Note 9. Income Taxes

During the three months ended March 31, 2014, the income tax expense of $2.9 million resulted primarily from tax expense attributable to profitable foreign entities.

During 2013, Cerberus, at the time the Company’s principal stockholder, sold its ownership in the Company. The sale constituted an ownership change under Section 382 of the Internal Revenue Code. Under Section 382, the amount of U.S. net operating losses generated before the ownership change that can be utilized after the change is limited. The Company still does not anticipate paying any material income taxes in the U.S. in 2014 or 2015, even with the annual limitation.

The Company continually evaluates its net deferred tax asset positions and the necessity of establishing or removing valuation allowances in all jurisdictions. The Company records valuation allowances when a history of cumulative losses exists and there is significant uncertainty related to the future realization of the deferred tax assets. In certain jurisdictions, such as the U.S., Brazil, and the Netherlands, the Company’s recent history of operating losses does not allow it to satisfy the “more likely than not” criterion for recognition of deferred tax assets. Therefore, it will maintain full valuation allowances against its net deferred tax assets in the U.S. and certain other countries until sufficient positive evidence exists to reduce or eliminate the valuation allowances. If its operating performance and automotive production volumes remain stable in the U.S., the Company believes that it is reasonably possible that valuation allowances in excess of $100 million could be released in 2015. If the U.S. valuation allowance is released, U.S. deferred income tax expense would be recorded on any subsequent U.S. pre-tax income, which will thereby impact the Company’s reported net income attributable to Tower International, Inc. and net income attributable to Tower International, Inc. per share; however, we still do not anticipate paying any material U.S. income taxes in either 2014 or 2015.

During the three months ended March 31, 2013, the income tax expense of $3.5 million resulted primarily from tax expense attributable to profitable foreign entities.