NOTE 11. Income Taxes:

For the years ended December 31, 2015, 2014 and 2013, domestic and foreign pretax income from continuing operations before noncontrolling interests was $383.5 million and $49.3 million, $301.8 million and $48.8 million, and $286.2 million and $24.5 million, respectively.

Income taxes are summarized as follows:

	Year ended December 31,
	2015			2014			2013
	(in thousands)
Current:
Federal	$	94,036		$	87,189		$	86,406
State		3,636			4,751			7,887
Foreign		10,589			812			24,331
		108,261			92,752			118,624
Deferred:
Federal		33,446			15,594			8,937
State		3,413			(304	)		9,774
Foreign		(1,225	)		8,303			(13,691	)
		35,634			23,593			5,020
	$	143,895		$	116,345		$	123,644

Income taxes differ from the amounts computed by applying the federal income tax rate of 35.0%. A reconciliation of this difference is as follows:

	Year ended December 31,
		2015					2014					2013
	(in thousands, except percentages)
Taxes calculated at federal rate	$	151,468		35.0	%	$	122,696		35.0	%	$	108,748		35.0	%
State taxes, net of federal benefit		4,581		1.1			2,891		0.8			11,480		3.7
Change in liability for tax positions		1,094		0.3			412		0.1			3,537		1.1
Foreign income taxed at different rates		(7,111	)	(1.6	)		(6,091	)	(1.7	)		8,567		2.8
Foreign tax credits		(1,710	)	(0.4	)		(2,184	)	(0.6	)		(5,640	)	(1.8	)
Other items, net		(4,427	)	(1.1	)		(1,379	)	(0.4	)		(3,048	)	(1.0	)
	$	143,895		33.3	%	$	116,345		33.2	%	$	123,644		39.8	%

The Company’s effective income tax rates (income tax expense as a percentage of income before income taxes) were 33.3% for 2015, 33.2% for 2014 and 39.8% for 2013. The differences in the effective tax rates were primarily due to changes in state and foreign income taxes resulting from fluctuations in the Company’s noninsurance and foreign subsidiaries’ contribution to pretax income and changes in the ratio of permanent differences to income before income taxes. In addition, the tax rate for 2014 reflected non-recurring tax benefits resulting from certain adjustments to the Company’s state and non-U.S. tax accounts. The 2015 rate includes a benefit for the release of valuation allowances previously provided against certain foreign net operating losses and other deferred tax assets.

The primary components of temporary differences that give rise to the Company’s net deferred tax liability are as follows:

	December 31,
	2015			2014
	(in thousands)
Deferred tax assets:
Deferred revenue	$	11,639		$	9,887
Employee benefits		77,994			74,068
Bad debt reserves		14,943			15,253
Investments in affiliates		—			13,670
Loss reserves		3,062			2,507
Pension		105,398			120,401
Net operating loss carryforward		15,541			23,727
Securities		6,128			—
Foreign tax credit		1,769			2,184
Other		7,904			8,712
		244,378			270,409
Valuation allowance		(6,729	)		(15,706	)
		237,649			254,703
Deferred tax liabilities:
Depreciable and amortizable assets		304,632			284,532
Claims and related salvage		40,901			36,653
Investments in affiliates		3,193			—
Securities		—			8,934
		348,726			330,119
Net deferred tax liability	$	111,077		$	75,416

The exercise of stock options and vesting of RSUs represent a tax benefit that has been reflected as a reduction of taxes payable and an increase to equity. The benefits recorded were $9.5 million and $6.9 million for the years ended December 31, 2015 and 2014, respectively.

In connection with the Company’s June 2010 spin-off from its prior parent, which subsequently assumed the name CoreLogic, Inc. (“CoreLogic”), it entered into a tax sharing agreement which governs the Company’s and CoreLogic’s respective rights, responsibilities and obligations for certain tax related matters. At December 31, 2015 and 2014, the Company had a net payable to CoreLogic of $36.5 million and $35.1 million, respectively, related to tax matters prior to the spin-off. This amount is included in the Company’s consolidated balance sheets in accounts payable and accrued liabilities. The increase during the current year was primarily the result of an additional accrual for tax matters prior to the spin-off.

At December 31, 2015, the Company had available a foreign tax credit carryover of $1.8 million. The Company expects to utilize these credits within the carryover period.

At December 31, 2015, the Company had available net operating loss carryforwards for income tax purposes totaling $92.9 million, consisting of federal, state and foreign losses of $0.4 million, $38.8 million and $53.7 million, respectively. Of the aggregate net operating losses, $28.0 million have an indefinite expiration and the remaining $64.9 million expire at various times beginning in 2016. The Company carries a valuation allowance of $6.7 million against its deferred tax assets. Of this amount, $5.7 million relates to net operating losses; the remaining $1.0 million relates to other foreign deferred tax assets. The year-over-year decrease in the overall valuation allowance is primarily due to the release of valuation allowances previously provided against certain foreign net operating losses and other deferred tax assets.

The Company evaluates the realizability of its deferred tax assets by assessing the valuation allowance and adjusts the allowance, if necessary. The factors used to assess the likelihood of realization are the Company’s forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. The ability or failure to achieve the forecasted taxable income in the applicable taxing jurisdictions could affect the ultimate realization of deferred tax assets. Based on future operating results in certain jurisdictions, it is possible that the current valuation allowance positions of those jurisdictions could be adjusted in the next 12 months.

As of December 31, 2015 and 2014, U.S. taxes were not provided for on the cumulative earnings of the Company’s foreign subsidiaries of $155.7 million and $132.8 million, respectively, as the Company has invested or expects to invest the undistributed earnings indefinitely. If in the future these earnings are repatriated to the United States, or if the Company determines that the earnings will be remitted in the foreseeable future, additional tax provisions may be required. It is not practicable to calculate the deferred taxes associated with these earnings because of the variability of multiple factors that would need to be assessed at the time of any assumed repatriation; however, foreign tax credits may be available to reduce federal income taxes in the event of distribution.

As of December 31, 2015, 2014 and 2013, the liability for income taxes associated with uncertain tax positions was $23.8 million, $24.1 million and $47.8 million, respectively. The net decreases in the liabilities during 2015 and 2014 were primarily attributable to activity related to examinations conducted by various taxing authorities. The net decrease in the liability during 2013 was primarily attributable to the Company’s effective settlement of a prior year tax return position. The liabilities could be reduced by $3.4 million as of December 31, 2015 and 2014, and by $32.6 million as of December 31, 2013, due to offsetting tax benefits associated with the correlative effects of potential adjustments, including timing adjustments and state income taxes. The net amounts of $20.4 million, $20.7 million and $15.2 million as of December 31, 2015, 2014 and 2013, respectively, if recognized, would favorably affect the Company’s effective tax rate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2015, 2014 and 2013 is as follows:

	December 31,
	2015			2014			2013
	(in thousands)
Unrecognized tax benefits—opening balance	$	24,100		$	47,800		$	47,900
Gross decreases—prior period tax positions		(800	)		(24,100	)		(600	)
Gross increases—current period tax positions		500			400			500
Unrecognized tax benefits—ending balance	$	23,800		$	24,100		$	47,800

The Company’s continuing practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense. As of December 31, 2015, 2014 and 2013, the Company had accrued $9.7 million, $8.9 million and $4.7 million, respectively, of interest and penalties (net of tax benefits of $4.1 million, $3.7 million and $1.9 million, respectively) related to uncertain tax positions.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various non-U.S. jurisdictions. The primary non-federal jurisdictions are California, Canada, India and the United Kingdom. During 2015, the Company concluded U.S. federal income tax examinations for calendar years 2010 and 2011. No material adjustments resulted from these examinations. The Company is generally no longer subject to U.S. federal, state and non-U.S. income tax examinations by taxing authorities for years prior to 2005.

It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the Company’s unrecognized tax positions may significantly decrease within the next 12 months. These changes may be the result of ongoing audits or the expiration of federal and state statutes of limitations for the assessment of taxes.

The Company records a liability for potential tax assessments based on its estimate of the potential exposure. New tax laws and new interpretations of laws and rulings by tax authorities may affect the liability for potential tax assessments. Due to the subjectivity and complex nature of the underlying issues, actual payments or assessments may differ from estimates. To the extent the Company’s estimates differ from actual payments or assessments, income tax expense is adjusted. The Company’s income tax returns in several jurisdictions are being examined by various tax authorities. The Company believes that adequate amounts of tax and related interest, if any, from any adjustments that may result from these examinations have been provided for.