6. Income Taxes

The components of U.S. and foreign income before income tax and a reconciliation between the federal income tax expense at statutory rates and the actual income tax expense is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,

	2016		2015		2016		2015

(In millions)

Income (loss) before income tax:
U.S.		$ 638		$ 188		$ 535		$ 454
Foreign		(82)		160		(60)		294

Total		$ 556		$ 348		$ 475		$ 748


Income tax expense at statutory rate		$ 194		$ 122		$ 166		$ 262
Increase (decrease) in income tax expense resulting from:
Exempt investment income		(28)		(34)		(92)		(92)
Foreign related tax differential		2		(27)		102		(32)
Amortization of deferred charges associated with intercompany rig sales to other tax jurisdictions				1				42
Taxes related to domestic affiliate		1		5		2		(1)
Partnership earnings not subject to taxes		(9)		(6)		(37)		(26)
Unrecognized tax benefit		(2)		(4)		8		1
Other		5		9		22		16

Income tax expense		$ 163		$ 66		$ 171		$ 170

The effective tax rate is impacted by the change in the relative components of earnings or losses generated in foreign tax jurisdictions with lower tax rates.

As of September 30, 2016, a valuation allowance of $61 million was established for the future tax benefit of foreign tax credits in the U.S. which Diamond Offshore no longer expects to be able to realize prior to their expiration.