Deferred income taxes are the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We have not recognized deferred US income taxes on the undistributed earnings of foreign subsidiaries and affiliates that we intend to permanently reinvest in foreign operations. The cumulative amount of such earnings was $961.1 million at December 31, 2016. The ultimate tax cost of repatriating these earnings depends on tax laws in effect and other circumstances at the time of distribution.

The following table shows the significant components of our deferred tax liabilities and assets as of December 31 (in millions):



	2016			2015
Deferred Tax Liabilities
Book/tax basis difference due to depreciation	$	1,119.1		$	1,058.1
Investments in affiliated companies	69.5			72.9
Lease accounting	11.1			7.3
Other	1.0			—
Total deferred tax liabilities	1,200.7			1,138.3
Deferred Tax Assets
Federal net operating loss	—			13.2
Alternative minimum tax credit	8.0			14.8
Foreign tax credit	—			5.8
Valuation allowance on foreign tax credit	—			(5.8		)
State net operating loss	25.4			27.7
Valuation allowance on state net operating loss	(12.9		)	(12.6		)
Foreign net operating loss	2.9			3.6
Valuation allowance on foreign net operating loss	(0.3		)	(0.3		)
Accruals not currently deductible for tax purposes	26.7			22.2
Allowance for losses	1.5			3.2
Pension and post-retirement benefits	30.9			35.8
Other	29.1			12.4
Total deferred tax assets	111.3			120.0
Net deferred tax liabilities	$	1,089.4		$	1,018.3

At December 31, 2016, we have fully utilized all of our available US federal tax net operating loss carryforward. We do have an alternative minimum tax credit of $8.0 million that has an unlimited carryforward period.

At December 31, 2016, we have fully utilized all of our available foreign tax credits. We do have state net operating losses of $25.4 million, net of federal benefits that are scheduled to expire at various times beginning in 2017. We have recorded a $12.9 million valuation allowance related to state net operating losses, as we believe it is more likely than not that we will be unable to use all of these losses. Additionally, we have foreign net operating losses, net of valuation allowances, of $2.6 million which have unlimited carryforward periods. Our use of future tax credits and net operating losses depends on a number of variables, including the amount of taxable income and state apportionment factors.

The following table shows a reconciliation of the beginning and ending amount of our gross liability for unrecognized tax benefits (in millions)



	2016			2015
Beginning balance	$	5.7		$	5.6
Additions to tax positions of prior years	—			0.1
Reduction for tax positions of prior years	(1.4		)	—
Ending balance	$	4.3		$	5.7

At December 31, 2016, our gross liability for unrecognized tax benefits was $4.3 million, of which $2.8 million, if recognized, would favorably impact income tax expense. During the year ended December 31, 2016, we reduced our unrecognized tax benefit by $1.4 million based on a final determination ruling for a disputed state tax filing position. During the year ended December 31, 2015, we added an additional $0.1 million gross state tax liability. We recognize interest and penalties related to unrecognized tax benefits as income tax expense. We have not accrued any amounts for penalties. To the extent interest is not assessed or is otherwise reduced with respect to uncertain tax positions, we will record any required adjustment as a reduction of income tax expense.

We file one consolidated federal income tax return with our domestic subsidiaries in the US jurisdiction, as well as tax returns in various state and foreign jurisdictions. As of December 31, 2016, all audits or statute of limitations with respect to our federal tax returns for years prior to 2013 have been closed or expired. Additionally, we do not currently have any ongoing state income tax audits.

The following table shows the components of income before income taxes, excluding affiliates, for the years ending December 31 (in millions):



	2016		2015		2014
Domestic	$	211.0	$	174.7	$	137.9
Foreign	94.4		95.6		93.3
	$	305.4	$	270.3	$	231.2

The following table shows income taxes, excluding domestic and foreign joint ventures, for the years ending December 31 (in millions):



	2016		2015			2014
Current
Domestic:
Federal	$	6.0	$	5.6		$	0.7
State and local	—		(0.2		)	0.6
	6.0		5.4			1.3
Foreign	16.9		15.3			13.0
	22.9		20.7			14.3
Deferred
Domestic:
Federal	55.8		44.7			45.0
State and local	10.5		33.7			5.6
	66.3		78.4			50.6
Foreign	6.5		11.8			10.8
	72.8		90.2			61.4
Income taxes	$	95.7	$	110.9		$	75.7

The following table shows the differences between our effective income tax rate and the federal statutory income tax rate for the years ending December 31 (in millions):



	2016			2015			2014
Income taxes at federal statutory rate	$	106.9		$	94.6		$	80.9
Adjust for effect of:
Foreign tax credits	(7.8		)	—			—
Foreign earnings taxed at lower rates	(9.7		)	(6.2		)	(8.5		)
Corporate owned life insurance	(1.7		)	(0.9		)	(0.6		)
State income taxes	6.8			7.6			4.1
State deferred tax rate change impact	—			14.1			—
Other	1.2			1.7			(0.2		)
Income taxes	$	95.7		$	110.9		$	75.7
Effective income tax rate	31.3		%	41.0		%	32.7		%

In 2016, our effective tax rate was 31.3% compared to 41.0% in 2015 and 32.7% in 2014. The current year effective tax rate reflects the utilization of $7.8 million in foreign tax credits. The 2015 effective tax rate reflected incremental deferred state income taxes of $14.1 million associated with a change in our consolidated effective state tax rate. Specifically, the sale of our marine assets in our Portfolio Management segment had a negative impact on our allocation factors that increased our overall effective state income tax rates in future years. Additionally, the 2015 rate reflected a higher contribution from domestic source income, which is taxed at a higher rate, as well as the impact of an increase in the statutory tax rate in Alberta, Canada.

The adjustment for foreign earnings in each year reflects the impact of lower tax rates on income earned at our foreign subsidiaries. State income taxes are recognized on domestic pretax income or loss. The amount of our domestic income subject to state taxes relative to our total worldwide income impacts the effect state income tax has on our overall income tax rate.

Separately, our affiliates incurred income taxes of $5.7 million and $18.3 million in 2016 and 2014, and an income tax benefit of $0.5 million in 2015. The 2016 and 2015 amounts were favorably impacted tax benefits of $3.9 million and $7.7 million as a result of income tax rate reductions enacted in the United Kingdom.