Taxes on Income

Income before taxes on income resulted from domestic and foreign operations is as follows:



(in millions)	Year Ended December 31,
	2015		2014			2013
Domestic operations	$	1,266	$	(423	)	$	821
Foreign operations	549		477			478
Total continuing income before taxes	$	1,815	$	54		$	1,299

The provision for taxes on income consists of the following:



(in millions)	Year Ended December 31,
	2015			2014			2013
Federal:
Current	$	90		$	285		$	194
Deferred	276			(213		)	51
Total federal	366			72			245
Foreign:
Current	111			135			152
Deferred	(1		)	1			(19		)
Total foreign	110			136			133
State and local:
Current	34			62			37
Deferred	37			(25		)	10
Total state and local	71			37			47
Total provision for taxes for continuing operations	547			245			425
Provision for discontinued operations	—			140			299
Total provision for taxes	$	547		$	385		$	724

A reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate for financial reporting purposes is as follows:



	Year Ended December 31,
	2015		2014		2013
U.S. federal statutory income tax rate	35.0	%	35.0	%	35.0	%
Legal and regulatory settlements	—		524.1		—
State and local income taxes	2.6		64.2		2.8
Foreign operations	(3.2	)	(79.6	)	(3.9	)
S&P Dow Jones Indices LLC joint venture	(2.0	)	(60.2	)	(2.0	)
Tax credits and incentives	(2.9	)	(91.5	)	(2.1	)
Other, net	0.6		61.7		2.9
Effective income tax rate for continuing operations	30.1	%	453.7	%	32.7	%

The principal temporary differences between the accounting for income and expenses for financial reporting and income tax purposes are as follows:



(in millions)	December 31,
	2015			2014
Deferred tax assets:
Legal and regulatory settlements	$	45		$	305
Employee compensation	91			99
Accrued expenses	72			94
Postretirement benefits	126			146
Unearned revenue	39			27
Allowance for doubtful accounts	12			13
Loss carryforwards	114			37
Other	18			14
Total deferred tax assets	517			735
Deferred tax liabilities:
Goodwill and intangible assets	(299		)	(362		)
Fixed assets	(9		)	(8		)
Other	—			—
Total deferred tax liabilities	(308		)	(370		)
Net deferred income tax asset (liability) before valuation allowance	209			365
Valuation allowance	(98		)	(16		)
Net deferred income tax asset (liability)	$	111		$	349
Reported as:
Current deferred tax assets	$	109		$	360
Current deferred tax liabilities	(8		)	(2		)
Non-current deferred tax assets	33			31
Non-current deferred tax liabilities	(23		)	(40		)
Net deferred income tax asset (liability)	$	111		$	349

We record valuation allowances against deferred income tax assets when we determine that it is more likely than not based upon all the available evidence that such deferred income tax assets will not be realized. The valuation allowance is primarily related to operating losses.

We have not recorded deferred income taxes applicable to undistributed earnings of foreign subsidiaries that are indefinitely reinvested in foreign operations. Undistributed earnings that are indefinitely reinvested in foreign operations amounted to $1,573 million at December 31, 2015. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings is not practicable.

We made net income tax payments for continuing and discontinued operations totaling $260 million in 2015, $419 million in 2014, and $787 million in 2013. As of December 31, 2015, we had net operating loss carryforwards of $440 million, which will expire over various periods.

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



(in millions)	Years ended December 31,
	2015			2014			2013
Balance at beginning of year	$	118		$	82		$	74
Additions based on tax positions related to the current year	22			30			27
Additions for tax positions of prior years	12			33			10
Reduction for tax positions of prior years	(14		)	(11		)	(9		)
Reduction for settlements	(18		)	(16		)	(20		)
Balance at end of year	$	120		$	118		$	82

The total amount of federal, state and local, and foreign unrecognized tax benefits as of December 31, 2015, 2014 and 2013 was $120 million, $118 million and $82 million, respectively, exclusive of interest and penalties. The increase of $20 million in 2015 (excluding settlements) is the amount of unrecognized tax benefits that unfavorably impacted tax expense. The unfavorable impact to the tax provision was partially offset by the resolution of tax audits in multiple jurisdictions.

We recognize accrued interest and penalties related to unrecognized tax benefits in interest expense and operating-related expense, respectively. In addition to the unrecognized tax benefits, as of December 31, 2015 and 2014, we had $31 million and $23 million, respectively, of accrued interest and penalties associated with uncertain tax positions.

During 2015, we completed the federal income tax audit for 2013. The U.S. federal income tax audits for 2014 and 2015 are in process. During 2015, we completed various state and foreign tax audits and, with few exceptions, we are no longer subject to federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before 2007. The impact to tax expense in 2015, 2014 and 2013 was not material.

We file income tax returns in the U.S. federal jurisdiction, various states, and foreign jurisdictions, and we are routinely under audit by many different tax authorities. We believe that our accrual for tax liabilities is adequate for all open audit years based on an assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. It is possible that tax examinations will be settled prior to December 31, 2016. If any of these tax audit settlements do occur within that period, we would make any necessary adjustments to the accrual for unrecognized tax benefits. Until formal resolutions are reached between us and the tax authorities, the determination of a possible audit settlement range with respect to the impact on unrecognized tax benefits is not practicable.

Based on the current status of income tax audits, we believe that the total amount of unrecognized tax benefits may significantly decrease in the next twelve months. Although the ultimate resolution of our tax audits is unpredictable, the resulting change in our unrecognized tax benefits could have a material impact on our results of operations and/or cash flows.