Income Taxes

The components of the benefit (provision) for income taxes on continuing operations were:



	Year Ended December 31
Millions of dollars	2015			2014			2013
Current income taxes:
Federal	$	635		$	(959	)	$	(245	)
Foreign	(636		)	(734		)	(485		)
State	51			(36		)	(49		)
Total current	50			(1,729		)	(779		)
Deferred income taxes:
Federal	(18		)	83			4
Foreign	262			357			125
State	(20		)	14			2
Total deferred	224			454			131
Income tax benefit (provision)	$	274		$	(1,275	)	$	(648	)

The United States and foreign components of income (loss) from continuing operations before income taxes were as follows:



	Year Ended December 31
Millions of dollars	2015			2014		2013
United States	$	(1,560	)	$	3,020	$	1,070
Foreign	624			1,692		1,694
Total	$	(936	)	$	4,712	$	2,764

Reconciliations between the actual provision for income taxes on continuing operations and that computed by applying the United States statutory rate to income (loss) from continuing operations before income taxes were as follows:



	Year Ended December 31
	2015		2014		2013
United States statutory rate	35.0	%	35.0	%	35.0	%
Impact of foreign income taxed at different rates	(15.6	)	(5.7	)	(9.3	)
Venezuela devaluation	4.3		—		—
Valuation allowance against tax assets	3.5		(3.6	)	(0.1	)
Impact of impairments and other charges	(3.0	)	—		—
Non-deductible acquisition costs	2.6		—		—
Adjustments of prior year taxes	(0.7	)	0.3		(0.6	)
Other impact of foreign operations	(0.5	)	(0.1	)	(0.7	)
State income taxes	0.3		0.8		1.7
Domestic manufacturing deduction	—		(1.9	)	(2.0	)
Other items, net	3.4		2.3		(0.5	)
Total effective tax rate on continuing operations	29.3	%	27.1	%	23.5	%

Our effective tax rate on continuing operations was 29.3% for 2015, 27.1% for 2014 and 23.5% for 2013. The effective tax rate in all periods were positively impacted by lower tax rates in certain foreign jurisdictions. The effective tax rate for 2015 was also impacted by the tax effects of the $2.2 billion of impairments and other charges, a change in mix of geographic earnings in which we experienced low levels of United States income during the year, additional valuation allowances booked on foreign deferred tax assets, a $199 million foreign currency exchange loss in Venezuela, and non-deductible costs related to the pending Baker Hughes acquisition. The effective tax rate for 2014 was positively impacted by a $201 million net operating loss valuation allowance released as a result of a reorganization of our legal structure in Brazil. Partially offsetting these items were total charges of approximately $150 million for a write-off of certain prepaid tax assets recorded in Iraq, additional tax expenses related to the settlement of a research and development credit with the United States authorities, and tax expenses related to other unrecognized tax benefits, which are mostly included in "Other items, net" in the table above.

We have not provided United States income taxes and foreign withholding taxes on the undistributed earnings of foreign subsidiaries as of December 31, 2015 because we intend to permanently reinvest such earnings outside the United States. If these foreign earnings were to be repatriated in the future, the related United States tax liability may be reduced by any foreign income taxes previously paid on these earnings. As of December 31, 2015, the cumulative amount of earnings upon which United States income taxes have not been provided is approximately $6.9 billion. It is not practicable to estimate the amount of unrecognized deferred tax liability related to these earnings at this time.

The primary components of our deferred tax assets and liabilities were as follows:



	December 31
Millions of dollars	2015		2014
Gross deferred tax assets:
Accrued liabilities	$	392	$	494
Net operating loss carryforwards	540		462
Employee compensation and benefits	403		395
Foreign tax credit carry forward	365		79
Other	354		236
Total gross deferred tax assets	2,054		1,666
Gross deferred tax liabilities:
Depreciation and amortization	1,334		1,005
Other	109		111
Total gross deferred tax liabilities	1,443		1,116
Valuation allowances	213		184
Net deferred income tax asset	$	398	$	366

At December 31, 2015, we had $2.0 billion of net operating loss carryforwards, of which $375 million will expire from 2016 through 2019, $367 million will expire from 2020 through 2024, and $285 million will expire from 2025 through 2035. The remaining balance will not expire.

The following table presents a rollforward of our unrecognized tax benefits and associated interest and penalties.



Millions of dollars	Unrecognized Tax Benefits				Interest and Penalties
Balance at January 1, 2013	$	228			$	68
Change in prior year tax positions	(53		)		(9		)
Change in current year tax positions	30				1
Cash settlements with taxing authorities	(21		)		(17		)
Lapse of statute of limitations	(9		)		(9		)
Balance at December 31, 2013	$	175			$	34
Change in prior year tax positions	83				24
Change in current year tax positions	84				—
Cash settlements with taxing authorities	(27		)		(1		)
Lapse of statute of limitations	(1		)		(1		)
Balance at December 31, 2014	$	314		(a)	$	56
Change in prior year tax positions	(33		)		7
Change in current year tax positions	62				1
Cash settlements with taxing authorities	(16		)		(15		)
Lapse of statute of limitations	(5		)		(2		)
Balance at December 31, 2015	$	322		(a)(b)	$	47

(a)

Includes $67 million as of December 31, 2015 and $46 million as of December 31, 2014 in foreign unrecognized tax benefits that would give rise to a United States tax credit. Approximately $176 million, which excludes $10 million of unrecognized tax benefits covered by an indemnification asset, as of December 31, 2015 and $194 million as of December 31, 2014, if resolved in our favor, would positively impact the effective tax rate and, therefore, be recognized as additional tax benefits in our statement of operations.


(b)	Includes $37 million that could be resolved within the next 12 months.

We file income tax returns in the United States federal jurisdiction and in various states and foreign jurisdictions. In most cases, we are no longer subject to state, local, or non-United States income tax examination by tax authorities for years before 2005. Tax filings of our subsidiaries, unconsolidated affiliates, and related entities are routinely examined in the normal course of business by tax authorities. Currently, our United States federal tax filings for the tax years 2012 through 2013 are under review, 2003 through 2009 are under appeal pending final calculation of certain tax attribute carryforwards, and 2010 through 2011 are also under appeals by the Internal Revenue Service.