10.

INCOME TAXES:

The components of income (loss) from continuing operations before income taxes were as follows (in thousands):


	Year Ended December 31,
	2015			2014		2013
Income (loss) from continuing operations before income taxes:
Domestic	$	244,955		$	263,357	$	472,816
Foreign		(16,280	)		163,242		115,504

Total	$	228,675		$	426,599	$	588,320

The components of the provision for income taxes for continuing operations were as follows (in thousands):


	Year Ended December 31,
	2015			2014		2013
Current:
Federal	$	85,830		$	67,430	$	164,397
State		9,783			8,693		20,998
Foreign		21,262			39,978		37,193

Total current tax provision		116,875			116,101		222,588

Deferred:
Federal		(5,247	)		11,507		(22,611	)
State		917			2,232		(2,540	)
Foreign		(15,073	)		9,167		(562	)

Total deferred tax provision (benefit)		(19,403	)		22,906		(25,713	)

Total provision for income taxes from continuing operations	$	97,472		$	139,007	$	196,875

The actual income tax provision differed from the income tax provision computed by applying the U.S. federal statutory corporate rate to income from continuing operations before provision for income taxes as follows (in thousands):


	Year Ended December 31,
	2015			2014			2013
Provision at the statutory rate	$	80,036		$	149,697		$	205,912
Increases (decreases) resulting from —
State taxes		7,241			7,890			11,201
Foreign taxes		1,239			(13,059	)		(9,994	)
Contingency reserves, net		4,438			(650	)		(3,385	)
Production activity deduction		(6,871	)		(6,033	)		(10,247	)
Employee per diems, meals and entertainment		8,727			9,817			7,888
Taxes on unincorporated joint ventures		(3,838	)		(6,429	)		(6,786	)
Asset impairments		7,047			—			—
Other		(547	)		(2,226	)		2,286

Total provision for income taxes from continuing operations	$	97,472		$	139,007		$	196,875

Deferred income taxes result from temporary differences in the recognition of income and expenses for financial reporting purposes and tax purposes. The tax effects of these temporary differences, representing deferred tax assets and liabilities, result principally from the following (in thousands):


	December 31,
	2015			2014
Deferred income tax liabilities:
Property and equipment	$	(189,793	)	$	(185,007	)
Goodwill		(69,059	)		(70,832	)
Other intangibles		(36,565	)		(48,344	)
Other book/tax accounting method differences		(61,095	)		(63,819	)

Total deferred income tax liabilities	$	(356,512	)		(368,002	)

Deferred income tax assets:
Accruals and reserves		25,070			20,835
Accrued insurance		75,591			64,745
Stock and incentive compensation and pension withdrawal liabilities		52,009			53,155
Net operating loss carryforwards		27,255			19,353
Other		10,894			10,194

Subtotal		190,819			168,282
Valuation allowance		(16,141	)		(13,028	)

Total deferred income tax assets		174,678			155,254

Total net deferred income tax liabilities	$	(181,834	)	$	(212,748	)

The net deferred income tax assets and liabilities were comprised of the following (in thousands):


	December 31,
	2015			2014
Deferred income taxes:
Assets		4,657			3,233
Liabilities		(186,491	)		(215,981	)

Total net deferred income tax liabilities	$	(181,834	)	$	(212,748	)

The valuation allowance for deferred income tax assets at December 31, 2015, 2014 and 2013 was $16.1 million, $13.0 million and $13.3 million, respectively. These valuation allowances relate to foreign net operating loss carryforwards, state net operating loss carryforwards and foreign tax credit carryforwards. The net change in the total valuation allowance for each of the years ended December 31, 2015, 2014 and 2013 was an increase of $3.1 million, a decrease of $0.3 million and an increase of $6.4 million, respectively. The valuation allowance was established primarily as a result of uncertainty in Quanta’s outlook as to future taxable income in particular tax jurisdictions. Quanta believes it is more likely than not that it will realize the benefit of its deferred tax assets, net of existing valuation allowances.

At December 31, 2015, Quanta had state and foreign net operating loss carryforwards, the tax effect of which was approximately $29.8 million. These carryforwards will expire as follows: 2016, $0.1 million; 2017, $1.2 million; 2018, $0.7 million; 2019, $0.7 million; 2020, $0.3 million and $26.8 million thereafter. A valuation allowance of $13.9 million has been recorded against certain foreign and state net operating loss carryforwards.

Through December 31, 2015, Quanta has not provided U.S. income taxes on approximately $269.8 million of unremitted foreign earnings. If Quanta was to repatriate cash that is indefinitely reinvested outside the U.S., it could be subject to additional U.S income and foreign withholding taxes. Because of the number and variability of assumptions required, it is not practicable to determine the amount of any additional U.S. tax liability that may result if Quanta decides to no longer indefinitely reinvest foreign earnings outside the U.S. If Quanta’s intentions or U.S. tax laws change in the future, there may be a significant negative impact on the provision for income taxes and cash flows as a result of recording an incremental tax liability, in the period such change occurs.

A reconciliation of unrecognized tax benefit balances is as follows (in thousands):


	December 31,
	2015			2014			2013
Balance at beginning of year	$	50,668		$	48,306		$	50,555
Additions based on tax positions related to the current year		5,340			9,133			8,984
Additions for tax positions of prior years		292			2,438			—
Reductions for tax positions of prior years		(132	)		—			—
Reductions for audit settlements		(1,345	)		—			—
Reductions resulting from a lapse of the applicable statute of limitations periods		(282	)		(9,209	)		(11,233	)

Balance at end of year	$	54,541		$	50,668		$	48,306

For the year ended December 31, 2015, the $0.3 million reduction was primarily due to the expiration of certain federal and state statute of limitations periods for the 2004 tax year. For the year ended December 31, 2014, the $9.2 million reduction was primarily due to the expiration of certain federal and state statute of limitations periods for the 2010 tax year. For the year ended December 31, 2013, the $11.2 million reduction was primarily due to the expiration of certain federal and state statute of limitations periods for the 2009 tax year.

The balances of unrecognized tax benefits, the amount of related interest and penalties and what Quanta believes to be the range of reasonably possible changes in the next 12 months are as follows (in thousands):


	December 31,
	2015		2014		2013
Unrecognized tax benefits	$	54,541	$	50,668	$	48,306
Portion that, if recognized, would reduce tax expense and effective tax rate		48,312		42,952		40,029
Accrued interest on unrecognized tax benefits		8,750		6,304		5,766
Accrued penalties on unrecognized tax benefits		673		697		99
Reasonably possible reduction to the balance of unrecognized tax benefits in succeeding 12 months	$	0 to $27,485	$	0 to $10,221	$	0 to $6,554
Portion that, if recognized, would reduce tax expense and effective tax rate	$	0 to $24,009	$	0 to $8,484	$	0 to $4,816

Quanta classifies interest and penalties within the provision for income taxes. Quanta recognized interest expense of $2.4 million, interest expense of $0.5 million and interest income of $0.2 million in the provision for income taxes for the years ended December 31, 2015, 2014 and 2013, respectively.

Quanta is currently under examination by the IRS for calendar years 2010, 2011 and 2012, and the federal statute of limitations for examination in all subsequent tax years remains open. Additionally, certain subsidiaries are under examination by various U.S. state, Canadian and other foreign tax authorities for multiple periods. Quanta’s Canadian subsidiaries remain open to examination by the Canada Revenue Agency for tax years 2010 through 2014 as these statute of limitations periods have not yet expired. Quanta does not consider any state in which it does business to be a major tax jurisdiction.