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Income Taxes | 12 Months Ended
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Dec. 31, 2015
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The Company recognized a tax benefit of $27 million for the year ended December 31, 2015 compared to a tax benefit of $15 million for the year ended December 31, 2014. The Company’s effective tax rates were 16.1% and (95.0)% as of December 31, 2015 and December 31, 2014, respectively. The Company’s effective tax rate was lower than the federal statutory rate of 35% primarily due to pre-tax losses in the United States and corporate structure alignment initiatives in various non-US jurisdictions. Since the date of the Enterprise acquisition, as part of its corporate initiatives, the Company has been executing its integration plan for the Enterprise business (the “Integration Plan”). The Company anticipates completing the Integration Plan as soon as practicable and expects that the Integration Plan will allow the combined businesses to achieve further synergies and cost savings associated with the acquisition. As part of the Integration Plan, the Company began realigning certain acquired assets of the Enterprise business with and into the Company’s corporate structure and business model. The geographical sources of (loss) income before income taxes were as follows (in millions):
| Year Ended December 31,
| 2015 |  | 2014 |  | 2013
United States | $ | (293 | ) |  | $ | (122 | ) |  | $ | 48 |
Outside United States | 129 |  |  | 139 |  |  | 116 |
Total | $ | (164 | ) |  | $ | 17 |  |  | $ | 164 |
The (benefit) provision for income taxes consists of the following (in millions):
| Year Ended December 31,
| 2015 |  | 2014 |  | 2013
Current: |  |  |  |  |
Federal | $ | 62 |  |  | $ | 6 |  |  | $ | 9 |
State | 2 |  |  | 4 |  |  | 1 |
Foreign | 33 |  |  | 19 |  |  | 12 |
Total current | 97 |  |  | 29 |  |  | 22 |
Deferred: |  |  |  |  |
Federal | (100 | ) |  | (38 | ) |  | 7 |
State | (22 | ) |  | (5 | ) |  | 1 |
Foreign | (2 | ) |  | (1 | ) |  | — |
Total deferred | (124 | ) |  | (44 | ) |  | 8 |
Total | $ | (27 | ) |  | $ | (15 | ) |  | $ | 30 |
The provision for income taxes differs from the amount computed by applying the U.S. statutory federal income tax rate of 35% to income before income taxes. A reconciliation of the provision for income taxes is below (in millions):
| Year Ended December 31,
| 2015 |  | 2014 |  | 2013
(Benefit) provision computed at statutory rate | $ | (57 | ) |  | $ | 6 |  |  | $ | 57 |
State income tax, net of Federal tax benefit | (2 | ) |  | (1 | ) |  | 1 |
US impact of Enterprise acquisition and integration | 45 |  |  | 7 |  |  | — |
Tax credits | (11 | ) |  | (3 | ) |  | (1 | )
Foreign rate differential | (30 | ) |  | (33 | ) |  | (26 | )
Change in valuation allowance | 13 |  |  | 3 |  |  | — |
Effect of rate changes on deferred taxes | (7 | ) |  | — |  |  | — |
US income inclusion | 7 |  |  | 3 |  |  | — |
Change in contingent income tax reserves | 6 |  |  | 3 |  |  | — |
Other | 9 |  |  | — |  |  | (1 | )
(Benefit) provision for income taxes | $ | (27 | ) |  | $ | (15 | ) |  | $ | 30 |
The primary reason for the difference between the US statutory rate of 35% and the Company’s effective tax rate is due to a combination of higher profits in lower rate international jurisdictions, research and experimental credits, foreign tax credits and other items. The significant jurisdictions driving the foreign rate differential are the UK, Singapore and Luxembourg. The US impact of Enterprise acquisition and integration of $45 million includes one-time charges of approximately $32 million. Tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows (in millions):
| December 31,
| 2015 |  | 2014
Deferred tax assets: |  |  |
Capitalized research expenditures | $ | 46 |  |  | $ | 27 |
Capitalized software costs | 43 |  |  | — |
Accrued bonus | 17 |  |  | 12 |
Inventory items | 27 |  |  | 2 |
Other accruals | 43 |  |  | 55 |
Deferred revenue | 59 |  |  | 79 |
Equity based compensation expense | 17 |  |  | 14 |
Unrealized gain and losses on securities and investments | 10 |  |  | 9 |
Net operating loss carryforwards | 63 |  |  | 27 |
Tax credits | 35 |  |  | 62 |
Sales return/rebate reserve | 12 |  |  | 8 |
Valuation allowance | (48 | ) |  | (57 | )
Total deferred tax assets | 324 |  |  | 238 |
Deferred tax liabilities: |  |  |
Unrealized loss on other investments | — |  |  | (1 | )
Depreciation and amortization | (273 | ) |  | (311 | )
Undistributed earnings | — |  |  | (3 | )
Total deferred tax liabilities | (273 | ) |  | (315 | )
Net deferred tax assets (liabilities) | $ | 51 |  |  | $ | (77 | )
The Company earns a significant amount of our operating income outside the U.S. With the exception of the acquired unrepatriated earnings related to the Enterprise acquisition, it is the Company’s policy to consider foreign earnings and profits to be permanently reinvested in foreign jurisdictions. As part of the Enterprise acquisition, the acquired earnings & profits and previously taxed income (“PTI”), including excess cash balances pursuant to the Master Acquisition Agreement (“MAA”) of the newly acquired MSI foreign subsidiaries will not be permanently reinvested. As a result, the Company established a deferred tax liability in purchase accounting in the amount of approximately $3 million. This amount was reversed in 2015. The Company has not recognized deferred tax liabilities for unremitted earnings of approximately $720 million and $466 million as of December 31, 2015 and 2014, respectively. It is not practicable to determine the amount of unrecognized deferred tax liabilities on these indefinitely reinvested earnings. As of December 31, 2014, the Company had approximately $37 million of net operating losses ("NOLs") and tax credits from MSI. Of this amount, the Company has utilized approximately $35 million of NOLs and tax credits against its US tax liability in 2015 and written off approximately $2 million of these tax credits. The Company has elected to capitalize and amortize approximately $139 million of research and experimentation costs and approximately $120 million of software costs in the US. At December 31, 2015, the Company has approximately $450 million of NOLs and approximately $35 million of credit carryforwards. Of this amount, approximately $100 million of NOLs and $33 million of credit carryforwards are expected to expire by 2035 and approximately $350 million of NOLs and $2 million of credit carryforwards will carry forward indefinitely. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
| Year ended December 31,
| 2015 | 2014
Balance at beginning of year | $ | 19 |  | $ | 4 |
Additions for tax positions related to the current year | 2 |  | 1 |
Additions for tax positions related to prior years | 15 |  | 2 |
Reductions for tax positions related to prior years | (2 | ) | 0 |
Settlements for tax positions | (1 | ) | 0 |
Additions related to Acquisition | $ | 0 |  | $ | 12 |
Balance at end of year | $ | 33 |  | $ | 19 |
At December 31, 2015 and December 31, 2014, there are $23 million and $19 million of unrecognized tax benefits that if recognized would affect the annual effective tax rate. The Company anticipates that it is reasonably possible that $4 million of unrecognized tax benefits may reverse in 2016, due to statute of limitation expiration and settlements with the tax authorities. The Company regularly assesses the reasonableness of the unrecognized tax benefits to determine the adequacy of its provision for income taxes; however there can be no assurance on the final determination of these unrecognized tax benefits. The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters as part of income tax expense. The Company accrued $3 million of interest and penalties in the consolidated balance sheets as of December 31, 2015 and 2014. The Company is currently undergoing audits of the 2013 and 2014 US federal income tax returns and its 2012 UK tax return. The tax years 2011 through 2015 remain open to examination by multiple state taxing jurisdictions. Below is a summary of open tax years by major jurisdiction outside of the United States.
China | 2003 - 2015
France | 2011 - 2015
Germany | 2009 - 2015
India | 1998 - 2015
Japan | 2012 - 2015
United Kingdom | 2009 - 2015

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 + Details
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