INCOME TAX

Pre-tax income for the years ended December 31, 2014, 2013 and 2012 consists of the following (dollars in thousands):



	2014		2013		2012
Pre-tax income - U.S.	$	768,857	$	473,223	$	644,219
Pre-tax income - foreign	239,676		162,031		275,004
Total pre-tax income	$	1,008,533	$	635,254	$	919,223

The provision for income tax expense for the years ended December 31, 2014, 2013 and 2012 consists of the following (dollars in thousands):



	2014			2013			2012
Current income tax expense (benefit):
U.S.	$	18,495		$	(48,831	)	$	52,378
Foreign	135,260			34,470			36,840
Total current	153,755			(14,361		)	89,218
Deferred income tax expense (benefit):
U.S.	242,694			226,771			183,929
Foreign	(71,963		)	4,007			14,183
Total deferred	170,731			230,778			198,112
Total provision for income taxes	$	324,486		$	216,417		$	287,330

Provision for income tax expense differed from the amounts computed by applying the U.S. federal income tax statutory rate of 35% to pre-tax income as a result of the following for the years ended December 31, 2014, 2013 and 2012 (dollars in thousands):



	2014			2013			2012
Tax provision at U.S. statutory rate	$	352,987		$	222,339		$	321,728
Increase (decrease) in income taxes resulting from:
Foreign tax rate differing from U.S. tax rate	(12,483		)	(8,032		)	(14,705		)
Differences in tax basis in foreign jurisdictions	(8,256		)	(26,484		)	(21,086		)
Deferred tax valuation allowance	2,076			26,507			635
Amounts related to tax audit contingencies	(9,083		)	9,034			2,260
Corporate rate changes - Canada	—			(414		)	1,374
Corporate rate changes - other	280			(1,184		)	(1,070		)
Subpart F	6,132			8,255			13,571
Foreign tax credits	(1,045		)	(1,786		)	(7,808		)
Return to provision adjustments	(8,123		)	(12,465		)	(7,351		)
Other, net	2,001			647			(218		)
Total provision for income taxes	$	324,486		$	216,417		$	287,330
Effective tax rate	32.2		%	34.1		%	31.3		%

The 2014 results benefited from the release of liabilities established for uncertain tax positions due to the closure with the U.S. Internal Revenue Service of tax returns for a recent five-year period. As a result of that release and other adjustments, the tax provision for the period was reduced and the accrued interest liability was reversed.

Total income taxes for the years ended December 31, 2014, 2013 and 2012 were as follows (dollars in thousands):



	2014			2013			2012
Provision for income taxes	$	324,486		$	216,417		$	287,330
Income tax from OCI and additional paid-in-capital:
Net unrealized holding gain (loss) on debt and equity securities recognized for financial reporting purposes	348,697			(467,454		)	246,682
Exercise of stock options	3,011			(3,125		)	(2,902		)
Foreign currency translation	22,998			12,330			(921		)
Unrealized pension and post retirement	(14,770		)	7,640			(2,779		)
Total income taxes provided	$	684,422		$	(234,192	)	$	527,410

The tax effects of temporary differences that give rise to significant portions of the deferred income tax asset and liabilities at December 31, 2014 and 2013, are presented in the following tables (dollars in thousands):



	2014			2013
Deferred income tax assets:
Nondeductible accruals	$	118,389		$	106,587
Differences between tax and financial reporting amounts concerning certain reinsurance transactions	64,445			59,942
Differences in the tax basis of cash and invested assets	—			2,106
Investment income differences	56,176			108,462
Deferred acquisition costs capitalized for tax	92,832			90,187
Net operating loss carryforward	170,965			252,192
Capital loss and tax credit carryforwards	26,365			2,356
Subtotal	529,172			621,832
Valuation allowance	(112,005		)	(102,228		)
Total deferred income tax assets	417,167			519,604
Deferred income tax liabilities:
Deferred acquisition costs capitalized for financial reporting	961,170			1,066,351
Differences between tax and financial reporting amounts concerning certain reinsurance transactions	1,044,097			906,197
Differences in the tax basis of cash and invested assets	667,601			310,332
Investment income differences	8,187			12,959
Differences in foreign currency translation	64,115			19,704
Total deferred income tax liabilities	2,745,170			2,315,543
Net deferred income tax liabilities	$	2,328,003		$	1,795,939
Balance sheet presentation of net deferred income tax liabilities:
Included in other assets	$	37,814		$	41,638
Included in deferred income taxes	2,365,817			1,837,577
Net deferred income tax liabilities	$	2,328,003		$	1,795,939

As of December 31, 2014, a valuation allowance for deferred tax assets of approximately $112.0 million was provided on the total deferred tax assets. The valuation allowance is primarily related to numerous branches and legal entities for which there is no history of earnings in recent years. Further there is a partial valuation allowance on RGA Reinsurance Company of South Africa, Limited and RGA Reinsurance Company of Australia Limited (“RGA Australia”) net operating losses, RGA International Reinsurance Company Limited’s foreign tax credit and RGA's deferred tax asset related to share expense for foreign entities. As of December 31, 2013, a valuation allowance for deferred tax assets of approximately $102.2 million was provided on the total deferred tax assets. The valuation allowance is primarily related to numerous branches and legal entities for which there is no history of earnings in recent years. Further there is a partial valuation allowance on a portion of RGA Australia's deferred tax asset and on RGA's deferred tax asset related to share expense for foreign entities. The Company utilizes valuation allowances when it believes, based on the weight of the available evidence, that it is more likely than not that the deferred income tax asset will not be realized.

The earnings of substantially all of the Company’s foreign subsidiaries have been permanently reinvested in foreign operations. A provision of $4.2 million has been made for U.S. taxes on repatriation. No other provision has been made for U.S. tax or foreign withholding taxes that may be applicable upon any repatriation or sale. The determination of the unrecognized deferred tax liability for temporary differences related to investments in the Company’s foreign subsidiaries is not practicable. At December 31, 2014 and 2013, the financial reporting basis in excess of the tax basis for which no deferred taxes have been recognized was approximately $1,115.2 million and $1,154.4 million, respectively.

During 2014, 2013 and 2012, the Company received federal and foreign income tax refunds of approximately $9.3 million, $2.6 million and $16.2 million, respectively. The Company made cash income tax payments of approximately $79.6 million, $113.4 million and $113.2 million in 2014, 2013 and 2012, respectively. At December 31, 2014 and 2013, the Company recognized gross deferred tax assets associated with net operating losses of approximately $647.0 million and $916.4 million, respectively, $19.1 million of which will begin to expire in 2025. The remaining net operating losses have either a valuation allowance or indefinite carryforward periods. However, these net operating losses, other than the net operating losses for which there is a valuation allowance, are expected to be utilized in the normal course of business during the period allowed for carryforwards and in any event, are not expected to be lost, due to the application of tax planning strategies that the Company would utilize.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is under continuous examination by the Internal Revenue Service and is subject to audit by taxing authorities in other foreign jurisdictions in which the Company has significant business operations. The income tax years under examination vary by jurisdiction. With a few exceptions, the Company is no longer subject to U.S. federal, state and foreign income tax examinations by tax authorities for years prior to 2011.

As of December 31, 2014, the Company’s total amount of unrecognized tax benefits was $274.7 million and the total amount of unrecognized tax benefits that would affect the effective tax rate, if recognized, was $30.8 million. Management believes there will be no material impact to the Company’s effective tax rate related to unrecognized tax benefits over the next 12 months.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2014, 2013 and 2012, is as follows (dollars in thousands):



	Total Unrecognized Tax Benefits
	2014			2013			2012
Beginning balance, January 1	$	279,801		$	245,636		$	194,260
Additions for tax positions of prior years	17,431			41,228			47,438
Reductions for tax positions of prior years	(26,001		)	(10,401		)	—
Additions for tax positions of current year	3,430			3,338			3,938
Ending balance, December 31	$	274,661		$	279,801		$	245,636

The Company recognized interest expense (benefit) associated with uncertain tax positions in 2014, 2013 and 2012 of $(36.6) million, $7.6 million and $9.9 million, respectively. As of December 31, 2014 and 2013, the Company had $20.7 million and $57.3 million, respectively, of accrued interest related to unrecognized tax benefits.