Income Taxes

The components of earnings (loss) before income taxes are as follows:



(In millions)	2016		2015		2014
Domestic	$	154.9	$	142.5	$	(45.1	)
Foreign	41.7		2.7		1.7
Total	$	196.6	$	145.2	$	(43.4	)

The provision (benefit) for income taxes consists of the following:



(In millions)	2016		2015			2014
Current: Domestic - Federal	$	36.4	$	43.6		$	22.2
Domestic - State	6.4		6.3			4.6
Foreign	6.3		6.1			4.8
	49.1		56.0			31.6
Deferred: Domestic - Federal	7.5		(5.9		)	(43.6		)
Domestic - State	0.2		(0.6		)	(5.6		)
Foreign	2.7		(2.3		)	(3.6		)
	10.4		(8.8		)	(52.8		)
Total income tax provision	$	59.5	$	47.2		$	(21.2	)

The following table represents a reconciliation of income taxes at the United States statutory rate with the effective tax rate as follows:



(In millions)	2016			2015			2014
Income taxes computed at the United States Statutory rate of 35%	$	68.8		$	50.8		$	(15.2	)
Increase (decrease) in taxes resulting from:
Change in unrecognized tax benefits	0.2			—			0.4
Foreign statutory rate differences	(4.3		)	(1.0		)	(0.9		)
Manufacturing deduction under the American Jobs Creation Act of 2004	(4.8		)	(4.8		)	(3.9		)
State taxes	5.2			4.2			(0.9		)
Tax on undistributed foreign earnings	—			(3.9		)	—
Sale of manufacturing facility in the United Kingdom	(1.6		)	—			—
Other, net	(4.0		)	1.9			(0.7		)
Income tax expense (benefit)	$	59.5		$	47.2		$	(21.2	)
Effective tax rate	30.3		%	32.6		%	48.9		%

The tax effects and types of temporary differences that give rise to significant components of the deferred tax assets and liabilities at May 28, 2016 and May 30, 2015, are as follows:



(In millions)	2016			2015
Deferred tax assets:
Compensation-related accruals	$	23.2		$	21.9
Accrued pension and post-retirement benefit obligations	9.2			11.0
Deferred revenue	5.6			2.9
Inventory related	3.8			6.4
Reserves for uncollectible accounts and notes receivable	1.2			1.4
Other reserves and accruals	3.0			3.6
Warranty	15.7			14.0
State and local tax net operating loss carryforwards and credits	5.7			5.7
Federal net operating loss carryforward	7.1			12.2
Foreign tax net operating loss carryforwards and credits	14.6			10.0
Undistributed foreign earnings	—			4.5
Other	4.7			4.4
Subtotal	93.8			98.0
Valuation allowance	(10.6		)	(11.1		)
Total	$	83.2		$	86.9

Deferred tax liabilities:
Book basis in property in excess of tax basis	$	(24.8	)	$	(16.7	)
Intangible assets	(47.4		)	(44.5		)
Other	(2.2		)	(3.6		)
Total	$	(74.4	)	$	(64.8	)

The future tax benefits of net operating loss (NOL) carry-forwards and foreign tax credits are recognized to the extent that realization of these benefits is considered more likely than not. The company bases this determination on the expectation that related operations will be sufficiently profitable or various tax planning strategies will enable the company to utilize the NOL carry-forwards and/or foreign tax credits. To the extent that available evidence about the future raises doubt about the realization of these tax benefits, a valuation allowance is established.

At May 28, 2016, the company had state and local tax NOL carry-forwards of $70.9 million, the state tax benefit of which is $5.2 million, which have various expiration periods from one to twenty-one years. The company also had state credits with a state tax benefit of $0.5 million which expires in 4 to six years. For financial statement purposes, the NOL carry-forwards and state tax credits have been recognized as deferred tax assets, subject to a valuation allowance of $2.1 million.

At May 28, 2016, the company had federal NOL carry-forwards of $20.4 million, the tax benefit of which is $7.1 million, which expire in 12 to 13 years. For financial statement purposes, the NOL carry-forwards have been recognized as deferred tax assets.

At May 28, 2016, the company had federal deferred assets of $1.5 million, the tax benefit of which is $0.5 million, which is related to investments in various foreign joint ventures. For financial statement purposes, the assets have been recognized as deferred tax assets, subject to a valuation allowance of $0.5 million.

At May 28, 2016, the company had foreign net operating loss carry-forwards of $49.2 million, the tax benefit of which is $10.9 million, which have expiration periods from seven years to an unlimited term. The company also had foreign tax credits with a tax benefit of $3.7 million which expire in one to eleven years. For financial statement purposes, NOL carry-forwards and foreign tax credits have been recognized as deferred tax assets, subject to a valuation allowance of $7.5 million.

At May 28, 2016, the company had foreign deferred assets of $2.7 million, the tax benefit of which is $0.5 million, which is related to various deferred taxes in Hong Kong and buildings in the United Kingdom. For financial statement purposes, the assets have been recognized as deferred tax assets, subject to a valuation allowance of $0.5 million.

The company has not provided for United States income taxes on undistributed earnings of foreign subsidiaries totaling approximately $117.2 million. Recording deferred income taxes on these undistributed earnings is not required, because these earnings have been deemed to be indefinitely reinvested. These amounts would be subject to possible U.S. taxation only if remitted as dividends. The determination of the hypothetical amount of unrecognized deferred U.S. taxes on undistributed earnings of foreign entities is not practicable.

The components of the company's unrecognized tax benefits are as follows:



(In millions)
Balance at May 31, 2014	$	1.8
Increases related to current year income tax positions	0.4
Increases related to prior year income tax positions	0.1
Decreases related to prior year income tax positions	(0.4		)
Decreases related to lapse of applicable statute of limitations	(0.1		)
Decreases related to settlements	—
Balance at May 30, 2015	1.8
Increases related to current year income tax positions	0.4
Increases related to prior year income tax positions	0.1
Decreases related to prior year income tax positions	(0.1		)
Decreases related to lapse of applicable statute of limitations	(0.1		)
Decreases related to settlements	(0.4		)
Balance at May 28, 2016	$	1.7

The company's effective tax rate would have been affected by the total amount of unrecognized tax benefits had this amount been recognized as a reduction to income tax expense.

The company recognizes interest and penalties related to unrecognized tax benefits through "Income tax expense (benefit)" in its Consolidated Statements of Comprehensive Income. Interest and penalties and the related liability, which are excluded from the table above, were as follows for the periods indicated:



(In millions)	May 28, 2016			May 30, 2015		May 31, 2014
Interest and penalty expense (income)	$	(0.1	)	$	0.4	$	0.2

Liability for interest and penalties	$	0.7		$	0.9

The company is subject to periodic audits by domestic and foreign tax authorities. Currently, the company is undergoing routine periodic audits in both domestic and foreign tax jurisdictions. It is reasonably possible that the amounts of unrecognized tax benefits could change in the next 12 months as a result of new positions that may be taken on income tax returns, settlement of tax positions and the closing of statutes of limitation. It is not expected that any of the changes will be material to the company's Consolidated Statements of Comprehensive Income.

During the year, the company has closed the audit of fiscal year 2015 with the Internal Revenue Service under the Compliance Assurance Process (CAP). For the majority of the remaining tax jurisdictions, the company is no longer subject to state and local, or non-U.S. income tax examinations by tax authorities for fiscal years before 2013.