Note 4—Income Taxes

The components of income before income taxes and the provision for income taxes are as follows:

	Year Ended December 31,
	2015			2014			2013
Income before income taxes:
United States	$	134.4		$	161.4		$	152.8
Foreign	918.4			811.1			693.8

	$	1,052.8		$	972.5		$	846.6


Current tax provision:
United States	$	39.5		$	63.7		$	47.5
Foreign	228.1			183.1			162.3

	267.6			246.8			209.8


Deferred tax provision (benefit):
United States	13.3			(0.7		)	(0.1		)
Foreign	(0.4		)	11.2			(1.8		)

	12.9			10.5			(1.9		)

Total provision for income taxes	$	280.5		$	257.3		$	207.9

At December 31, 2015, the Company had $70.3, $12.1 and $6.7 of foreign tax loss and credit carryforwards, U.S. federal loss carryforwards, and U.S. state tax loss and credit carryforwards net of federal benefit, respectively, of which $37.7, $12.1 and $3.2, respectively, will either expire or be refunded at various dates through 2035 and the balance can be carried forward indefinitely.

A valuation allowance of $18.5 and $15.5 at December 31, 2015 and 2014, respectively, has been recorded which relates to the foreign net operating loss carryforwards and U.S. state tax credits. The net change in the valuation allowance for deferred tax assets was an increase of $3.0 and a decrease of $3.9 in 2015 and 2014, respectively, which was related to foreign net operating loss and U.S. state credit carryforwards.

Differences between the U.S. statutory federal tax rate and the Company’s effective income tax rate are analyzed below:

	Year Ended December 31,
	2015		2014		2013

U.S. statutory federal tax rate	35.0	%	35.0	%	35.0	%
State and local taxes	0.1		0.4		0.6
Foreign earnings and dividends taxed at different rates	(8.8	)	(8.3	)	(9.4	)
Valuation allowance	0.3		(0.4	)	0.2
Tax impact of the delay in American Taxpayer Relief Act	—		—		(1.3	)
Other	—		(0.2	)	(0.5	)

Effective tax rate	26.6	%	26.5	%	24.6	%

The 2013 tax rate reflects a decrease in tax expense of $11.3, or $0.03 per diluted common share, resulting from the delay, by the U.S. government, in the reinstatement of certain federal income tax provisions for the year 2012 relating primarily to research and development credits and certain U.S. taxes on foreign income that are part of the tax provisions within the American Taxpayer Relief Act. Such tax provisions were reinstated on January 2, 2013 with retroactive effect to 2012. Under U.S. GAAP, the benefit to the Company of $11.3 relating to the 2012 tax year was recorded as a benefit in the first quarter of 2013 at the date of reinstatement; as such, between the fourth quarter of 2012 and the first quarter of 2013, there is no net impact on the Company from an income statement perspective. The 2013 tax rate also reflects a reduction in tax expense of $3.6, or $0.01 per diluted common share, for tax reserve adjustments relating to the completion of the audits of certain of the Company’s prior year tax returns. Excluding these impacts as well as the net impact of the acquisition-related expenses, the Company’s effective tax rate for 2015, 2014 and 2013 was 26.5%, 26.5% and 26.3%, respectively.

The components of the Company’s deferred tax assets and liabilities included in Intangibles and other long-term assets and in Accrued pension benefit obligations and other long-term liabilities in the accompanying Consolidated Balance Sheet are comprised of the following:

	December 31,
	2015			2014
Deferred tax assets relating to:
Accrued liabilities and reserves	$	21.4		$	27.3
Operating loss and tax credit carryforwards	29.4			26.2
Pensions, net	63.6			61.1
Inventories	29.0			22.6
Employee benefits	41.8			35.6

Total deferred tax assets	185.2			172.8
Valuation allowance	(18.5		)	(15.5		)

Total deferred tax assets, net of valuation allowances	166.7			157.3


Deferred tax liabilities relating to:
Goodwill		163.5			129.4
Depreciation and amortization	37.4			36.1
Contingent consideration	6.6			6.6

Total deferred tax liabilities	207.5			172.1


Net deferred tax liability	$	(40.8	)	$	(14.8	)

See Note 1 of the Consolidated Financial Statements for further discussion on the adoption of ASU 2015-17.

A tabular reconciliation of the gross amounts of unrecognized tax benefits excluding interest and penalties at the beginning and end of the year for 2015, 2014 and 2013 are as follows:

	2015			2014			2013
Unrecognized tax benefits as of January 1	$	27.7		$	24.8		$	26.4
Gross increases and gross decreases for tax positions in prior periods	0.3			2.2			1.4
Gross increases - current period tax position	2.1			2.6			2.4
Settlements	—			(0.5		)	—
Lapse of statute of limitations	(0.3		)	(1.4		)	(5.4		)

Unrecognized tax benefits as of December 31	$	29.8		$	27.7		$	24.8

The Company includes estimated interest and penalties related to unrecognized tax benefits in the provision for income taxes. During the years ended December 31, 2015, 2014 and 2013, the provision for income taxes included a net expense of $1.5, $0.9 and $0.2, respectively, in estimated interest and penalties. As of December 31, 2015, 2014 and 2013, the liability for unrecognized tax benefits included $6.0, $4.5 and $3.0, respectively, for tax-related interest and penalties.

The Company operates in the U.S. and numerous foreign taxable jurisdictions, and at any point in time has numerous audits underway at various stages of completion. With few exceptions, the Company is subject to income tax examinations by tax authorities for the years 2011 and after. The Company is generally not able to precisely estimate the ultimate settlement amounts or timing until the close of an audit. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by local authorities and may not be fully sustained, despite the Company’s belief that the underlying tax positions are fully supportable. As of December 31, 2015 and 2014, the amount of the liability for unrecognized tax benefits, including penalties and interest, which if recognized would impact the effective tax rate, was $20.6 and $19.2, respectively, which is included in Accrued pension benefit obligations and other long-term liabilities in the accompanying Consolidated Balance Sheets. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including progress of tax audits and the closing of statutes of limitation. Based on information currently available, management anticipates that over the next twelve month period, audit activity could be completed and statutes of limitation may close relating to existing unrecognized tax benefits of $3.1.