21.

Income Taxes

Teekay and a majority of its subsidiaries are not subject to income tax in the jurisdictions in which they are incorporated because they do not conduct business or operate in those jurisdictions. However, among others, the Company’s U.K. and Norwegian subsidiaries are subject to income taxes.

The significant components of the Company’s deferred tax assets and liabilities are as follows:


	December 31,			December 31,
	2014			2013
	$			$
Deferred tax assets:
Vessels and equipment		43,268			73,750
Tax losses carried forward⁽¹⁾		360,547			427,656
Other		28,973			32,012

Total deferred tax assets		432,788			533,418

Deferred tax liabilities:
Vessels and equipment		12,514			19,555
Long-term debt		2,295			22,008
Other		19,954			30,519

Total deferred tax liabilities		34,763			72,082
Net deferred tax assets		398,025			461,336
Valuation allowance		(385,431	)		(442,504	)

Net deferred tax assets		12,594			18,832

Net deferred tax assets are presented in other non-current assets in the accompanying consolidated balance sheets.

(1)

Substantially all of the Company’s net operating loss carryforwards of $1.46 billion relate primarily to its Norwegian, U.K., and Spanish subsidiaries and, to a lesser extent, to its Australian ship-owning subsidiaries. These net operating loss carryforwards are available to offset future taxable income in the respective jurisdictions, and can be carried forward indefinitely. The Company also has $47.0 million in disallowed finance costs that relate to its Spanish subsidiaries and are available to offset future finance costs and can be carried forward for 18 years.

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


	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2014			2013			2012
	$			$			$
Current		(6,460	)		2,742			9,167
Deferred		(3,713	)		(5,614	)		5,239

Income tax (expense) recovery		(10,173	)		(2,872	)		14,406

The Company operates in countries that have differing tax laws and rates. Consequently, a consolidated weighted average tax rate will vary from year to year according to the source of earnings or losses by country and the change in applicable tax rates. Reconciliations of the tax charge related to the relevant year at the applicable statutory income tax rates and the actual tax charge related to the relevant year are as follows:


	Year Ended			Year Ended			Year Ended
	December 31, 2014			December 31, 2013			December 31, 2012
	$			$			$
Net loss before taxes		134,175			38,352			(325,522	)
Net loss not subject to taxes		(80,454	)		(267,665	)		(129,307	)

Net (loss) income subject to taxes		214,629			306,017			(196,215	)

At applicable statutory tax rates		39,382			12,719			(15,808	)
Permanent and currency differences, adjustments to valuation allowances and uncertain tax positions		(28,027	)		(8,173	)		(2,817	)
Other		(1,182	)		(1,674	)		4,219

Tax expense (recovery) related to the current year		10,173			2,872			(14,406	)

The following is a roll-forward of the Company’s unrecognized tax benefits, recorded in other long-term liabilities, from January 1, 2012 to December 31, 2014:


	Year ended			Year ended			Year ended
	December 31,			December 31,			December 31,
	2014			2013			2012
	$			$			$
Balance of unrecognized tax benefits as at January 1		20,304			29,364			39,804
Increases for positions related to the current year		3,643			1,141			4,560
Changes for positions taken in prior years		1,015			(1,284	)		(5,085	)
Decreases related to statute of limitations		(4,627	)		(8,917	)		(9,915	)

Balance of unrecognized tax benefits as at December 31		20,335			20,304			29,364

The majority of the net decrease for positions for the year ended December 31, 2014 relates to a potential tax on freight income becoming statute barred.

The Company does not presently anticipate such uncertain tax positions will significantly increase or decrease in the next 12 months; however, actual developments could differ from those currently expected. The tax years 2010 through 2014 remain open to examination by some of the major jurisdictions in which the Company is subject to tax.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The interest and penalties on unrecognized tax benefits are included in the roll-forward schedule above and are approximately a reduction of $1.6 million in 2014, net of statute barred liabilities, and $7.2 million in 2013 and $0.8 million in 2012.