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TAXES ON INCOME | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
TAXES ON INCOME | TAXES ON INCOME The Company's pre-tax income from continuing operations before equity in earnings of equity method investees consisted of approximately $1.1 billion, $1.1 billion and $810 million from U.S. operations and $4 million, $11 million and $13 million from foreign operations for the years ended December 31, 2016, 2015 and 2014, respectively. During the year ended December 31, 2016, the Company recorded $84 million of income tax expense, consisting of $91 million of current income tax expense and a deferred income tax benefit of $7 million, associated with the sale of Focus Diagnostics (see Note 6). In addition, the Company recognized a non-taxable gain on an escrow recovery associated with an acquisition. During the year ended December 31, 2015, the Company recognized $145 million deferred income tax expense associated with the financial reporting and tax basis difference resulting from the contribution of the Clinical Trials business to the Q 2 Solutions joint venture and a $58 million deferred income tax benefit resulting from the future tax effects of winding down a subsidiary. The components of income tax expense from continuing operations for 2016, 2015 and 2014 were as follows:
| 2016 |  | 2015 |  | 2014
Current: |  |  |  |  |
Federal | $ | 346 |  |  | $ | 231 |  |  | $ | 204 |
State and local | 45 |  |  | 27 |  |  | 34 |
Foreign | 1 |  |  | 3 |  |  | 3 |
Deferred: |  |  |  |  |
Federal | 33 |  |  | 104 |  |  | 28 |
State and local | 4 |  |  | 7 |  |  | (6 | )
Foreign | — |  |  | 1 |  |  | (1 | )
Total | $ | 429 |  |  | $ | 373 |  |  | $ | 262 |
A reconciliation of the federal statutory rate to the Company's effective tax rate for 2016, 2015 and 2014 was as follows:
| 2016 |  | 2015 |  | 2014
Tax provision at statutory rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State and local income taxes, net of federal benefit | 3.3 |  |  | 2.6 |  |  | 3.2 |
Gains and losses on book and tax basis difference | 3.3 |  |  | (2.7 | ) |  | — |
Adjustments to unrecognized tax positions | 0.5 |  |  | (0.4 | ) |  | (5.1 | )
Impact of noncontrolling interests | (1.8 | ) |  | (1.6 | ) |  | (1.7 | )
Impact of equity earnings | 1.0 |  |  | 0.7 |  |  | 1.1 |
Other, net | (1.8 | ) |  | 0.2 |  |  | (0.7 | )
Effective tax rate | 39.5 | % |  | 33.8 | % |  | 31.8 | %
In 2016, the sale of Focus Diagnostics and the non-taxable gain on an escrow recovery associated with an acquisition resulted in the gains and losses on book and tax basis difference as discussed above. In 2015, the contribution of the Clinical Trials business to the Q 2 Solutions joint venture and winding down a subsidiary resulted in the gains and losses on book and tax basis difference as discussed above. In 2014, the adjustments to unrecognized tax positions mainly resulted from the favorable resolution of certain tax contingencies. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) as of December 31, 2016 and 2015 were as follows:
| 2016 |  | 2015
Non-current deferred tax assets (liabilities): |  |  |
Accounts receivable reserves | $ | 94 |  |  | $ | 95 |
Liabilities not currently deductible | 189 |  |  | 202 |
Stock-based compensation | 58 |  |  | 49 |
Capitalized R&D expense | — |  |  | 1 |
Basis differences in investments, joint ventures and subsidiaries | (87 | ) |  | (90 | )
Net operating loss carryforwards, net of valuation allowance | 120 |  |  | 140 |
Depreciation and amortization | (533 | ) |  | (517 | )
Total non-current deferred tax liabilities, net | $ | (159 | ) |  | $ | (120 | )
As of December 31, 2016 and 2015, non-current deferred tax assets of $32 million and $37 million, respectively, are recorded in other long-term assets. As of December 31, 2016 and 2015, non-current deferred tax liabilities of $191 million and $157 million, respectively, are included in other long-term liabilities. As of December 31, 2016, the Company had estimated net operating loss carryforwards for federal and state income tax purposes of $215 million and $1.4 billion, respectively, which expire at various dates through 2036. Estimated net operating loss carryforwards for foreign income tax purposes are $57 million as of December 31, 2016, some of which can be carried forward indefinitely while others expire at various dates through 2026. As of December 31, 2016, 2015 and 2014, deferred tax assets associated with net operating loss carryforwards of $204 million, $222 million and $242 million, respectively, have each been reduced by valuation allowances of $56 million, $54 million and $60 million, respectively. The Company has not provided U.S. federal income and foreign tax withholdings on undistributed earnings from certain non-U.S. subsidiaries for which the Company intends to reinvest such earnings indefinitely outside the U.S. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable. Income taxes payable, including those classified in other long-term liabilities as of December 31, 2016 and 2015, were $62 million and $50 million, respectively. Prepaid income taxes were $14 million and $41 million as of December 31, 2016 and 2015, respectively, and were included in prepaid expenses and other current assets. The total amount of unrecognized tax benefits as of and for the years ended December 31, 2016, 2015 and 2014 consisted of the following:
| 2016 |  | 2015 |  | 2014
Balance, beginning of year | $ | 91 |  |  | $ | 122 |  |  | $ | 168 |
Additions: |  |  |  |  |
For tax positions of current year | 3 |  |  | 5 |  |  | 17 |
For tax positions of prior years | 12 |  |  | 5 |  |  | 1 |
Reductions: |  |  |  |  |
Changes in judgment | (1 | ) |  | (11 | ) |  | (56 | )
Expirations of statutes of limitations | (7 | ) |  | (3 | ) |  | (6 | )
Settlements | — |  |  | (27 | ) |  | (2 | )
Balance, end of year | $ | 98 |  |  | $ | 91 |  |  | $ | 122 |
The contingent liabilities for tax positions primarily relate to uncertainties associated with the realization of tax benefits derived from the allocation of income and expense among state jurisdictions, the characterization and timing of certain tax deductions associated with business combinations, income and expenses associated with certain intercompany licensing arrangements, certain tax credits and the deductibility of certain settlement payments. The total amount of unrecognized tax benefits as of December 31, 2016, that, if recognized, would affect the effective income tax rate from continuing operations is $44 million. Based upon the expiration of statutes of limitations, settlements and/or the conclusion of tax examinations, the Company believes it is reasonably possible that the total amount of unrecognized tax benefits may decrease by up to $11 million within the next twelve months. Accruals for interest expense on contingent tax liabilities are classified in income tax expense in the consolidated statements of operations. Accruals for penalties have historically been immaterial. Interest expense (income) included in income tax expense in each of the years ended December 31, 2016, 2015 and 2014 was approximately $2 million, $0 million and $(1) million respectively. As of December 31, 2016 and 2015, the Company has approximately $12 million and $9 million, respectively, accrued, net of the benefit of a federal and state deduction, for the payment of interest on uncertain tax positions. The recognition and measurement of certain tax benefits includes estimates and judgment by management and inherently involves subjectivity. Changes in estimates may create volatility in the Company's effective tax rate in future periods and may be due to settlements with various tax authorities (either favorable or unfavorable), the expiration of the statute of limitations on some tax positions and obtaining new information about particular tax positions that may cause management to change its estimates. In the regular course of business, various federal, state, local and foreign tax authorities conduct examinations of the Company's income tax filings and the Company generally remains subject to examination until the statute of limitations expires for the respective jurisdiction. The Internal Revenue Service (“IRS”) has either completed its examinations of the Company's consolidated federal income tax returns or the statute of limitations has expired up through and including the 2012 tax year; however, the Company is pursuing all alternatives for settlement, including litigation, for certain tax adjustments related to its 2009 tax year. At this time, the Company does not believe that there will be any material additional payments beyond its recorded contingent liability reserves that may be required as a result of these tax audits. As of December 31, 2016, a summary of the tax years that remain subject to examination, are under appeal, or are otherwise unresolved for the Company's major jurisdictions are: United States - federal 2009, 2013 - 2016 United States - various states 2006 - 2016

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