Income Taxes

Income (loss) from continuing operations before income taxes and the (provision for) benefit from income taxes consisted of the following:



	Year ended December 31,
	2015			2014			2013
Income (loss) from continuing operations:
United States	$	(14.2	)	$	366.2		$	23.2
Foreign	(188.8		)	(110.4		)	(33.7		)
	$	(203.0	)	$	255.8		$	(10.5	)
(Provision for) benefit from income taxes:
Current:
United States	$	10.9		$	(200.1	)	$	116.2
Foreign	(3.3		)	(16.5		)	11.6
Total current	7.6			(216.6		)	127.8
Deferred and other:
United States	(10.7		)	95.7			(118.1		)
Foreign	14.9			(18.8		)	10.3
Total deferred and other	4.2			76.9			(107.8		)
Total (provision) benefit	$	11.8		$	(139.7	)	$	20.0

The reconciliation of income tax computed at the U.S. federal statutory tax rate to our effective income tax rate was as follows:



	Year ended December 31,
	2015		2014		2013
Tax at U.S. federal statutory rate	35.0	%	35.0	%	35.0	%
State and local taxes, net of U.S. federal benefit	(0.1	)%	2.7	%	7.2	%
U.S. credits and exemptions	1.2	%	(1.3	)%	55.0	%
Foreign earnings/losses taxed at lower rates	(10.6	)%	9.4	%	(6.1	)%
Audit settlements with taxing authorities	0.5	%	(4.6	)%	3.9	%
Adjustments to uncertain tax positions	(4.2	)%	(1.6	)%	10.5	%
Changes in valuation allowance	(14.4	)%	13.2	%	50.9	%
Tax on distributions of foreign earnings	(0.2	)%	4.4	%	18.3	%
Goodwill impairment and basis adjustments	(1.8	)%	(2.4	)%	11.4	%
Other	0.4	%	(0.2	)%	4.4	%
	5.8	%	54.6	%	190.5	%

Significant components of our deferred tax assets and liabilities were as follows:



	As of December 31,
	2015			2014 ⁽¹⁾
Deferred tax assets:
NOL and credit carryforwards	$	85.3		$	266.2
Pension, other postretirement and postemployment benefits	80.3			116.9
Payroll and compensation	28.8			67.5
Legal, environmental and self-insurance accruals	40.6			45.8
Working capital accruals	15.8			34.7
Other	21.1			49.5
Total deferred tax assets	271.9			580.6
Valuation allowance	(70.9		)	(152.9		)
Net deferred tax assets	201.0			427.7
Deferred tax liabilities:
Intangible assets recorded in acquisitions	81.6			277.3
Basis difference in affiliates	10.3			187.5
Accelerated depreciation	38.9			64.8
Other	23.6			36.5
Total deferred tax liabilities	154.4			566.1
	$	46.6		$	(138.4	)


⁽¹⁾	Represents deferred tax assets and liabilities related to both continuing and discontinued operations, with net deferred tax liabilities associated with discontinued operations totaling $143.9. As discussed in Notes 1 and 18, certain corrections were made to deferred income taxes resulting in an increase of net deferred tax liabilities of $1.3.

General Matters

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We periodically assess deferred tax assets to determine if they are likely to be realized and the adequacy of deferred tax liabilities, incorporating the results of local, state, federal and foreign tax audits in our estimates and judgments.

At December 31, 2015, we had the following tax loss carryforwards available: state tax loss carryforwards of approximately $433.0 and tax losses of various foreign jurisdictions of approximately $221.0. We also had federal and state tax credit carryforwards of $6.0. Of these amounts, $0.3 expire in 2016 and $452.7 expire at various times between 2016 and 2035. The remaining carryforwards have no expiration date.

Realization of deferred tax assets, including those associated with net operating loss and credit carryforwards, is dependent upon generating sufficient taxable income in the appropriate tax jurisdiction. We believe that it is more likely than not that we may not realize the benefit of certain of these deferred tax assets and, accordingly, have established a valuation allowance against these deferred tax assets. Although realization is not assured for the remaining deferred tax assets, we believe it is more likely than not that the deferred tax assets will be realized through future taxable earnings or tax planning strategies. However, deferred tax assets could be reduced in the near term if our estimates of taxable income are significantly reduced or tax planning strategies are no longer viable. The valuation allowance decreased by $82.0 in 2015 and increased by $3.6 in 2014. The most significant driver of the 2015 decrease was the impact of the Spin-Off, partially offset by the losses generated during the year for our large power projects in South Africa.

The amount of income tax that we pay annually is dependent on various factors, including the timing of certain deductions. These deductions can vary from year to year, and, consequently, the amount of income taxes paid in future years will vary from the amounts paid in prior years.

Undistributed Foreign Earnings

In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those operations. As of December 31, 2015, we had not recorded a provision for U.S. or foreign withholding taxes on approximately $33.0 of the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. It is not practicable to estimate the amount of a deferred tax liability related to the undistributed earnings of these foreign subsidiaries, in the event that these earnings are no longer considered to be indefinitely reinvested, due to the hypothetical nature of the calculation.

Unrecognized Tax Benefits

As of December 31, 2015, we had gross unrecognized tax benefits of $48.8 (net unrecognized tax benefits of $30.1), all of which, if recognized, would impact our effective tax rate from continuing operations. Similarly, at December 31, 2014 and 2013, we had gross unrecognized tax benefits of $63.3 (net unrecognized tax benefits of $33.9) and $128.4 (net unrecognized tax benefits of $72.9), respectively.

We classify interest and penalties related to unrecognized tax benefits as a component of our income tax provision. As of December 31, 2015, gross accrued interest totaled $5.4 (net accrued interest of $4.5), while the related amounts as of December 31, 2014 and 2013 were $5.9 (net accrued interest of $4.9) and $12.4 (net accrued interest of $8.6), respectively. Our income tax (provision) benefit for the years ended December 31, 2015, 2014 and 2013 included gross interest income of $0.2, $0.9 and $0.2, respectively, resulting from a reduction in our liability for uncertain tax positions. As of December 31, 2015 and December 31, 2014, we had no accrual for penalties included in our unrecognized tax benefits, while the related amount as of December 31, 2013 was $7.1. Our income tax (provision) benefit for the year ended December 31, 2014 included a benefit of $7.1 for the reversal of penalties previously accrued, resulting primarily from audit settlements during the year. No amount for penalties was included in the income tax (provision) benefit for the years ended December 31, 2015 or December 31, 2013.

Based on the outcome of certain examinations or as a result of the expiration of statutes of limitations for certain jurisdictions, we believe that within the next 12 months it is reasonably possible that our previously unrecognized tax benefits could decrease by approximately $6.0 to $10.0. The previously unrecognized tax benefits relate to a variety of tax matters including deemed income inclusions, transfer pricing and various state matters.

The aggregate changes in the balance of unrecognized tax benefits for the years ended December 31, 2015, 2014 and 2013 were as follows:



	Year ended December 31,
	2015			2014			2013
Unrecognized tax benefit — opening balance	$	63.3		$	128.4		$	108.4
Gross increases — tax positions in prior period	14.1			3.7			0.5
Gross decreases — tax positions in prior period	(7.6		)	(36.9		)	(2.3		)
Gross increases — tax positions in current period	11.3			11.7			28.4
Settlements	—			(28.2		)	(1.1		)
Lapse of statute of limitations	(4.4		)	(14.7		)	(5.5		)
Gross decreases — Spin-Off	(26.7		)	—			—
Change due to foreign currency exchange rates	(1.2		)	(0.7		)	—
Unrecognized tax benefit — ending balance	$	48.8		$	63.3		$	128.4

Other Tax Matters

During 2015, our income tax provision was impacted by (i) the effects of approximately $139.0 of pre-tax losses generated during the year (the majority of which relate to our large projects in South Africa) for which no tax benefit was recognized, as future realization of any such tax benefit is considered unlikely, (ii) $3.7 of foreign taxes incurred during the year related to the Spin-Off and the reorganization actions undertaken to facilitate the Spin-Off, and (iii) $3.4 of taxes related to various audit settlements, statute expirations, and other adjustments to liabilities for uncertain tax positions.

During 2014, our income tax provision was impacted by the U.S. income taxes provided in connection with the $491.2 gain on the sale of our interest in EGS and by the following income tax charges: (i) $33.8 related to net increases in valuation allowances recorded against certain foreign deferred income tax assets and (ii) $11.4 related to the repatriation of certain earnings of our non-U.S. subsidiaries. In addition, our income tax provision was impacted unfavorably by a low effective tax rate on foreign losses. The impact of these items was partially offset by the following income tax benefits: (i) $16.2 of tax benefits related to various audit settlements, statute expirations and other adjustments to liabilities for uncertain tax positions, with the most notable being the closure of our U.S. tax examination for the years 2008 through 2011, and (ii) $6.4 of tax benefits related to a loss on an investment in a foreign subsidiary.

During 2013, our income tax provision was impacted by the following income tax benefits: (i) $9.5 related to net reductions in valuation allowances recorded against certain foreign deferred income tax assets; (ii) $4.1 related to various audit settlements and statute expirations; and (iii) $4.1 associated with the Research and Experimentation Credit generated in 2012.

We perform reviews of our income tax positions on a continuous basis and accrue for potential uncertain positions when we determine that an uncertain position meets the criteria of the Income Taxes Topic of the Codification. Accruals for these uncertain tax positions are recorded in "Income taxes payable" and "Deferred and other income taxes" in the accompanying consolidated balance sheets based on the expectation as to the timing of when the matters will be resolved. As events change and resolutions occur, these accruals are adjusted, such as in the case of audit settlements with taxing authorities.

We have filed our federal income tax returns for the 2013 and 2014 tax years and those returns are subject to examination. With regard to all open tax years, we believe any contingencies are adequately provided for.

State income tax returns generally are subject to examination for a period of three to five years after filing the respective tax returns. The impact on such tax returns of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. We have various state income tax returns in the process of examination. We believe any uncertain tax positions related to these examinations have been adequately provided for.

We have various foreign income tax returns under examination. The most significant of these are in Germany for the 2010 through 2013 tax years. We believe that any uncertain tax positions related to these examinations have been adequately provided for.

An unfavorable resolution of one or more of the above matters could have a material adverse effect on our results of operations or cash flows in the quarter and year in which an adjustment is recorded or the tax is due or paid. As audits and examinations are still in process, the timing of the ultimate resolution and any payments that may be required for the above matters cannot be determined at this time.