(10) Income Taxes

Income (loss) before taxes consisted of the following (in millions):



	2014			2013		2012
United States	$	(11.2	)	$	75.4	$	121.3
Foreign	101.5			95.1		148.6
Total	$	90.3		$	170.5	$	269.9

The provision for income taxes is summarized as follows (in millions):



	2014			2013			2012
Current
Federal	$	37.8		$	15.4		$	24.5
State	1.5			4.8			7.2
Foreign	41.3			29.8			31.4
	80.6			50.0			63.1
Deferred	(26.4		)	(5.5		)	6.5
Total	$	54.2		$	44.5		$	69.6

A reconciliation of the statutory Federal income tax rate and the effective tax rate reflected in the consolidated statements of income follows:



	2014		2013		2012
Federal statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	(0.4	)%	1.9	%	2.0	%
Domestic production activities deduction	(2.7	)%	(1.4	)%	(1.0	)%
Foreign rate differential - China	(7.7	)%	(4.4	)%	(2.1	)%
Foreign rate differential - All Other	(4.8	)%	(9.2	)%	(9.3	)%
Research and development credit	(7.4	)%	(4.5	)%	—	%
Statutory tax rate change	—	%	(2.6	)%	—	%
Goodwill impairment	42.9	%	13.2	%	—	%
Valuation allowance	4.2	%	1.7	%	—	%
Adjustments to tax accruals and reserves	—	%	—	%	0.5	%
Other	0.9	%	(3.6	)%	0.7	%
Effective tax rate	60.0	%	26.1	%	25.8	%

Deferred taxes arise primarily from differences in amounts reported for tax and financial statement purposes. The Company's net deferred tax liability as of January 3, 2015 of $(49.0) million is classified on the consolidated balance sheet as a net current deferred income tax benefit of $67.0 million and a net non-current deferred income tax liability of $(116.0) million.

The components of this net deferred tax liability are as follows (in millions):



	January 3, 2015			December 28, 2013
Accrued employee benefits	$	60.5		$	43.5
Bad debt allowances	8.8			2.6
Warranty accruals	4.7			4.9
Inventory	9.7			7.7
Accrued liabilities	9.5			13.2
Derivative instruments	19.7			5.9
Tax loss carryforward	16.6			11.4
Valuation allowance	(10.1		)	(5.9		)
Other	2.8			1.4
Deferred tax assets	122.2			84.7
Property related	(37.1		)	(41.6		)
Intangible items	(134.1		)	(136.6		)
Deferred tax liabilities	(171.2		)	(178.2		)
Net deferred tax liability	$	(49.0	)	$	(93.5	)

Following is a reconciliation of the beginning and ending amount of unrecognized tax benefits (in millions):



Unrecognized tax benefits, January 1, 2012	$	7.1
Gross increases from prior period tax positions	0.7
Gross increases from current period tax positions	—
Settlements with taxing authorities	(1.6		)
Lapse of statute of limitations	(0.5		)
Unrecognized tax benefits, December 29, 2012	$	5.7
Gross increases from prior period tax positions	1.1
Gross increases from current period tax positions	0.3
Settlements with taxing authorities	(2.1		)
Lapse of statute of limitations	(0.6		)
Unrecognized tax benefits, December 28, 2013	$	4.4
Gross increases from prior period tax positions	0.1
Gross increases from current period tax positions	3.6
Settlements with taxing authorities	(2.1		)
Lapse of statute of limitations	(0.2		)
Unrecognized tax benefits, January 3, 2015	$	5.8

Unrecognized tax benefits as of January 3, 2015 amount to $5.8 million, all of which would impact the effective income tax rate if recognized.

Potential interest and penalties related to unrecognized tax benefits are recorded in income tax expense. During fiscal 2014, 2013 and 2012, the Company recognized approximately $(0.2) million, $0.2 million and $0.1 million in net interest (income) expense, respectively. The Company had approximately $1.1 million, $1.3 million and $1.1 million of accrued interest as of January 3, 2015, December 28, 2013 and December 29, 2012, respectively.

Due to statute expirations, approximately $0.2 million of the unrecognized tax benefits, including accrued interest, could reasonably change in the coming year.

With few exceptions, the Company is no longer subject to U.S. Federal and state/local income tax examinations by tax authorities for years prior to 2010, and the Company is no longer subject to non-U.S. income tax examinations by tax authorities for years prior to 2008.

At January 3, 2015, the Company had approximately $16.6 million of tax effected net operating losses in various jurisdictions with a portion expiring over a period of up to 15 years and the remaining never expiring. At December 28, 2013, the Company had approximately $11.4 million of tax effected net operating losses in various jurisdictions with a portion expiring over a period up to 15 years and the remaining never expiring.

Valuation allowances totaling $10.1 million and $5.9 million as of January 3, 2015 and December 28, 2013, respectively, have been established for deferred income tax assets primarily related to certain subsidiary loss carryforwards that may not be realized. Realization of the net deferred income tax assets is dependent on generating sufficient taxable income prior to their expiration. Although realization is not assured, management believes it is more-likely-than-not that the net deferred income tax assets will be realized. The amount of the net deferred income tax assets considered realizable, however, could change in the near term if future taxable income during the carryforward period fluctuates.

The Company has been granted a tax holiday for some of its Chinese subsidiaries. This tax holiday expires in 2016 and is renewable subject to certain conditions with which the Company expects to comply.