10. Income Taxes

The following table presents the components of our consolidated income tax expense for each of the last three fiscal years (in thousands):

	2016			2015			2014
Current income tax expense:
Federal	$	36,020		$	72,840		$	102,450
State		11,336			16,248			18,698
Foreign		52,259			43,344			38,107
Total current tax expense		99,615			132,432			159,255
Deferred income tax expense (benefit):
Federal		6,439			13,337			7,561
State		485			2,295			2,789
Foreign		(34,331	)		(46,809	)		20,449
Total deferred tax expense (benefit)		(27,407	)		(31,177	)		30,799
Consolidated income tax expense	$	72,208		$	101,255		$	190,054

Deferred taxes reflect the tax effects of temporary differences between the amounts recorded as assets and liabilities for financial reporting purposes and the comparable amounts recorded for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The following table presents the components of our net deferred tax assets at September 30, 2016 and October 2, 2015 (in thousands):

	2016			2015
Deferred tax assets:
Obligations relating to:
Defined benefit pension plans	$	77,834		$	64,644
Other employee benefit plans		179,063			186,701
Net Operating Losses		139,125			134,467
Self-insurance programs		1,722			473
Contract revenues and costs		(8,177	)		25,579
Deferred Rent		7,955			9,428
Restructuring		47,792			6,722
Other		9,933			6,370
Valuation Allowance		(41,684	)		(60,320	)
Gross deferred tax assets		413,563			374,064
Deferred tax liabilities:
Depreciation and amortization		(154,939	)		(187,099	)
Other, net		(1,555	)		(3,994	)
Gross deferred tax liabilities		(156,494	)		(191,093	)
Net deferred tax assets	$	257,069		$	182,971

A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts. The valuation allowance at September 30, 2016 and October 2, 2015 was $41.7 million and $60.3 million, respectively.

Net operating loss carry forwards of foreign subsidiaries at September 30, 2016 and October 2, 2015 totaled $483.4 million and $455.1 million, respectively. If unused, foreign net operating losses of $26.1 million will expire between 2017 and 2036. Net operating losses of $361.5 million can be carried forward indefinitely.

The following table presents the income tax benefits realized from the exercise of nonqualified stock options and disqualifying dispositions of stock sold under our employee stock purchase plans during each of the last three fiscal years (in millions):

2016				2015				2014
$	1.50			$	0.20			$	3.40

The following table reconciles total income tax expense using the statutory U.S. federal income tax rate to the consolidated income tax expense shown in the accompanying Consolidated Statements of Earnings for each of the last three fiscal years (dollars in thousands):

	2016			2015			2014
Statutory amount	$	98,935		$	141,479		$	189,758
State taxes, net of the federal benefit		7,853			12,857			12,750
Tax differential on foreign earnings		11,337			(38,838	)		11,991
Foreign Tax Credits		(44,018	)		(21,313	)		(20,802	)
Uncertain Tax Positions		1,449			2,281			(9,847	)
Other, net		(3,348	)		4,789			6,204
Consolidated income tax expense	$	72,208		$	101,255		$	190,054
Rates used to compute statutory amount		35.0	%		35.0	%		35.0	%
Consolidated effective income tax rate		25.2	%		23.5	%		35.1	%

The Company’s consolidated effective income tax rate was 25.2% for fiscal 2016, compared to 23.5% in fiscal 2015. Contributing to the increase in the effective tax rate when compared to the prior year is the absence of a $23.1 million nonrecurring benefit related to foreign currency loss in 2015. The fiscal 2016 effective tax rate is lower than the statutory rate due to an $11.2 million benefit related to a valuation allowance release, a $6.9 million benefit from a prior period adjustment to income taxes payable, and an $8.7 million benefit recorded upon the filing of a US amended tax return to claim additional foreign tax credits and an U.S. Internal Revenue Code Section 179D benefit for the design of energy efficient buildings. Offsetting the current year benefits was an $8.9 million expense charge related to the revaluation of deferred tax assets due to a statutory tax rate change in the United Kingdom.

The following table presents income tax payments made during each of the last three fiscal years (in millions):

2016				2015				2014
$	116.30			$	156.50			$	173.60

The following table presents the components of our consolidated earnings before taxes for each of the last three fiscal years (in thousands):

	2016		2015		2014
United States earnings	$	206,159	$	283,504	$	288,800
Foreign earnings		80,564		146,633		253,366
	$	286,723	$	430,137	$	542,166

United States income taxes, net of applicable credits, have been provided on the undistributed earnings of the Company’s foreign subsidiaries, except in those instances where the earnings have been permanently reinvested. At September 30, 2016, approximately $26.1 million of such undistributed earnings of certain foreign subsidiaries have been permanently reinvested. Should these earnings be repatriated, approximately $5.4 million of income taxes would be payable.

The Company accounts for unrecognized tax benefits in accordance with ASC Topic 740, Income Taxes. It accounts for interest and penalties on unrecognized tax benefits as interest and penalties (i.e., not as part of income tax expense). The Company’s liability for gross unrecognized tax benefits was $44.2 million and $42.7 million at September 30, 2016 and October 2, 2015, respectively, all of which, if recognized, would affect the Company’s consolidated effective income tax rate. The Company had $36.4 million and $42.1 million in accrued interest and penalties at September 30, 2016 and October 2, 2015, respectively. The Company estimates that, within 12 months, $4.3 million of gross, primarily non-U.S. unrecognized tax benefits will reverse due to the anticipated expiration of time to assess tax. As of September 30, 2016, the Company’s U.S. federal income tax returns for tax years 2013 through 2016 remain subject to examination.

The following table presents the reconciliation of the beginning and ending amount of unrecognized tax benefits for the years presented (in thousands):

	2016			2015			2014
Balance, beginning of year		42,666			41,923			51,770
Additions based on tax positions related to the current year		5,670			6,440			6,528
Additions for tax positions of prior years		367			—			—
Reductions for tax positions of prior years		(2,451	)		(5,697	)		(16,375	)
Settlement		(2,085	)		—			—
Balance, end of year		44,167			42,666			41,923