6) INCOME TAXES

Components of income tax expense/(benefit) are as follows (amounts in thousands):

	Year Ended December 31,
	2016			2015			2014
Current
Federal	$	368,957		$	363,734		$	248,172
Foreign		8,513			3,151			4,167
State		42,166			38,987			23,224
		419,636			405,872			275,563
Deferred
Federal		(12,092	)		(15,912	)		41,583
Foreign		2,463			5,545			—
State		(820	)		(302	)		7,525
		(10,449	)		(10,669	)		49,108
Total	$	409,187		$	395,203		$	324,671

The foreign provision for income taxes is based on foreign pre-tax earnings of $58 million in 2016, $41 million in 2015 and $15 million in 2014. Our consolidated financial statements provide for any related tax liability on undistributed earnings that we do not intend to be indefinitely reinvested outside the U.S. Certain of our undistributed international earnings intended to be indefinitely reinvested in operations outside the U.S. have a statutory rate of 20.0%. As of December 31, 2016, U.S. income taxes have not been provided on a cumulative total of $99 million of such earnings. The amount of unrecognizable deferred tax liability related to these temporary differences is estimated to be approximately $15 million.

A reconciliation between the federal statutory rate and the effective tax rate is as follows:

	Year Ended December 31,
	2016			2015			2014
Federal statutory rate		35.0	%		35.0	%		35.0	%
State taxes, net of federal income tax benefit		2.4	%		2.3	%		2.3	%
Other items		-0.6	%		-0.6	%		0.0	%
Impact of income attributable to noncontrolling interests		-1.4	%		-2.2	%		-2.4	%
Effective tax rate		35.4	%		34.5	%		34.9	%

Our effective tax rates were 35.4%, 34.5% and 34.9% for the years ended December 31, 2016, 2015 and 2014, respectively. The increase in our effective tax rate for the year ended December 31, 2016 is primarily impacted by the decrease in net income attributable to noncontrolling interests due to our purchase of the minority ownership interests held by a third-party in our six acute care hospitals located in Las Vegas, Nevada, which is not tax effected in the statement of income. Including the expense related to income attributable to noncontrolling interests, the effective tax rate for the years ended December 31, 2016, 2015 and 2014 were 36.8%, 36.7% and 37.3%, respectively.

Included in “Other current assets” on our Consolidated Balance Sheet are prepaid federal and state income taxes amounting to approximately $10 million and $42 million as of December 31, 2016 and 2015, respectively.

Deferred income taxes are based on the estimated future tax effects of differences between the financial statement carrying amounts and the tax bases of assets and liabilities under the provisions of the enacted tax laws. The components of deferred taxes are as follows (amounts in thousands):

		Year Ended December 31,
		2016							2015
		Assets				Liabilities			Assets				Liabilities

Self-insurance reserves	$		85,940		$			$		88,401		$
Compensation accruals			83,328							66,399
Doubtful accounts and other reserves			38,017							29,616
Other currently non-deductible accrued liabilities			24,058							17,213
Depreciable and amortizable assets							332,326							400,809
State and foreign net operating loss carryforwards and other state and foreign deferred tax assets			66,639							62,541
Net pension liabilities – OCI only			5,926							10,929
Other combined items – OCI only			815							457
Other liabilities							2,949							2,960
	$		304,723		$		335,275	$		275,556		$		403,769
Valuation Allowance			(56,333	)			0			(52,567	)			0
Total deferred income taxes	$		248,390		$		335,275	$		222,989		$		403,769

Decreases in deferred tax liabilities relating to depreciable and amortizable assets primarily reflect the impact of deferred taxes recorded in conjunction with our purchase of the minority ownership interests held by a third-party in our six acute care hospitals located in Las Vegas, Nevada.

At December 31, 2016, state net operating loss carryforwards (expiring in years 2017 through 2036), and credit carryforwards available to offset future taxable income approximated $1.04 billion representing approximately $52 million in deferred state tax benefit (net of the federal benefit). At December 31, 2016, there were foreign net operating losses and credit carryforwards of approximately $21 million expiring through 2023 representing approximately $5 million in deferred foreign tax benefit. Increases in deferred tax assets relating to foreign net operating loss carryforwards reflect the impact of deferred taxes recorded in conjunction with the acquisition of Cambian Adult Services located in the U.K. during 2016. At December 31, 2016, related to the acquisition of Foundations Recovery Network, LLC, there were federal net operating losses of approximately $7 million expiring through 2032 representing approximately $2 million in deferred federal tax benefits.

A valuation allowance is required when it is more likely than not that some portion of the deferred tax assets will not be realized. Based on available evidence, it is more likely than not that certain of our state tax benefits will not be realized. Therefore, valuation allowances of approximately $52 million and $51 million have been reflected as of December 31, 2016 and 2015, respectively. During 2016, the valuation allowance on these state tax benefits increased by $1 million due to additional net operating losses incurred. In addition, valuation allowances of approximately $4 million and $2 million have been reflected as of December 31, 2016 and 2015 related to foreign net operating losses and credit carryforwards. The foreign valuation allowance increased approximately $3 million due to the acquisition of Cambian Adult Services. There were no significant increases in valuation allowances as a result of the acquisition of Foundations.

We adopted the provisions of Accounting for Uncertainty in Income Taxes effective January 1, 2007. During 2016 and 2015, the estimated liabilities for uncertain tax positions (including accrued interest and penalties) were increased less than $1 million due to tax positions taken in the current and prior years. During 2016, the estimated liabilities for uncertain tax positions (including accrued interest and penalties) were reduced due to the lapse of the statute of limitations resulting in a net income tax benefit of less than $1 million. The balance at each of December 31, 2016 and 2015, if subsequently recognized, that would favorably affect the effective tax rate and the provision for income taxes is approximately $1 million as of each date.

We recognize accrued interest and penalties associated with uncertain tax positions as part of the tax provision. As of December 31, 2016 and 2015, we have accrued interest and penalties of less than $1 million as of each date. The U.S. federal statute of limitations remains open for the 2013 and subsequent years. Foreign and U.S. state and local jurisdictions have statutes of limitations generally ranging for 3 to 4 years. The statute of limitations on certain jurisdictions could expire within the next twelve months. It is reasonably possible that the amount of unrecognized tax benefits will change during the next 12 months, however, it is anticipated that any such change, if it were to occur, would not have a material impact on our results of operations.

The tabular reconciliation of unrecognized tax benefits for the years ended December 31, 2016, 2015 and 2014 is as follows (amounts in thousands).

	As of December 31,
	2016			2015			2014
Balance at January 1,	$	1,982		$	2,402		$	3,369
Additions based on tax positions related to the current year		50			50			50
Additions for tax positions of prior years		74			111			195
Reductions for tax positions of prior years		(94	)		(524	)		(1,212	)
Settlements		(753	)		(57	)		—
Balance at December 31,	$	1,259		$	1,982		$	2,402