INCOME TAXES

The provision for income taxes consists of the following:



(millions)	2017			2016			2015
Income taxes
Current
Federal	$	67.1		$	127.7		$	78.8
State	6.2			15.1			9.1
International	53.9			50.2			42.4
	127.2			193.0			130.3
Deferred
Federal	23.8			(29.6		)	9.3
State	0.9			(2.4		)	0.4
International	(0.6		)	(8.0		)	(8.7		)
	24.1			(40.0		)	1.0
Total income taxes	$	151.3		$	153.0		$	131.3

In 2017, current federal income tax expense decreased by $60.6 million from $127.7 million in 2016 to $67.1 million in 2017. That change was largely offset by a net increase in deferred federal tax expense of $53.4 million, from a deferred benefit of $29.6 million in 2016 to a deferred expense of $23.8 million in 2017. These changes principally are the result of a decrease in deductible temporary differences in 2017, with a resultant decrease in deferred tax assets.

In 2016, current federal income tax expense increased by $48.9 million from $78.8 million in 2015 to $127.7 million in 2016. That change was largely offset by a net increase in deferred federal tax benefit of $38.9 million, from a deferred expense of $9.3 million in 2015 to a deferred benefit of $29.6 million in 2016. These changes principally stemmed from higher pretax income in the U.S. in 2016 compared to the prior year as well as to an increase in deductible temporary differences in 2016, with a resultant increase in deferred tax assets, in order to maximize certain available tax credits.

The components of income from consolidated operations before income taxes follow:



(millions)	2017		2016		2015
Pretax income
United States	$	382.1	$	383.3	$	308.3
International	212.7		205.9		187.9
	$	594.8	$	589.2	$	496.2

A reconciliation of the U.S. federal statutory rate with the effective tax rate follows:



	2017		2016		2015
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefits	0.8		1.4		1.2
International tax at different effective rates	(4.8	)	(6.7	)	(7.6	)
U.S. tax on remitted and unremitted earnings	0.4		0.4		1.1
Stock compensation expense	(1.6	)	—		—
U.S. manufacturing deduction	(1.8	)	(2.2	)	(1.9	)
Changes in prior year tax contingencies	(2.1	)	(1.8	)	(2.1	)
Other, net	(0.5	)	(0.1	)	0.8
Total	25.4	%	26.0	%	26.5	%

Deferred tax assets and liabilities are comprised of the following:



(millions)	2017			2016
Deferred tax assets
Employee benefit liabilities	$	146.8		$	184.5
Other accrued liabilities	51.7			42.2
Inventory	12.4			5.5
Tax loss and credit carryforwards	50.2			39.3
Other	18.7			15.1
Valuation allowance	(26.0		)	(10.5		)
	253.8			276.1
Deferred tax liabilities
Depreciation	52.3			38.1
Intangible assets	1,246.0			262.5
Other	6.1			6.1
	1,304.4			306.7
Net deferred tax liability	$	(1,050.6	)	$	(30.6	)

At November 30, 2017, our non-U.S. subsidiaries have tax loss carryforwards of $194.2 million. Of these carryforwards, $7.6 million expire in 2018, $7.6 million from 2019 through 2020, $49.5 million from 2021 through 2028 and $129.5 million may be carried forward indefinitely.

At November 30, 2017, we have tax credit carryforwards of $12.3 million, all of which expire in 2022.

A valuation allowance has been provided to record deferred tax assets at their net realizable value based on a more likely than not criteria. The $15.5 million net increase in the valuation allowance from 2016 was mainly due to subsidiaries' net operating losses which may not be realized in future periods.

U.S. income taxes are not provided for unremitted earnings of international subsidiaries and affiliates where our intention is to reinvest these earnings permanently. Unremitted earnings of such entities were $1.8 billion at November 30, 2017. Upon distribution of these earnings, we could be subject to both U.S. income taxes and withholding taxes. Determination of the unrecognized deferred income tax liability is not practical because of the complexities involved with this hypothetical calculation. See note 19.

The total amount of unrecognized tax benefits as of November 30, 2017 and November 30, 2016 were $39.1 million and $58.3 million, respectively. If recognized, $26.6 million of these tax benefits as of November 30, 2017 would affect the effective tax rate.

The following table summarizes the activity related to our gross unrecognized tax benefits for the years ended November 30:



(millions)	2017			2016			2015
Balance at beginning of year	$	58.3		$	56.5		$	55.7
Additions for current year tax positions	7.3			10.3			8.9
Additions for prior year tax positions	0.9			2.4			3.2
Reductions for prior year tax positions	(8.4		)	—			(0.8		)
Settlements	(18.1		)	—			(0.1		)
Statute expirations	(2.1		)	(10.0		)	(8.1		)
Foreign currency translation	1.2			(0.9		)	(2.3		)
Balance at November 30	$	39.1		$	58.3		$	56.5

We record interest and penalties on income taxes in income tax expense. We recognized interest and penalty expense (income) of $0.4 million, $1.2 million and $(0.1) million in 2017, 2016 and 2015, respectively. As of November 30, 2017 and 2016, we had accrued $5.3 million and $5.7 million, respectively, of interest and penalties related to unrecognized tax benefits.

Tax settlements or statute of limitation expirations could result in a change to our uncertain tax positions. We believe that the reasonably possible total amount of unrecognized tax benefits as of November 30, 2017 that could decrease in the next 12 months as a result of various statute expirations, audit closures and/or tax settlements would not be material.

We file income tax returns in the U.S. federal jurisdiction and various state and non-U.S. jurisdictions. The open years subject to tax audits vary depending on the tax jurisdictions. In major jurisdictions, we are no longer subject to income tax audits by taxing authorities for years before 2010.

We are under normal recurring tax audits in the U.S. and in several jurisdictions outside the U.S. 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 reserves for uncertain tax positions are adequate to cover existing risks and exposures.