Income Taxes

At December 31, 2013, we had recognized deferred tax assets relating to tax loss carryforwards of $756.1 primarily from foreign jurisdictions, for which a valuation allowance of $717.6 has been provided. We also had recognized deferred tax assets of $585.4 relating to excess foreign tax credit carryforwards that will expire in the 2018-2023 period. We have concluded that the deferred tax assets associated with the excess foreign tax credits are “more likely than not” to be realized prior to expiration.

During the fourth quarter of 2012, as a result of the uncertainty of our financing arrangements and our domestic liquidity profile at that time, we determined that we may repatriate offshore cash to meet certain domestic funding needs. Accordingly, we asserted that these undistributed earnings of foreign subsidiaries were no longer indefinitely reinvested and, therefore, recorded an additional provision for income taxes of $168.3 on such earnings. At December 31, 2012, we had a deferred tax liability in the amount of $224.8 for the U.S. tax cost on the undistributed earnings of subsidiaries outside of the U.S. of $3.1 billion.

At December 31, 2013, we continue to assert that our foreign earnings are not indefinitely reinvested, as a result of our domestic liquidity profile. Accordingly, we adjusted our deferred tax liability to account for our 2013 undistributed earnings of foreign subsidiaries and for earnings that were actually repatriated to the U.S. during the year. Additionally, the deferred tax liability was reduced due to the lower cost to repatriate the undistributed earnings of our foreign subsidiaries compared to 2012. The net impact on the deferred tax liability associated with the Company’s undistributed earnings is a reduction of $81.9, resulting in a deferred tax liability balance of $142.8 related to the incremental U.S. tax cost on $2.6 billion of undistributed foreign earnings at December 31, 2013. This deferred income tax liability amount is net of the estimated foreign tax credits that would be generated upon the repatriation of such earnings. The repatriation of foreign earnings should result in the utilization of foreign tax credits in the year of repatriation; therefore, the utilization of foreign tax credits is dependent on the amount and timing of repatriations, as well as the jurisdictions involved. We have not included the undistributed earnings of our subsidiary in Venezuela in the calculation of this deferred income tax liability as local regulations restrict cash distributions denominated in U.S. dollars.

Deferred tax assets (liabilities) resulting from temporary differences in the recognition of income and expense for tax and financial reporting purposes at December 31 consisted of the following:



	2013			2012
Deferred tax assets:
Accrued expenses and reserves	$	274.2		$	279.3
Pension and postretirement benefits	132.0			195.6
Asset revaluations	37.4			39.4
Capitalized expenses	199.4			131.8
Intangible assets	—			142.3
Share-based compensation	63.7			62.2
Restructuring initiatives	23.9			26.4
Postemployment benefits	8.1			14.0
Tax loss carryforwards	756.1			648.0
Foreign tax credit carryforwards	585.4			356.0
Minimum tax and business credit carryforwards	53.2			47.5
All other	52.6			65.9
Valuation allowance	(783.4		)	(627.4		)
Total deferred tax assets	1,402.6			1,381.0
Deferred tax liabilities:
Depreciation and amortization	(55.9		)	(44.3		)
Unremitted foreign earnings	(142.8		)	(224.8		)
Prepaid expenses	(16.6		)	(10.0		)
Capitalized interest	(9.4		)	(10.2		)
All other	(33.7		)	(24.6		)
Total deferred tax liabilities	(258.4		)	(313.9		)
Net deferred tax assets	$	1,144.2		$	1,067.1

Deferred tax assets (liabilities) at December 31 were classified as follows:



	2013			2012
Deferred tax assets:
Prepaid expenses and other	$	233.6		$	273.5
Other assets	944.7			826.9
Total deferred tax assets	1,178.3			1,100.4
Deferred tax liabilities:
Income taxes	(1.1		)	(6.1		)
Long-term income taxes	(33.0		)	(27.2		)
Total deferred tax liabilities	(34.1		)	(33.3		)
Net deferred tax assets	$	1,144.2		$	1,067.1

The valuation allowance primarily represents amounts for foreign tax loss carryforwards. The basis used for recognition of deferred tax assets included the profitability of the operations, related deferred tax liabilities and the likelihood of utilizing tax credit carryforwards during the carryover periods. The net increase in the valuation allowance of $156.0 during 2013 was mainly due to several of our foreign entities continuing to incur losses during 2013, thereby increasing the tax loss carryforwards for which a valuation allowance was provided. In addition, the net increase in the valuation allowance was partially attributable to Venezuela, due to the impact of higher than expected inflation on our taxable income which negatively impacted the likelihood we would realize existing deferred tax assets. Given the short life of the net operating loss carryforward periods for Venezuela, we determined that it was more likely than not that we would not use these carryforward losses before they expire.

Income from continuing operations, before taxes for the years ended December 31 was as follows:



	2013			2012			2011
United States	$	(500.8	)	$	(227.7	)	$	(156.9	)
Foreign	663.4			656.4			1,137.0
Total	$	162.6		$	428.7		$	980.1

The U.S. loss from continuing operations, before taxes, for the years ended December 31, 2013, 2012 and 2011, does not include dividend income from foreign subsidiaries.

The provision for income taxes for the years ended December 31 was as follows:



	2013			2012			2011
Federal:
Current	$	76.6		$	38.8		$	41.7
Deferred	(212.5		)	(111.5		)	(95.0		)
	(135.9		)	(72.7		)	(53.3		)
Foreign:
Current	216.3			267.5			368.5
Deferred	90.5			143.6			(9.0		)
	306.8			411.1			359.5
State and other:
Current	(.7		)	1.2			(1.5		)
Deferred	(6.6		)	(4.2		)	(0.2		)
	(7.3		)	(3.0		)	(1.7		)
Total	$	163.6		$	335.4		$	304.5

The foreign provision for income taxes includes the U.S. tax cost on foreign earnings of $9.9, $156.8 and $24.7 for the years ended December 31, 2013, 2012 and 2011, respectively.

The effective tax rate for the years ended December 31 was as follows:



	2013		2012		2011
Statutory federal rate	35.0	%	35.0	%	35.0	%
State and local taxes, net of federal tax benefit	(2.1	)	(.5	)	.2
Taxes on foreign income, including translation	(22.0	)	(2.0	)	(3.3	)
Audit settlements, statute expirations and amended returns	(6.9	)	(2.1	)	(3.3	)
Additional tax on unremitted prior year foreign earnings	—		39.3		—
Venezuela devaluation and highly inflationary accounting	28.2		—		—
FCPA accrual	19.2		—		—
China goodwill impairment	8.4		3.6		—
Reserves for uncertain tax positions	4.5		3.0		1.1
Net change in valuation allowances	31.4		1.5		.1
Blocked income	3.9		1.1		.9
Other	1.0		(.7	)	.4
Effective tax rate	100.6	%	78.2	%	31.1	%

At December 31, 2013, we had tax loss carryforwards of $2,519.8. The loss carryforwards expiring between 2014 and 2028 are $197.2 and the loss carryforwards which do not expire are $2,322.6. We also had minimum tax credit carryforwards of $37.9 which do not expire, business credit carryforwards of $15.3 that will expire between 2020 and 2033, and foreign tax credit carryforwards of $585.4 that will expire between 2018 and 2023.

Uncertain Tax Positions

At December 31, 2013, we had $28.0 of total gross unrecognized tax benefits of which approximately $2.8 would impact the effective tax rate, if recognized.

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




Balance at December 31, 2010	$	84.3
Additions based on tax positions related to the current year	1.2
Additions for tax positions of prior years	9.3
Reductions for tax positions of prior years	(20.0		)
Reductions due to lapse of statute of limitations	(6.7		)
Reductions due to settlements with tax authorities	(32.1		)
Balance at December 31, 2011	36.0
Additions based on tax positions related to the current year	7.4
Additions for tax positions of prior years	9.3
Reductions for tax positions of prior years	(3.7		)
Reductions due to lapse of statute of limitations	(6.4		)
Reductions due to settlements with tax authorities	(6.6		)
Balance at December 31, 2012	36.0
Additions based on tax positions related to the current year	5.3
Additions for tax positions of prior years	1.9
Reductions for tax positions of prior years	(7.8		)
Reductions due to lapse of statute of limitations	(3.1		)
Reductions due to settlements with tax authorities	(4.3		)
Balance at December 31, 2013	$	28.0

We recognize interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes. We had $4.4 at December 31, 2013 and $6.2 at December 31, 2012, accrued for interest and penalties, net of tax benefit. We recorded benefits of $.1, $1.1 and $3.8 for interest and penalties, net of taxes during 2013, 2012 and 2011, respectively.

We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. As of December 31, 2013, the tax years that remained subject to examination by major tax jurisdiction for our most significant subsidiaries were as follows:



Jurisdiction	Open Years
Brazil	2008-2013
China	2007-2013
Mexico	2008-2013
Poland	2008-2013
Russia	2011-2013
United States	2013

We anticipate that it is reasonably possible that the total amount of unrecognized tax benefits could decrease in the range of $5 to $10 within the next 12 months due to the closure of tax years by expiration of the statute of limitations and audit settlements.