NOTE 4 — INCOME TAXES

The provision for income taxes consists of the following (dollars in millions):


	2014			2013			2012
Current:
Federal	$	916		$	827		$	604
State		102			86			58
Foreign		52			44			43
Deferred:
Federal		3			(53	)		167
State		(5	)		20			(8	)
Foreign		40			26			24

	$	1,108		$	950		$	888

The provision for income taxes reflects $9 million ($6 million net of tax) of interest expense related to taxing authority examinations and $4 million and $53 million ($3 million and $33 million net of tax, respectively) of reductions in interest related to taxing authority examinations for the years ended December 31, 2014, 2013 and 2012, respectively. Our foreign income before income taxes was $238 million, $187 million and $178 million for the years ended December 31, 2014, 2013 and 2012, respectively.

A reconciliation of the federal statutory rate to the effective income tax rate follows:


	2014			2013			2012
Federal statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal tax benefit		2.3			2.3			2.2
Change in liability for uncertain tax positions		0.5			0.5			—
Tax exempt interest income		(0.1	)		(0.2	)		(0.2	)
Other items, net		(0.5	)		0.3			(1.4	)

Effective income tax rate on income applicable to HCA Holdings, Inc.		37.2			37.9			35.6
Income attributable to noncontrolling interests from consolidated partnerships		(5.4	)		(5.7	)		(4.9	)

Effective income tax rate on income before income taxes		31.8	%		32.2	%		30.7	%

A summary of the items comprising the deferred tax assets and liabilities at December 31 follows (dollars in millions):


	2014				2013
	Assets		Liabilities		Assets		Liabilities
Depreciation and fixed asset basis differences	$	—	$	226	$	—	$	229
Allowances for professional liability and other risks		403		—		365		—
Accounts receivable		341		—		423		—
Compensation		272		—		240		—
Other		756		745		638		698

	$	1,772	$	971	$	1,666	$	927

At December 31, 2014, federal and state net operating loss carryforwards (expiring in years 2015 through 2030) available to offset future taxable income approximated $120 million and $5 million, respectively. Utilization of net operating loss carryforwards in any one year may be limited.

The following table summarizes the activity related to our unrecognized tax benefits (dollars in millions):


	2014			2013
Balance at January 1	$	445		$	425
Additions based on tax positions related to the current year		3			21
Additions for tax positions of prior years		72			25
Reductions for tax positions of prior years		(11	)		(18	)
Settlements		(1	)		(5	)
Lapse of applicable statutes of limitations		(5	)		(3	)

Balance at December 31	$	503		$	445

During 2014, the IRS Examination Division began an audit of HCA Holding’s Inc.’s 2011 and 2012 federal income tax returns. We are also subject to examination by state and foreign taxing authorities. During 2013, we finalized settlements with the IRS resolving all outstanding issues for HCA Inc.’s 2007, 2008 and 2009 tax years.

Our liability for unrecognized tax benefits was $548 million, including accrued interest of $58 million and excluding $13 million that was recorded as reductions of the related deferred tax assets, as of December 31, 2014 ($462 million, $30 million and $13 million, respectively, as of December 31, 2013). Unrecognized tax benefits of $205 million ($160 million as of December 31, 2013) would affect the effective rate, if recognized.

Depending on the resolution of any IRS, state and foreign tax disputes, the completion of examinations by federal, state or foreign taxing authorities, or the expiration of statutes of limitation for specific taxing jurisdictions, we believe it is reasonably possible that our liability for unrecognized tax benefits may significantly increase or decrease within the next 12 months. However, we are currently unable to estimate the range of any possible change.