INCOME TAXES

Income before income taxes was taxed in the following jurisdictions in each of the years ended December 31:



	2015		2014		2013
	(Dollars in thousands)
Domestic	$	222,188	$	273,487	$	252,961
Foreign	30,698		11,065		1,757
Total	$	252,886	$	284,552	$	254,718

The components of the provision for income taxes were as follows:



	2015			2014			2013
	(Dollars in thousands)
Current:
Federal	$	77,777		$	51,399		$	48,905
State	7,972			4,487			5,954
Foreign	8,002			7,519			7,321
Current income tax provision	93,751			63,405			62,180
Deferred:
Federal	(10,065		)	38,879			9,559
State	(1,932		)	2,958			2,637
Foreign	(1,281		)	(3,081		)	(5,071		)
Deferred income tax (benefit) provision	(13,278		)	38,756			7,125
	$	80,473		$	102,161		$	69,305

The provision for income taxes varied from income taxes computed at the statutory U.S. federal income tax rate as a result of the following:



	2015			2014			2013
	(Dollars in thousands)
Income taxes computed at the statutory U.S. federal income tax rate	$	88,512		$	99,597		$	89,151
State income taxes, net of federal tax benefit	4,903			8,165			7,775
Tax liabilities required (no longer required)	2,342			815			(17,043		)
Valuation allowance	1,441			(3,747		)	(5,087		)
Manufacturing exemption	(7,849		)	(5,798		)	(7,452		)
Tax credit refunds, net	(2,325		)	(2,163		)	(1,797		)
Foreign earnings taxed at other than 35%	(6,383		)	5,957			(600		)
Deferred tax rate changes	163			(1,327		)	2,235
Other	(331		)	662			2,123
	$	80,473		$	102,161		$	69,305

Effective tax rate	31.8		%	35.9		%	27.2		%

Deferred income taxes reflect the net tax effect of temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Significant components of our deferred tax assets and liabilities at December 31 were as follows:



	2015			2014
	(Dollars in thousands)
Deferred tax assets:
Pension and other postretirement liabilities	$	11,000		$	14,957
Rationalization and other accrued liabilities	25,306			14,933
Property, plant and equipment	1,053			1,182
AMT and other credit carryforwards	1,733			1,500
Net operating loss carryforwards	26,357			33,972
Other intangible assets	1,025			1,597
Foreign currency translation	236			825
Inventory and related reserves	27,176			10,604
Other	5,337			6,676
Total deferred tax assets	99,223			86,246
Deferred tax liabilities:
Property, plant and equipment	(192,372		)	(194,793		)
Pension and other postretirement liabilities	(18,268		)	(13,383		)
Other intangible assets	(81,650		)	(82,150		)
Foreign currency translation	(21,697		)	(13,110		)
Other	(4,200		)	(3,988		)
Total deferred tax liabilities	(318,187		)	(307,424		)
Valuation allowance	(8,648		)	(7,858		)
	$	(227,612	)	$	(229,036	)

At December 31, 2015, the net deferred tax liability in our Consolidated Balance Sheets was comprised of long-term deferred tax assets of $21.1 million and long-term deferred tax liabilities of $248.7 million. At December 31, 2014, the net deferred tax liability in our Consolidated Balance Sheets was comprised of long-term deferred tax assets of $27.4 million and long-term deferred tax liabilities of $256.4 million. Long-term deferred tax assets and long-term deferred tax liabilities were classified as other assets, net and other liabilities, respectively, in our Consolidated Balance Sheets.

The valuation allowance in 2015 includes deferred tax assets of $8.6 million resulting from foreign net operating loss carryforwards, or NOLs. The valuation allowance for deferred tax assets increased in 2015 by $1.4 million primarily due to an increase in the valuation allowance related to foreign tax loss carryforwards and state and local tax credits.

At December 31, 2015, we had foreign NOLs of approximately $21.5 million that are available to offset future taxable income. Of that amount, approximately $9.7 million will expire from 2016 to 2026. The remaining portion has no expiration date. At December 31, 2015, we had state tax NOLs of approximately $4.9 million that are available to offset future taxable income and that will expire from 2023 to 2034.

We recognize accrued interest and penalties related to unrecognized taxes as additional income tax expense. At December 31, 2015 and 2014, we had $4.3 million and $3.4 million, respectively, accrued for potential interest and penalties.

The total amount of unrecognized tax benefits recorded in other liabilities as of December 31, 2015 and 2014 were $32.8 million and $27.8 million, respectively, excluding associated tax assets and including the federal tax benefit of state taxes, interest and penalties.

Tax assets associated with uncertain tax positions primarily represent our estimate of the potential tax benefits in one tax jurisdiction that could result from the payment of income taxes in another jurisdiction. At December 31, 2015 and 2014, we had approximately $16.5 million and $16.1 million, respectively, in assets associated with uncertain tax positions recorded in other assets in our Consolidated Balance Sheets.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits included as other liabilities in our Consolidated Balance Sheets was as follows:



	2015			2014
	(Dollars in thousands)
Balance at January 1,	$	48,143		$	50,398
Increase based upon tax positions of current year	3,853			646
Increase based upon tax positions of a prior year	988			457
Decrease due to acquisitions	(1,327		)	(2,732		)
Decrease based upon settlements with taxing authorities	—			(50		)
Decrease based upon a lapse in the statute of limitations	(1,320		)	(576		)
Balance at December 31,	$	50,337		$	48,143

The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, at December 31, 2015 and 2014 were $15.8 million and $11.8 million, respectively.

Silgan and its subsidiaries file U.S. Federal income tax returns, as well as income tax returns in various states and foreign jurisdictions. The Internal Revenue Service, or IRS, completed its review of tax years 2012 through 2014 and we have been accepted into the Compliance Assurance Program for the 2015 and 2016 tax years which provides for the review by the IRS of tax matters relating to our tax return prior to filing. We are subject to examination by state and local tax authorities generally for the period mandated by statute, with the exception of states where waivers of the statute of limitations have been executed. These states and the earliest open period include Wisconsin (1995), Nebraska (2006) and California (2011). Our foreign subsidiaries are generally not subject to examination by tax authorities for periods before 2008, and we have contractual indemnities with third parties with respect to open periods that predate our ownership of certain foreign subsidiaries. Subsequent periods may be examined by the relevant tax authorities. We do not expect a material change to our unrecognized tax benefits within the next twelve months.

We had undistributed earnings from foreign subsidiaries of $41.6 million at December 31, 2015. If the earnings of foreign subsidiaries were not indefinitely reinvested, a deferred tax liability of $14.5 million would be required, excluding the potential use of foreign tax credits in the United States.