Note 14 - Income Taxes

Noble-UK is a company which is tax resident in the UK and, as such, will be subject to UK corporation tax on its taxable profits and gains. A UK tax exemption is available in respect of qualifying dividends income and capital gains related to the sale of qualifying participations. We operate in various countries throughout the world, including the United States. The income of the non-UK subsidiaries is not expected to be subject to UK corporation tax. Prior to the redomiciliation, Noble-Swiss was the group holding company and was exempt from Swiss cantonal and communal income tax on its worldwide income, and was also granted participation relief from Swiss federal tax for qualifying dividend income and capital gains related to the sale of qualifying participations. It is expected that the participation relief will result in a full exemption of participation income from Swiss federal income tax. We do not expect the redomiciliation from Switzerland to the UK to have a material impact on our effective tax rate.

Consequently, we have taken account of those tax exemptions and provided for income taxes based on the laws and rates in effect in the countries in which operations are conducted, or in which we or our subsidiaries have a taxable presence for income tax purposes.

The components of the net deferred taxes are as follows:

	2015			2014
Deferred tax assets
United States
Deferred pension plan amounts	$	22,858		$	23,497
Accrued expenses not currently deductible		20,041			14,250
Other		3,069			11,267
Non-U.S.
Net operating loss carry forwards		3,800			6,907
Deferred pension plan amounts		2,347			3,096
Other		2,064			—
Deferred tax assets		54,179			59,017
Less: valuation allowance		(3,800	)		(6,907	)
Net deferred tax assets	$	50,379		$	52,110
Deferred tax liabilities
United States
Excess of net book basis over remaining tax basis	$	(126,096	)	$	(166,959	)
Other		(10,277	)		(4,969	)
Non-U.S.
Excess of net book basis over remaining tax basis		(200	)		(200	)
Other		(4,366	)		(397	)
Deferred tax liabilities		(140,939	)		(172,525	)
Net deferred tax liabilities	$	(90,560	)	$	(120,415	)

Income (loss) from continuing operations before income taxes consists of the following:

	Year Ended December 31,
	2015		2014			2013
United States	$	4,031	$	38,206		$	178,090
Non-U.S.		738,402		(8,741	)		460,331
Total	$	742,433	$	29,465		$	638,421

The income tax provision for continuing operations consists of the following:

	Year Ended December 31,
	2015			2014			2013
Current- United States	$	113,648		$	50,829		$	83,302
Current- Non-U.S.		81,756			74,288			23,836
Deferred- United States		(38,103	)		(18,655	)		(14,032	)
Deferred- Non-U.S.		1,931			189			(989	)
Total	$	159,232		$	106,651		$	92,117

The following is a reconciliation of our reserve for uncertain tax positions, excluding interest and penalties:

	2015			2014			2013
Gross balance at January 1,	$	108,812		$	115,969		$	115,009
Additions based on tax positions related to current year		31,022			16,880			2,318
Additions for tax positions of prior years		47,561			12,928			18,906
Reductions for tax positions of prior years		(11,945	)		(8	)		(7,910	)
Expiration of statutes		(1,237	)		(2,852	)		(2,633	)
Reduction due to Spin-off		—			(26,870	)		—
Tax settlements		(4,526	)		(7,235	)		(9,721	)
Gross balance at December 31,		169,687			108,812			115,969
Related tax benefits		(14,369	)		(1,064	)		(2,038	)
Net reserve at December 31,	$	155,318		$	107,748		$	113,931

The liabilities related to our reserve for uncertain tax positions are comprised of the following:

	2015		2014
Reserve for uncertain tax positions, excluding interest and penalties	$	155,318	$	107,748
Interest and penalties included in “Other liabilities”		10,961		8,039
Reserve for uncertain tax positions, including interest and penalties	$	166,279	$	115,787

If these reserves of $166 million are not realized, the provision for income taxes will be reduced by $166 million.

We include, as a component of our “Income tax provision,” potential interest and penalties related to recognized tax contingencies within our global operations. Interest and penalties resulted in an income tax expense of $3 million in 2015, an income tax benefit of $1 million in 2014 and an income tax benefit of $7 million in 2013.

It is reasonably possible that our existing liabilities related to our reserve for uncertain tax positions may increase or decrease in the next twelve months primarily due to the completion of open audits or the expiration of statutes of limitation. However, we cannot reasonably estimate a range of changes in our existing liabilities due to various uncertainties, such as the unresolved nature of various audits.

We conduct business globally and, as a result, we file numerous income tax returns in the U.S. and non-U.S. jurisdictions. In the normal course of business we are subject to examination by taxing authorities throughout the world, including major jurisdictions such as Brazil, Mexico, Norway, Saudi Arabia, Argentina, Australia, Denmark, Gabon, Malaysia, the Netherlands, Turkey, United Arab Emirates, Switzerland, the United Kingdom and the United States. We are no longer subject to U.S. Federal income tax examinations for years before 2010 and non-U.S. income tax examinations for years before 2000.

Noble-UK conducts substantially all of its business through Noble-Cayman and its subsidiaries. The income of our non-UK subsidiaries is not subject to UK income tax. Earnings are taxable in the United Kingdom at the UK statutory rate of 20.25 percent. Ongoing consultative process in the United Kingdom and a possible change in law could materially impact our tax rate on operations in the United Kingdom continental shelf. A reconciliation of tax rates outside of the United Kingdom and the Cayman Islands to our Noble-UK effective rate for continuing operations is shown below:

	Year Ended December 31,
	2015			2014			2013
Effect of:
Tax rates which are different than the UK and Cayman Island rates		14.4	%		19.3	%		15.5	%
Tax impact of asset impairment		5.3	%		344.0	%		0.0	%
Reserve for (resolution of) tax authority audits		1.7	%		(1.3	)%		(1.1	)%
Total		21.4	%		362.0	%		14.4	%

We generated and fully utilized U.S. foreign tax credits of $15 million, $17 million and $15 million in 2015, 2014 and 2013, respectively.

At December 31, 2014 and December 31, 2015, we have no undistributed earnings of our subsidiaries for which deferred income taxes have not been provided.