INCOME TAXES

Our 2016 income tax provision from continuing operations was $111.2 million compared to $106.3 million for 2015 and $103.5 million for 2014. The actual income tax rates on income from continuing operations before income taxes, less amounts attributable to noncontrolling interests, for the years ended December 31, 2016, 2015 and 2014, were 37.5%, 38.1% and 37.4%, respectively. The increase in the 2016 income tax provision compared to 2015 was predominantly due to the effect of increased income before income taxes and certain increases in the state tax provision attributable to the mix of earnings. The increase in the 2015 income tax provision compared to 2014 was predominantly due to certain increases in the state tax provision attributable to the mix of earnings and the effect of a change in the United Kingdom statutory tax rate on deferred tax assets.

As of December 31, 2016 and 2015, the amount of unrecognized income tax benefits was $4.0 million and $4.8 million, respectively (of which $2.2 million and $3.0 million, if recognized, would favorably affect our effective income tax rate, respectively).

As of December 31, 2016 and 2015, we had an accrual of $0.5 million and $0.4 million for the payment of interest related to unrecognized income tax benefits included in the Consolidated Balance Sheets, respectively. During each of the years ended December 31, 2016 and 2015, we recognized approximately $0.1 million in interest expense related to our unrecognized income tax benefits. In addition, we reversed less than $0.1 million and $0.1 million of accrued interest expense related to our unrecognized income tax benefits for the years ended December 31, 2016 and 2015, respectively. As of December 31, 2016 and 2015, we had total income tax reserves included in “Other long-term liabilities” of $4.5 million and $5.2 million, respectively. We record interest expense on unrecognized tax benefits in income tax expense.

A reconciliation of unrecognized income tax benefits at the beginning and at the end of the year is as follows (in thousands):



	2016			2015
Balance at beginning of year	$	4,761		$	5,203
Additions based on tax positions related to the current year	1,415			611
Additions based on tax positions related to prior years	—			—
Reductions for tax positions of prior years	(1,360		)	(1,053		)
Reductions for expired statute of limitations	(834		)	—
Balance at end of year	$	3,982		$	4,761

It is reasonably possible that approximately $3.3 million of unrecognized income tax benefits at December 31, 2016, primarily relating to uncertain tax positions attributable to tax return filing positions, may decrease in the next twelve months as a result of anticipated settlements with taxing authorities and the expiration of applicable statutes of limitations.

We file income tax returns with the Internal Revenue Service and various state, local and foreign tax agencies. The Company is currently under examination by the Internal Revenue Service and various state taxing authorities for the years 2008 through 2015.

The income tax provision in the accompanying Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014 consisted of the following (in thousands):



	2016			2015			2014
Current:
Federal provision	$	95,171		$	94,405		$	80,852
State and local provisions	23,387			21,320			14,532
Foreign provision	749			831			2,396
	119,307			116,556			97,780
Deferred	(8,108		)	(10,300		)	5,748
	$	111,199		$	106,256		$	103,528

Factors accounting for the variation from U.S. statutory income tax rates from continuing operations for the years ended December 31, 2016, 2015 and 2014 were as follows (in thousands):



	2016			2015			2014
Federal income taxes at the statutory rate	$	103,773		$	97,588		$	98,576
Noncontrolling interests	(76		)	(77		)	(1,667		)
State and local income taxes, net of federal tax benefits	14,801			12,590			9,944
State tax reserves	74			62			(38		)
Permanent differences	3,698			3,096			2,961
Domestic manufacturing deduction	(6,830		)	(6,604		)	(5,008		)
Excess tax benefit from share-based compensation	(2,114		)	—			—
Foreign income taxes (including UK statutory rate changes)	(1,290		)	(361		)	(1,237		)
Federal tax reserves	(893		)	14			62
Other	56			(52		)	(65		)
	$	111,199		$	106,256		$	103,528

The deferred income tax assets and deferred income tax liabilities recorded for the years ended December 31, 2016 and 2015 were as follows (in thousands):



	2016			2015
Deferred income tax assets:
Excess of amounts expensed for financial statement purposes over amounts deducted for income tax purposes:
Insurance liabilities	$	62,473		$	58,582
Pension liability	8,950			6,255
Deferred compensation	35,649			28,033
Other (including liabilities and reserves)	32,350			28,562
Total deferred income tax assets	139,422			121,432
Valuation allowance for deferred tax assets	(3,531		)	(805		)
Net deferred income tax assets	135,891			120,627
Deferred income tax liabilities:
Costs capitalized for financial statement purposes and deducted for income tax purposes:
Goodwill and identifiable intangible assets	(229,347		)	(218,715		)
Depreciation of property, plant and equipment	(18,145		)	(17,211		)
Other	(5,761		)	(5,299		)
Total deferred income tax liabilities	(253,253		)	(241,225		)
Net deferred income tax liabilities	$	(117,362	)	$	(120,598	)

The components of the net deferred income tax liabilities in the accompanying Consolidated Balance Sheets are included in “Prepaid expenses and other” of $41.7 million and $36.0 million, “Other assets” of $12.9 million and $11.3 million, and “Other long-term obligations” of $172.0 million and $167.9 million, at December 31, 2016 and December 31, 2015, respectively.

We file a consolidated federal income tax return including all of our U.S. subsidiaries. As of December 31, 2016 and 2015, the total valuation allowance on net deferred income tax assets was approximately $3.5 million and $0.8 million, respectively, related to state and local net operating losses. The reason for the net increase in the valuation allowance for 2016 was related to the uncertainty of projected future earnings required to realize the benefit of net operating loss carryforwards for certain subsidiaries. Although realization is not assured, we believe it is more likely than not that the deferred income tax asset, net of the valuation allowance discussed above, will be realized. The amount of the deferred income tax asset considered realizable, however, could be reduced if estimates of future income are reduced.

At December 31, 2016, we had trading losses for United Kingdom income tax purposes of approximately $17.9 million, which have no expiration date. Such losses are subject to review by the United Kingdom taxing authority. Realization of the deferred income tax assets is dependent on our generating sufficient taxable income. We believe that the deferred income tax assets will be realized through projected future income.

Income before income taxes from continuing operations for the years ended December 31, 2016, 2015 and 2014 consisted of the following (in thousands):



	2016		2015		2014
United States	$	283,904	$	264,867	$	265,529
Foreign	12,590		13,956		16,116
	$	296,494	$	278,823	$	281,645

As of December 31, 2016, we had undistributed foreign earnings from our United Kingdom subsidiary of approximately $28.1 million for which we have not recorded a deferred tax liability, as a significant portion of such earnings were subject to tax in prior periods and the earnings which have not been subject to income taxes in prior periods are indefinitely reinvested. As of December 31, 2016, the amount of cash held in the United Kingdom was approximately $30.2 million which, if repatriated, should not result in any federal or state income taxes. As of December 31, 2016, we had undistributed foreign earnings from our Puerto Rico subsidiary of approximately $1.4 million for which we have not recorded a deferred tax liability as such earnings are indefinitely reinvested. As of December 31, 2016, the amount of cash held in Puerto Rico was approximately $3.0 million which, if repatriated, may result in federal and state income taxes of approximately $0.5 million.