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Income Taxes | 12 Months Ended
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Dec. 31, 2015
Income Taxes |
Income Taxes | 10. Income Taxes The provision for income taxes was calculated based on the following components of earnings (loss) before income taxes:
|  | 2015 |  | 2014 |  | 2013 |
Continuing operations |  | (restated(1)) |  | (restated(1)) |  | (restated(1)) |
U.S. |  | $ | — |  | $ | 36 |  | $ | 219 |
Non-U.S. |  |  | 268 |  |  | 271 |  |  | 249 |
|  | $ | 268 |  | $ | 307 |  | $ | 468 |
| (1) |  | See Note 1 for restatement information.
Discontinued operations |  | 2015 |  | 2014 |  | 2013 |
U.S. |  | $ | — |  | $ | (19) |  | $ | (8) |
Non-U.S. |  |  | (4) |  |  | (4) |  |  | (10) |
|  | $ | (4) |  | $ | (23) |  | $ | (18) |
The provision (benefit) for income taxes consists of the following:
|  | 2015 |  | 2014 |  | 2013 |
Current: |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 9 |  | $ | 7 |  | $ | 7 |
Non-U.S. |  |  | 85 |  |  | 103 |  |  | 116 |
|  |  | 94 |  |  | 110 |  |  | 123 |
Deferred: |  |  |  |  |  |  |  |  |  |
U.S. |  |  | 10 |  |  | — |  |  | — |
Non-U.S. |  |  | 2 |  |  | (18) |  |  | (3) |
|  |  | 12 |  |  | (18) |  |  | (3) |
Total: |  |  |  |  |  |  |  |  |  |
U.S. |  |  | 19 |  |  | 7 |  |  | 7 |
Non-U.S. |  |  | 87 |  |  | 85 |  |  | 113 |
Total for continuing operations |  |  | 106 |  |  | 92 |  |  | 120 |
Total for discontinued operations |  |  | — |  |  | — |  |  | — |
|  | $ | 106 |  | $ | 92 |  | $ | 120 |
A reconciliation of the provision for income taxes based on the statutory U.S. Federal tax rate of 35% to the provision for income taxes is as follows:
|  | 2015 |  | 2014 |  | 2013 |
|  | (restated(1)) |  | (restated(1)) |  | (restated(1)) |
Tax provision on pretax earnings from continuing operations at statutory U.S. Federal tax rate |  | $ | 94 |  | $ | 107 |  | $ | 164 |
Increase (decrease) in provision for income taxes due to: |  |  |  |  |  |  |  |  |  |
Non-U.S. tax rates |  |  | (12) |  |  | (22) |  |  | (18) |
Changes in valuation allowance |  |  | 1 |  |  | (2) |  |  | (47) |
Withholding tax, net |  |  | 18 |  |  | 18 |  |  | 22 |
Non-deductible acquisition costs |  |  | 6 |  |  |  |  |  |  |
U.S. tax on intercompany dividends and interest |  |  | 16 |  |  | 1 |  |  | 3 |
Tax exempt income |  |  | (3) |  |  | (5) |  |  | (6) |
Tax law changes |  |  | (3) |  |  |  |  |  | 6 |
Tax credit |  |  | (13) |  |  | (3) |  |  | (2) |
Other items |  |  | 2 |  |  | (2) |  |  | (2) |
Provision for income taxes |  | $ | 106 |  | $ | 92 |  | $ | 120 |
| (1) |  | See Note 1 for restatement information.
Deferred income taxes reflect: (1) 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; and (2) carryovers and credits for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2015 and 2014 are as follows:
|  | 2015 |  | 2014 |
|  | (restated(1)) |  | (restated(1)) |
Deferred tax assets: |  |  |  |  |  |  |
Accrued postretirement benefits |  | $ | 51 |  | $ | 58 |
Asbestos-related liabilities |  |  | 286 |  |  | 329 |
Foreign tax credit |  |  | 389 |  |  | 376 |
Operating and capital loss carryovers |  |  | 435 |  |  | 464 |
Other credit carryovers |  |  | 38 |  |  | 37 |
Accrued liabilities |  |  | 82 |  |  | 85 |
Pension liability |  |  | 128 |  |  | 117 |
Other |  |  | 63 |  |  | 80 |
Total deferred tax assets |  |  | 1,472 |  |  | 1,546 |
Deferred tax liabilities: |  |  |  |  |  |  |
Property, plant and equipment |  |  | 128 |  |  | 127 |
Intangibles and deferred software |  |  | 131 |  |  | 34 |
Other |  |  | 25 |  |  | 41 |
Total deferred tax liabilities |  |  | 284 |  |  | 202 |
Valuation allowance |  |  | (1,135) |  |  | (1,223) |
Net deferred taxes |  | $ | 53 |  | $ | 121 |
| (1) |  | See Note 1 for restatement information.
Deferred taxes are included in the Consolidated Balance Sheets at December 31, 2015 and 2014 as follows:
|  | 2015 |  | 2014 |
Prepaid expenses |  | $ | — |  | $ | 39 |
Other assets |  |  | 177 |  |  | 203 |
Deferred taxes |  |  | (124) |  |  | (121) |
Net deferred taxes |  | $ | 53 |  | $ | 121 |
The Company reviews the likelihood that it will realize the benefit of its deferred tax assets and therefore the need for valuation allowances on a quarterly basis, or whenever events indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset is considered, along with other positive and negative evidence. At December 31, 2015, before valuation allowance, the Company had unused foreign tax credits of $389 million expiring in 2017 through 2025, research tax credits of $14 million expiring from 2019 to 2035, and alternative minimum tax credits of $23 million which do not expire and which will be available to offset future U.S. Federal income tax. Approximately $145 million of the deferred tax assets related to operating and capital loss carryforwards can be carried over indefinitely, with the remaining $290 million expiring between 2016 and 2036. In certain jurisdictions, the Company’s analysis indicates that it has cumulative losses in recent years. This is considered significant negative evidence which is objective and verifiable and, therefore, difficult to overcome. However, the cumulative loss position is not solely determinative and, accordingly, the Company considers all other available positive and negative evidence in its analysis. Based on its analysis, the Company has recorded a valuation allowance for the portion of deferred tax assets where based on the weight of available evidence it is unlikely to realize those deferred tax assets. At December 31, 2015, the Company’s equity in the undistributed earnings of foreign subsidiaries for which income taxes had not been provided approximated $2.5 billion. The Company intends to reinvest these earnings indefinitely in the non-U.S. operations and has not distributed any of these earnings to the U.S. in 2015, 2014 or 2013. It is not practicable to estimate the U.S. and foreign tax which would be payable should these earnings be distributed. Deferred taxes are provided for earnings of non-U.S. jurisdictions when the Company plans to remit those earnings. The Company has recognized tax benefits as a result of incentives in certain non-U.S. jurisdictions which expire in 2016. The Company records a liability for unrecognized tax benefits related to uncertain tax positions. The Company accrues interest and penalties associated with unrecognized tax benefits as a component of its income tax expense. The following is a reconciliation of the Company’s total gross unrecognized tax benefits for the years ended December 31, 2015, 2014 and 2013:
|  | 2015 |  | 2014 |  | 2013 |
Balance at January 1 |  | $ | 77 |  | $ | 100 |  | $ | 97 |
Additions and reductions for tax positions of prior years |  |  | 1 |  |  | (13) |  |  | (3) |
Additions based on tax positions related to the current year |  |  | 10 |  |  | 10 |  |  | 9 |
Reductions due to the lapse of the applicable statute of limitations |  |  | (5) |  |  | (8) |  |  | (2) |
Reductions due to settlements |  |  | (1) |  |  | (1) |  |  |  |
Foreign currency translation |  |  | (8) |  |  | (11) |  |  | (1) |
Balance at December 31 |  | $ | 74 |  | $ | 77 |  | $ | 100 |
Unrecognized tax benefits, which if recognized, would impact the Company’s effective income tax rate |  | $ | 67 |  | $ | 70 |  | $ | 92 |
Accrued interest and penalties at December 31 |  | $ | 25 |  | $ | 29 |  | $ | 35 |
Interest and penalties included in tax expense for the years ended December 31 |  | $ | (1) |  | $ | (2) |  | $ | 1 |
Based upon the outcome of tax examinations, judicial proceedings, or expiration of statute of limitations, it is reasonably possible that the ultimate resolution of these unrecognized tax benefits may result in a payment that is materially different from the current estimate of the tax liabilities. The Company believes that it is reasonably possible that the estimated liability could decrease up to $47 million within the next 12 months. This is primarily the result of audit settlements or statute expirations in several taxing jurisdictions. The Company is currently under examination in various tax jurisdictions in which it operates, including Argentina, Bolivia, Brazil, China, Canada, Colombia, France, Germany, Indonesia, and Italy. The years under examination range from 2004 through 2013. The Company believes that there are no jurisdictions in which the outcome of unresolved issues or claims is likely to be material to the Company’s results of operations, financial position or cash flows. The Company further believes that adequate provisions for all income tax uncertainties have been made. During 2015, the Company concluded income tax audits in several jurisdictions, including Argentina, Germany, Italy, Peru and Poland.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 + Details
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