Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Income from continuing operations before income tax

Income before income tax and the provision for income tax consist of the following (in millions):



Years ended December 31	2015			2014			2013
Income before income taxes:
U.K.	$	149		$	347		$	96
U.S.	(51		)	(55		)	349
Other	1,591			1,473			1,093
Total	$	1,689		$	1,765		$	1,538
Income tax expense (benefit):
Current:
U.K.	$	43		$	1		$	(18	)
U.S. federal	137			156			111
U.S. state and local	54			75			52
Other	256			236			259
Total current tax expense	$	490		$	468		$	404
Deferred tax expense (benefit):
U.K.	$	(39	)	$	38		$	43
U.S. federal	(140		)	(133		)	(48		)
U.S. state and local	(14		)	(24		)	10
Other	(30		)	(15		)	(19		)
Total deferred tax benefit	$	(223	)	$	(134	)	$	(14	)
Total income tax expense	$	267		$	334		$	390

Reconciliation of the income tax provisions based on the U.S. statutory corporate tax rate to the provisions reflected in the Consolidated Financial Statements

The reconciliation to the provisions reflected in the Consolidated Financial Statements is as follows:



Years ended December 31	2015	2014	2013
Statutory tax rate	20.3%	21.5%	23.0%
U.S. state income taxes, net of U.S. federal benefit	0.5	1.5	2.6
Taxes on international operations (1)	(6.6)	(8.9)	(4.4)
Nondeductible expenses	2.2	1.7	1.4
Adjustments to prior year tax requirements	(1.3)	0.9	0.1
Deferred tax adjustments, including statutory rate changes	(0.1)	(0.7)	1.4
Deferred tax adjustments, international earnings	—	1.0	3.3
Adjustments to valuation allowances	(0.6)	0.6	(1.7)
Change in uncertain tax positions	1.4	1.7	(0.3)
Other — net	—	(0.4)	—
Effective tax rate	15.8%	18.9%	25.4%

(1)

The Company determines the adjustment for taxes on international operations based on the difference between the statutory tax rate applicable to earnings in each foreign jurisdiction and the enacted rate of 20.3%, 21.5% and 23.0% at December 31, 2015, 2014 and 2013, respectively. The benefit to the Company's effective income tax rate from taxes on international operations relates to benefits from lower-taxed global operations, primarily due to the use of global funding structures.

Components of Aon's deferred tax assets and liabilities

The components of the Company's deferred tax assets and liabilities are as follows (in millions):



As of December 31	2015			2014
Deferred tax assets:
Employee benefit plans	$	635		$	739
Net operating/capital loss and tax credit carryforwards	349			295
Accrued interest	293			303
Other accrued expenses	98			44
Deferred revenue	65			40
Investment basis differences	56			45
Other	56			6
Total	1,552			1,472
Valuation allowance on deferred tax assets	(175		)	(205		)
Total	$	1,377		$	1,267
Deferred tax liabilities:
Intangibles and property, plant and equipment	$	(961	)	$	(1,058	)
Other accrued expenses	(99		)	(40		)
Deferred costs	(30		)	(28		)
Unrealized foreign exchange gains	(29		)	(44		)
Unremitted earnings	(18		)	(28		)
Other	(44		)	(28		)
Total	$	(1,181	)	$	(1,226	)
Net deferred tax asset	$	196		$	41

Deferred income taxes (assets and liabilities netted by jurisdiction) as classified in the Consolidated Statements of Financial Position

Deferred income taxes (assets and liabilities have been netted by jurisdiction) have been classified in the Consolidated Statements of Financial Position as follows (in millions):



As of December 31,	2015			2014
Deferred tax assets — current (1)	$	232		$	212
Deferred tax assets — non-current	141			144
Deferred tax liabilities — current (1)	(1		)	(2		)
Deferred tax liabilities — non-current	(176		)	(313		)
Net deferred tax asset	$	196		$	41


(1)	Included in Other current assets and Other current liabilities.

Reconciliation of the beginning and ending amount of unrecognized tax benefits

The following is a reconciliation of the Company's beginning and ending amount of uncertain tax positions (in millions):



	2015			2014
Balance at January 1	$	191		$	164
Additions based on tax positions related to the current year	31			31
Additions for tax positions of prior years	53			10
Reductions for tax positions of prior years	(18		)	(6		)
Settlements	(32		)	—
Business combinations	—			5
Lapse of statute of limitations	(5		)	(11		)
Foreign currency translation	(2		)	(2		)
Balance at December 31	$	218		$	191