Income Taxes

The following table summarizes the domestic and foreign components of income from continuing operations before income taxes for the years ended December 31, 2015, 2014 and 2013:



	Year Ended December 31,
(Amounts in thousands)	2015		2014		2013
Domestic	$	238,416	$	145,622	$	182,736
Foreign	24,808		14,389		21,189
Income from continuing operations before income taxes	$	263,224	$	160,011	$	203,925

The following table summarizes the components of income tax expense (benefit) from continuing operations for the years ended December 31, 2015, 2014 and 2013:



(Amounts in thousands)	Current			Deferred			Total
2015:
U.S. federal	$	(119	)	$	61,583		$	61,464
Foreign	9,656			(2,399		)	7,257
State and local	6,336			(4,688		)	1,648
Income tax expense	$	15,873		$	54,496		$	70,369
2014:
U.S. federal	$	(57	)	$	31,757		$	31,700
Foreign	6,260			46			6,306
State and local	7,028			1,488			8,516
Income tax expense	$	13,231		$	33,291		$	46,522
2013:
U.S. federal	$	—		$	39,077		$	39,077
Foreign	9,868			(1,123		)	8,745
State and local	2,818			(3,039		)	(221		)
Income tax expense	$	12,686		$	34,915		$	47,601

Recorded income tax expense allocated to income from continuing operations differed from amounts computed by applying the U.S. federal income tax rate of 35% to income before income taxes and discontinued operations as a result of the following:



	Year Ended December 31,
(Amounts in thousands)	2015			2014			2013
Computed "expected" federal income tax expense	$	92,128		$	56,004		$	71,374
Effect of noncontrolling interest income distribution	(13,358		)	(13,114		)	(13,412		)
Change in valuation allowance	896			1,413			13,144
Effect of state and local income taxes, net of federal tax benefit	1,072			5,535			(144		)
Nondeductible compensation	435			2,271			2,265
Effect of foreign income taxes	741			635			(1,495		)
Effect of foreign earnings earned and remitted in the same year	5,155			11,126			195
Effect of foreign tax credits	(4,432		)	(15,571		)	(17,387		)
Effect of change in accounting method related to recoverable bankruptcy costs	(9,603		)	—			—
Effect of additional basis due to amended returns, net of NOL reduction	—			(3,532		)	—
Other, net	(2,665		)	1,755			(6,939		)
Income tax expense	$	70,369		$	46,522		$	47,601

In prior periods, a deduction was taken for foreign taxes paid to other jurisdictions. The Company amended the 2011 and 2012 tax returns to take a Foreign Tax Credit in lieu of that deduction and to recover additional fixed asset basis. Additionally, the Company filed an amended return for 2013 to recoup additional fixed asset basis and to recover previously expired NOL carryforwards. This resulted in a net increase to deferred tax assets.

In connection with emergence from Chapter 11, the Company's prepetition debt securities, primarily the prepetition notes issued by SFI and SFO, were extinguished. Absent an exception, a debtor recognizes cancellation of debt income ("CODI") upon discharge of its outstanding indebtedness for an amount of consideration that is less than its adjusted issue price. The Internal Revenue Code ("IRC") provides that a debtor in a bankruptcy case may exclude CODI from income but must reduce certain of its tax attributes by the amount of any CODI realized as a result of the consummation of a plan of reorganization. The amount of CODI realized by a taxpayer is the adjusted issue price of any indebtedness discharged less the sum of (i) the amount of cash paid, (ii) the issue price of any new indebtedness issued and (iii) the fair market value of any other consideration, including equity, issued. As a result of the market value of our equity upon emergence from Chapter 11 bankruptcy proceedings, we were able to retain a significant portion of our federal NOLs and state NOLs (collectively, the "Tax Attributes") after reduction of the Tax Attributes for CODI realized on emergence from Chapter 11. As a result of emergence from Chapter 11, the Company's NOLs were reduced by approximately $804.8 million of CODI.

Sections 382 and 383 of the IRC impose an annual limitation on the utilization of NOLs and other favorable Tax Attribute carryforwards that a corporation has at the time of a so-called "ownership change" within the meaning of IRC Section 382. The Company's issuance of stock pursuant to its reorganization under Chapter 11 resulted in such an ownership change. The limitation amount is the product of the value of the Company, computed under special rules that apply to a bankruptcy reorganization, and a published rate that applied for the month the Company emerged from Chapter 11. The Company's limitation amount is approximately $32.5 million for each year to which NOLs and other Tax Attribute carryforwards that existed at emergence are carried, increased by the portion of the net built-in income and gain that existed at emergence and that IRS pronouncements permit a taxpayer to treat as recognized during the five year period following the ownership change. This has allowed the Company to increase its annual limitation by amounts that are expected to total $696.0 million by the end of 2015. Annual limitation amounts accumulate for future use to the extent they are not utilized in a given year. As a result of the Section 382 limitation, the Company may have a cash tax liability in future years even though its deferred tax assets have not been exhausted. A subsequent ownership change could further limit the Company's utilization of NOLs and other Tax Attributes if a smaller limitation resulted from the subsequent ownership change or applied to NOLs and other Tax Attributes accumulated after emergence from Chapter 11.

Substantially all of our future taxable temporary differences (deferred tax liabilities) relate to the different financial accounting and tax depreciation methods and periods for property and equipment (20 to 25 years for financial reporting purposes and 7 to 12 years for tax reporting purposes) and intangibles. Our net operating loss carryforwards, alternative minimum tax credits, accrued insurance expenses and deferred compensation amounts represent future income tax benefits (deferred tax assets). The following table summarizes the components of deferred income tax assets and deferred tax liabilities as of December 31, 2015 and 2014:



	December 31,
(Amounts in thousands)	2015		2014
Deferred tax assets	$	362,733	$	427,141
Less: Valuation allowance	88,398		97,284
Net deferred tax assets	274,335		329,857
Deferred tax liabilities	414,608		414,641
Net deferred tax liability	$	140,273	$	84,784



	December 31,
(Amounts in thousands)	2015		2014
Deferred tax assets:
Federal net operating loss carryforwards	$	106,418	$	158,638
State net operating loss carryforwards	96,811		104,752
Deferred compensation	41,241		57,030
Foreign tax credits	37,390		32,958
Alternative minimum tax credits	6,591		6,591
Accrued insurance, pension liability and other	74,282		67,172
Total deferred tax assets	$	362,733	$	427,141

Deferred tax liabilities:
Property and equipment	$	288,504	$	290,432
Intangible assets and other	126,104		124,209
Total deferred tax liabilities	$	414,608	$	414,641

In addition to the net operating losses recognized under financial accounting principles and included in deferred income tax assets in the above table, we had approximately $244.2 million of income tax deductions related to share-based payments that are in excess of the amount recognized in the accompanying financial statements as of December 31, 2015. When these benefits are realized in our tax returns as a reduction of taxes that otherwise would have been required to be paid in cash, then, in accordance with FASB ASC Topic 718, Compensation - Stock Compensation, we will recognize these excess benefits as an increase in additional paid in capital on an after-tax basis, which at current income tax rates would approximate $95.7 million. We use the "with and without" method when determining when excess tax benefits have been realized.

As of December 31, 2015 and 2014, we had approximately $6.6 million of alternative minimum tax credits that have no expiration date.

As of December 31, 2015, we had approximately $0.4 billion and $3.8 billion of net operating loss carryforwards available for U.S. federal income tax and state income tax purposes, respectively, that expire through 2030 and 2034, respectively. We have recorded a valuation allowance of $88.4 million and $97.3 million as of December 31, 2015 and 2014, respectively, due to uncertainties related to our ability to utilize some of our deferred tax assets before they expire. The valuation allowance at December 31, 2015 and December 31, 2014 was based on our inability to use state deferred tax assets related to NOLs that were generated in states where we no longer do business or where we have consistently not generated taxable income. During the year ended December 31, 2014, certain of these fully valued deferred tax assets related to NOL carryforwards were written off or written down as a result of changes in state tax laws. In particular, fully valued NOL carryforwards related to past operations in Ohio were written off since our operations in that state are no longer subject to corporate income tax in that state. Additionally, due to a change in New York tax law, certain NOL carryforwards were converted from pre-apportionment NOL carryforwards to post-apportionment NOL carryforwards, resulting in a write down of these fully valued NOLs. In conjunction with each of these changes, a corresponding reduction in valuation allowance was recorded. These changes did not impact our results of operations.

The change in valuation allowance attributable to income from continuing operations, discontinued operations and other comprehensive loss and equity is presented below:



	Year Ended December 31,
(Amounts in thousands)	2015		2014			2013
Continuing operations	$	896	$	1,413		$	13,144
Discontinued operations	—		(207		)	(209		)
Total change in valuation allowance	$	896	$	1,206		$	12,935

Our unrecognized tax benefit as of December 31, 2015 and 2014 was $43.9 million. There were no additions or reductions to this unrecognized tax benefit during 2015. We classify interest and penalties attributable to income taxes as part of income tax expense. Due to the Company's NOL position, we have not accrued any penalties and interest.