INCOME TAXES

The components of income (loss) before income taxes are as follows:



For the years ended December 31,	2016			2015			2014
Domestic	$	1,395,440		$	1,357,618		$	1,320,738
Foreign	(295,959		)	(455,771		)	(14,695		)
Income before income taxes	$	1,099,481		$	901,847		$	1,306,043

The components of our provision for income taxes are as follows:



For the years ended December 31,	2016			2015			2014
Current:
Federal	$	391,705		$	409,060		$	385,642
State	51,706			47,978			52,331
Foreign	(25,877		)	(29,605		)	2,362
	417,534			427,433			440,335
Deferred:
Federal	(7,706		)	(31,153		)	20,649
State	(452		)	(2,346		)	2,725
Foreign	(29,939		)	(5,038		)	(4,578		)
	(38,097		)	(38,537		)	18,796
Total provision for income taxes	$	379,437		$	388,896		$	459,131

The income tax benefit associated with stock-based compensation of $17,814 and $24,839 for the years ended December 31, 2016 and 2015, respectively, reduced accrued income taxes on the Consolidated Balance Sheets. We credited additional paid-in capital to reflect the net excess income tax benefits.

Deferred taxes reflect temporary differences between the tax basis and financial statement carrying value of assets and liabilities. The significant temporary differences that comprised the deferred tax assets and liabilities are as follows:



December 31,	2016			2015
Deferred tax assets:
Post-retirement benefit obligations	$	90,584		$	95,763
Accrued expenses and other reserves	141,228			163,908
Stock-based compensation	48,500			46,665
Derivative instruments	44,010			8,858
Pension	14,662			28,940
Lease financing obligation	18,950			18,947
Accrued trade promotion reserves	50,463			36,501
Net operating loss carryforwards	143,085			99,155
Capital loss carryforwards	38,691			44,546
Other	14,452			14,444
Gross deferred tax assets	604,625			557,727
Valuation allowance	(235,485		)	(207,055		)
Total deferred tax assets	369,140			350,672
Deferred tax liabilities:
Property, plant and equipment, net	202,300			218,729
Acquired intangibles	113,074			120,420
Inventories	27,608			20,063
Other	8,884			8,258
Total deferred tax liabilities	351,866			367,470
Net deferred tax assets (liabilities)	$	17,274		$	(16,798	)
Included in:
Non-current deferred tax assets, net	56,861			36,390
Non-current deferred tax liabilities, net	(39,587		)	(53,188		)
Net deferred tax assets (liabilities)	$	17,274		$	(16,798	)

We believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets. Changes in deferred tax assets for net operating loss carryforwards resulted primarily from current year losses in foreign jurisdictions. Changes in deferred tax assets for derivative instruments resulted primarily from the tax impact of our payment to settle an interest rate swap in 2016.

The valuation allowances as of December 31, 2016 and 2015 are primarily related to U.S. capital loss carryforwards and various foreign jurisdictions' net operating loss carryforwards and other deferred tax assets that we do not expect to realize.

The following table reconciles the federal statutory income tax rate with our effective income tax rate:



For the years ended December 31,	2016		2015		2014
Federal statutory income tax rate	35.0	%	35.0	%	35.0	%
Increase (reduction) resulting from:
State income taxes, net of Federal income tax benefits	3.4		4.2		3.0
Qualified production income deduction	(3.8	)	(4.4	)	(2.4	)
Business realignment and impairment charges and gain on sale of trademark licensing rights	0.4		10.8		0.7
Foreign rate differences	3.6		2.2		(0.1	)
Historic and solar tax credits	(3.3	)	(3.3	)	—
Other, net	(0.8	)	(1.4	)	(1.0	)
Effective income tax rate	34.5	%	43.1	%	35.2	%

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



December 31,	2016			2015
Balance at beginning of year	$	33,411		$	32,230
Additions for tax positions taken during prior years	2,804			1,122
Reductions for tax positions taken during prior years	(4,080		)	(2,112		)
Additions for tax positions taken during the current year	9,100			6,623
Settlements	—			(702		)
Expiration of statutes of limitations	(5,233		)	(3,750		)
Balance at end of year	$	36,002		$	33,411

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $27,691 as of December 31, 2016 and $25,947 as of December 31, 2015.

We report accrued interest and penalties related to unrecognized tax benefits in income tax expense. We recognized a net tax benefit of $75 in 2016, a net tax expense of $1,153 in 2015 and a net tax benefit of $9,082 in 2014 for interest and penalties. Accrued net interest and penalties were $3,716 as of December 31, 2016 and $3,791 as of December 31, 2015.

We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. A number of years may elapse before an uncertain tax position, for which we have unrecognized tax benefits, is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our unrecognized tax benefits reflect the most likely outcome. We adjust these unrecognized tax benefits, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular position could require the use of cash. Favorable resolution would be recognized as a reduction to our effective income tax rate in the period of resolution.

The number of years with open tax audits varies depending on the tax jurisdiction. Our major taxing jurisdictions include the United States (federal and state), Canada, China and Mexico. U.S., Canadian, Chinese and Mexican federal audit issues typically involve the timing of deductions and transfer pricing adjustments. Tax examinations by the U.S. Internal Revenue Service and various state taxing authorities could be conducted for years beginning in 2013.

We are no longer subject to Canadian federal income tax examinations by the Canada Revenue Agency (“CRA”) for years before 2007. In 2013, the CRA concluded its audit for 2007 through 2009 and issued a letter to us indicating proposed adjustments primarily associated with business realignment charges and transfer pricing. In 2014, the CRA withdrew the proposed adjustments related to business realignment charges and transfer pricing of inventory, and we paid a $1,600 assessment related to other cross-border adjustments. Also in 2014, the CRA concluded its audit for 2010 through 2012 and issued a letter to us indicating proposed transfer pricing adjustments, and we paid a $612 assessment. We provided notice to the U.S. Competent Authority and the CRA provided notice to the Canada Competent Authority of the likely need for their assistance to resolve the adjustments for 2007 through 2012. Accordingly, as of December 31, 2016, we recorded a non-current receivable of approximately $1,449 associated with the anticipated resolution of the adjustments by the Competent Authority of each country. In the fourth quarter of 2016, the CRA commenced its audit of our Canadian income tax returns for 2014 through May 2015.

We are no longer subject to Chinese federal income tax examinations by the China State Administration of Taxation ("China SAT") for years before 2011. We are no longer subject to Mexican federal income tax examinations by the Servicio de Administracion Tributaria (“Mexico SAT”) for years before 2010. We work with the IRS, the CRA, the China SAT and the Mexico SAT to resolve proposed audit adjustments and to minimize the amount of adjustments. We do not anticipate that any potential tax adjustments will have a significant impact on our financial position or results of operations.

We reasonably expect reductions in the liability for unrecognized tax benefits of approximately $4,160 within the next 12 months because of the expiration of statutes of limitations and settlements of tax audits.

As of December 31, 2016, we had approximately $291,387 of undistributed earnings of our international subsidiaries. We intend to continue to reinvest earnings outside the United States for the foreseeable future and, therefore, have not recognized any U.S. tax expense on these earnings. It is not practicable for us to determine the amount of unrecognized U.S. tax expense on these reinvested international earnings.

Investments in Partnerships Qualifying for Tax Credits

In 2016, we continued to invest in partnerships which make equity investments in projects eligible to receive federal historic and energy tax credits. The investments are accounted for under the equity method and reported within other assets in our Consolidated Balance Sheets. The tax credits, when realized, are recognized as a reduction of tax expense, at which time the corresponding equity investment is written-down to reflect the remaining value of the future benefits to be realized. For the years ended December 31, 2016 and 2015, we recognized investment tax credits and related outside basis difference benefit totaling $52,342 and $43,437, respectively, and we wrote-down the equity investment by $43,482 and $39,489, respectively, to reflect the realization of these benefits. The equity investment write-down is reflected within other (income) expense, net in the Consolidated Statements of Income.