
8.	INCOME TAXES

Our provision for income taxes consisted of the following:



		Year Ended December 31,
($ in millions)		2016			2015		2014
U.S. Federal:
	Current	$	1.3		30.3		11.1
	Deferred	(11.1		)	17.8		30.3
		$	(9.8	)	48.1		41.4
State and Local:
	Current	$	8.2		5.3		6.5
	Deferred	(4.0		)	1.9		0.3
		$	4.2		7.2		6.8
International:
	Current	$	105.4		81.9		66.3
	Deferred	8.2			(4.4	)	(16.9	)
		$	113.6		77.5		49.4

Total		$	108.0		132.8		97.6

In 2016, our current tax expense increased by $21.8 million, and our deferred tax expense was reduced by a corresponding amount, due to the generation of net operating loss carryovers. In 2015 and 2014, our current tax expense was reduced by $16.8 million and $23.5 million, respectively, due to the utilization of prior years' net operating loss carryovers.

Income tax expense differed from the amounts computed by applying the U.S. federal income tax rate of 35% to earnings before provision for income taxes as a result of the following:



		Year Ended December 31,
($ in millions)		2016					2015					2014
Income tax expense at statutory rates		$	154.8		35.0	%	$	202.7		35.0	%	$	170.0		35.0	%
	Increase (reduction) in income taxes from:
	State and local income taxes, net of federal income tax benefit	2.8			0.6		5.9			1.0		5.1			1.0
	Amortization of goodwill and other intangibles	(5.7		)	(1.3	)	(5.1		)	(0.9	)	(5.2		)	(1.1	)
	Nondeductible expenses	6.7			1.5		5.4			0.9		5.1			1.0
	International earnings taxed at various rates	(59.1		)	(13.4	)	(57.0		)	(9.8	)	(59.1		)	(12.2	)
	Valuation allowances	8.3			1.9		(4.7		)	(0.8	)	7.4			1.5
	Recognition of tax benefit, net of nondeductible indemnification asset write-off	—			—		(8.3		)	(1.4	)	(22.4		)	(4.6	)
	Other, net	0.2			0.1		(6.1		)	(1.1	)	(3.3		)	(0.5	)
Total		$	108.0		24.4	%	$	132.8		22.9	%	$	97.6		20.1	%

With respect to international earnings taxed at varying rates, we have operations which constitute a taxable income presence in 94 countries or other taxable jurisdictions outside of the U.S. which are treated as such by the U.S. Internal Revenue Code. All of those countries had income tax rates lower than the combined U.S. federal and state income tax rate in 2016.

With respect to jurisdictions in which we operate with very low tax rates (those with effective national and local combined tax rates of 25% or lower), income from Hong Kong (16.5%), Singapore (17%), the United Kingdom (20%), and the Netherlands (25%) represent the most significant components of the international earnings line item in our effective tax rate reconciliation. Other very low rate tax jurisdictions with meaningful contributions to the international earnings line item in our effective tax rate reconciliation include Cyprus (12.5%), Ireland (12.5%), Poland (19%), and The People's Republic of China (25%). In the aggregate, these very low rate jurisdictions contributed over two-thirds of the difference between the actual income tax provision for international earnings and the equivalent provision at the U.S. statutory rate in 2016. The remaining difference was contributed by earnings in jurisdictions with effective tax rates above 25% and by earnings of insignificant amounts in very low tax rate jurisdictions other than those noted above.

In defining very low tax rate jurisdictions, we consider effective tax rates which applied in 2016 based upon income levels and including national and municipal, state or provincial taxes also based upon income levels, which may cause those effective rates to differ from the maximum national statutory rates for the jurisdictions. We consider jurisdictions with a tax rate of 25% or lower to be very low tax rate jurisdictions, which represents a difference of 10% or more from the U.S. federal statutory income tax rate.

Our income before taxes from domestic (U.S.) and international sources is presented in the following table.



	Year Ended December 31,
($ in millions)	2016		2015	2014
Domestic	$	57.2	132.1	111.2
International	385.2		447.0	374.4
Total	$	442.4	579.1	485.6

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below.



	December 31,
($ in millions)	2016			2015		2014
Deferred tax assets attributable to:
Accrued expenses	$	224.2		170.5		153.0
U.S. federal and state loss and credit carryovers	21.7			6.6		14.6
Allowances for uncollectible accounts	12.7			7.1		6.8
International loss carryovers	118.1			121.0		136.9
Investments in real estate ventures	—			26.9		33.6
Pension liabilities	18.2			12.6		20.0
Other	7.4			—		—
Deferred tax assets	402.3			344.7		364.9
Less: valuation allowances	(51.7		)	(51.7	)	(62.0	)
Net deferred tax assets	$	350.6		293.0		302.9

Deferred tax liabilities attributable to:
Property and equipment	$	24.3		0.6		1.6
Intangible assets	152.8			123.9		101.7
Income deferred for tax purposes	2.1			2.2		1.6
Investment in real estate ventures	11.9			—		—
Other	0.1			0.4		5.5
Deferred tax liabilities	$	191.2		127.1		110.4
Net deferred taxes	$	159.4		165.9		192.5

We have not provided a deferred tax liability on the unremitted foreign earnings of international subsidiaries because it is our intent to permanently reinvest such earnings outside of the U.S. If repatriation of all such earnings were to occur, we estimate our resulting U.S. federal and state tax liability would be approximately $204.0 million, net of the benefits of utilization of foreign tax credits.

As of December 31, 2016, we had an available U.S. net operating loss carryover of $27.1 million, which expires in 2036, U.S. state net operating loss carryovers with an aggregate benefit of $12.3 million, which expire at various dates through 2036, and international net operating loss carryovers of $535.7 million, which generally do not have expiration dates. The change in deferred tax balances for net operating loss carryovers from 2015 to 2016 included increases from current year losses and decreases from current year estimated utilization.

As of December 31, 2016, we believe it is more-likely-than-not the net deferred tax assets of $159.4 million will be realized based upon our estimates of future income and the consideration of net operating losses, earnings trends, and tax planning strategies. Valuation allowances have been provided with regard to the tax benefit of certain international net operating loss carryovers, for which we have concluded recognition is not yet appropriate. In 2016, we reduced valuation allowances by $9.5 million on some jurisdictions' net operating losses due to the utilization or expiration of those losses, and we increased valuation allowances by $17.3 million for other jurisdictions based upon circumstances that caused us to establish or continue to provide valuation allowances on current or prior year losses in addition to those provided in prior years. The balance of the movement in valuation allowances comparing December 31, 2016 to December 31, 2015 was attributable to the effect of changes in foreign currency exchange rates.

As of December 31, 2016, our net current receivable for income tax was $40.7 million, consisting of a current receivable of $121.1 million and current payable of $80.4 million, and our net noncurrent liability was $24.3 million, consisting of a noncurrent payable. As of December 31, 2015, our net current receivable for income tax was $2.3 million, consisting of a current receivable of $90.4 million and a current payable of $88.1 million.

JLL or one or more of our subsidiaries files income tax returns in the U.S. (including 47 states, 25 cities, the District of Columbia, and Puerto Rico), the United Kingdom (including England and Scotland), Australia, Germany, The People's Republic of China (including Hong Kong and Macau), France, Japan, Singapore, India, The Netherlands, Spain, and 80 other countries. Generally, the Company's open tax years include those from 2012 to the present, although reviews of taxing authorities for more recent years have been completed or are in process in a number of jurisdictions.

As of December 31, 2016, JLL was under examination in the United Kingdom, France, India, Indonesia, Thailand, the Philippines, and Taiwan. In the United States, JLL was under examination in the States of Massachusetts and New York.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is presented in the following table.



($ in millions)	2016			2015
Balance as of January 1	$	28.3		48.5
Additions based on tax positions related to the current year	10.8			7.8
Decrease for the reversals of tax positions of prior years	(1.5		)	(11.2	)
Lapse of statute of limitations	—			(16.8	)
Balance as of December 31	$	37.6		28.3

We believe it is reasonably possible matters for which we have recorded $1.4 million of gross unrecognized tax benefits will be resolved within twelve months after December 31, 2016. The recognition of tax benefits, and other changes to the amounts of our unrecognized tax benefits, may occur as the result of ongoing operations, the outcomes of audits or other examinations by tax authorities, or the passing of statutes of limitations. We do not expect changes to our unrecognized tax benefits to have a significant impact on net income, the financial position, or the cash flows of the Company. We do not believe we have material tax positions for which the ultimate deductibility is highly certain, but there is uncertainty about the timing of such deductibility.

We recognize interest accrued and penalties, if any, related to income taxes as a component of income tax expense. During the year ended December 31, 2016, we recognized no interest expense or penalties. During the years ended December 31, 2015 and 2014, we recognized approximately $0.1 million and $0.5 million, respectively, in interest expense and no penalties. We had approximately $1.7 million and $1.8 million of accrued interest related to income taxes as of December 31, 2016 and 2015, respectively.