items:



	2015			2014			2013
U.S. statutory rate at 35%	$	224		$	181		$	203
Tax on foreign income	(74		)	(67		)	(53		)
Valuation allowance	21			(70		)	1
Non-deductible impairment charges	—			18			—
Tax law changes	4			(17		)	11
Other items, net	3			(4		)	(14		)
Income tax provision	$	178		$	41		$	148

The Company benefits from certain incentives in Brazil which allow it pay reduced income taxes. The incentives expire at various dates beginning in 2018. These incentives increased net income attributable to the Company by $8, $12 and $11 in 2015, 2014 and 2013.

The Company paid taxes of $137, $109 and $114 in 2015, 2014 and 2013.

The components of deferred taxes at December 31 are:



	2015					2014
	Assets			Liabilities		Assets			Liabilities
Tax loss and credit carryforwards	$	535		$	—	$	589		$	—
Postretirement and postemployment benefits	65			—		97			—
Pensions	223			38		229			49
Property, plant and equipment	19			167		14			132
Intangible assets	—			158		—			58
Asbestos	102			—		103			—
Accruals and other	131			98		123			114
Valuation allowances	(241		)	—		(245		)	—
Total	$	834		$	461	$	910		$	353

At December 31, 2014, $99 of deferred tax assets were included in prepaid expenses and other current assets.

Tax loss and credit carryforwards expire as follows:



Year	Amount
2016	$	5
2017	22
2018	32
2019	30
2020	44
Thereafter	294
Unlimited	108

Tax loss and credit carryforwards expiring after 2020 include $151 of U.S. state tax loss carryforwards and $116 of U.S. federal foreign tax credits. The unlimited category includes $75 of French tax loss carryforwards. The carryforwards presented above exclude $59 of U.S. windfall tax benefits that will be recorded in additional paid-in capital when realized.

Realization of any portion of the Company’s deferred tax assets is dependent upon the availability of taxable income in the relevant jurisdictions. The Company considers all sources of taxable income, including (i) taxable income in any available carry back period, (ii) the reversal of taxable temporary differences, (iii) tax-planning strategies, and (iv) taxable income expected to be generated in the future other than from reversing temporary differences. The Company also considers whether there have been cumulative losses in recent years. The Company records a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company’s valuation allowances at December 31, 2015 include $185 related to U.S. state loss carryforwards and $33 in Canada.

The Company continues to maintain a valuation allowance against the portion of U.S. state tax loss carryforwards that the Company does not believe are more likely than not to be utilized prior to their expiration. The Company’s ability to utilize state tax loss carryforwards is impacted by several factors including taxable income, expiration dates, limitations imposed by certain states on the amount of loss carryforwards that can be used in a given year to offset taxable income and whether the state permits the Company to file a combined return.

The Company continues to maintain a full valuation allowance against its net deferred tax assets in Canada. Although the Company's Canadian operations generated a profit in 2015, given the history of operating losses, at this time, the Company does not believe it is more likely than not that it will realize its deferred tax benefits in Canada.

In 2014, the Company recognized an income tax benefit of $86 to fully release the valuation allowance against its net deferred tax assets in France. In recent years, the Company's operating profits in France were offset by interest expense. In the third quarter of 2014, the Company refinanced its bonds issued by a French subsidiary resulting in significant interest savings. The impact of the refinancing and current low interest rate environment has significantly lowered the Company's interest expense in France. As

the Company is currently generating taxable income in France and is projecting future taxable income in France, the Company has fully released its valuation allowance. Due to the Company's high level of debt in France, a significant increase in interest rates could cause the Company to incur losses which may result in recording additional valuation allowance in the future. The Company's loss carryforwards in France do not expire.

Management’s estimates of the appropriate valuation allowance in any jurisdiction involve a number of assumptions and judgments, including the amount and timing of future taxable income. Should future results differ from management’s estimates, it is possible there could be future adjustments to the valuation allowances that would result in an increase or decrease in tax expense in the period such changes in estimates are made.

The Company has not provided deferred taxes on $838 of earnings in certain non-U.S. subsidiaries because such earnings are indefinitely reinvested in its international operations. Upon distribution of such earnings in the form of dividends or otherwise, the Company would be subject to incremental tax. It is not practicable to estimate the amount of tax that might be payable.

A reconciliation of unrecognized tax benefits follows:



	2015			2014			2013
Balance at January 1	$	26		$	31		$	35
Additions for prior year tax positions	13			—			—
Lapse of statute of limitations	—			(1		)	(5		)
Settlements	(9		)	—			—
Foreign currency translation	(2		)	(4		)	1
Balance at December 31	$	28		$	26		$	31

The Company’s unrecognized tax benefits include potential liabilities related to transfer pricing, foreign withholding taxes, and non-deductibility of expenses and exclude $1 of interest and penalties as of December 31, 2015. In 2015, the increase for prior year positions related to an unfavorable tax court ruling in Spain. The total interest and penalties recorded in income tax expense was $3 in 2015 and less than $1 in 2014 and 2013. As of December 31, 2015, unrecognized tax benefits of $28, if recognized, would affect the Company's effective tax rate.

The Company’s unrecognized tax benefits are not expected to increase over the next twelve months and are expected to decrease as open tax years lapse or claims are settled. The Company is unable to estimate a range of reasonably possible changes in its unrecognized tax benefits in the next twelve months as it is unable to predict when, or if, the tax authorities will commence their audits, the time needed for the audits, and the audit findings that will require settlement with the applicable tax authorities, if any.

The tax years that remained subject to examination by major tax jurisdiction as of December 31, 2015 were 2005 and subsequent years for France; 2006 and subsequent years for the UK; 2009 and subsequent years for Spain and Germany; 2010 and subsequent years for Italy and Mexico; 2011 and subsequent years for Brazil and Canada; and 2012 and subsequent years for the U.S.. In addition, tax authorities in certain jurisdictions, including the U.S., may examine earlier years when tax carryforwards that were generated in those years are subsequently utilized.