Income Taxes

Earnings from continuing operations before taxes for the years 2014, 2013 and 2012 were taxed under the following jurisdictions:



	2014		2013		2012
	(In million of dollars)
Domestic	$	5.9	$	35.1	$	56.3
Foreign	10.7		13.7		12.5
Total	$	16.6	$	48.8	$	68.8

The provision for income taxes from continuing operations was as follows:



	2014			2013			2012
	(In millions of dollars)
Current tax expense:
U.S. federal	$	5.6		$	7.3		$	1.4
U.S. state and local	1.4			3.5			3.0
Foreign	12.7			10.4			10.0
Total current	19.7			21.2			14.4
Deferred tax expense:
U.S. federal	(22.0		)	(26.9		)	4.7
U.S. state and local	(0.4		)	(1.6		)	0.9
Foreign	(4.4		)	(2.8		)	(0.9		)
Total deferred	(26.8		)	(31.3		)	4.7
Total provision	$	(7.1	)	$	(10.1	)	$	19.1

Deferred taxes are comprised of the following:



	2014			2013
	(In millions of dollars)
Depreciation and amortization	$	(11.6	)	$	(10.4	)
Employee compensation and benefit plans	70.4			68.1
Workers’ compensation	21.6			22.8
Unrealized gain on securities	(23.7		)	(17.2		)
Loss carryforwards	47.2			49.4
Credit carryforwards	103.0			82.0
Other, net	8.2			0.2
Valuation allowance	(58.5		)	(56.3		)
Net deferred tax assets	$	156.6		$	138.6

The deferred tax balance is classified in the consolidated balance sheet as:



	2014			2013
	(In millions of dollars)
Current assets, deferred tax	$	34.4		$	35.5
Noncurrent deferred tax asset	146.3			121.7
Current liabilities, income and other taxes	(0.4		)	(0.4		)
Noncurrent liabilities, other long-term liabilities	(23.7		)	(18.2		)
	$	156.6		$	138.6

The differences between income taxes from continuing operations for financial reporting purposes and the U.S. statutory rate of 35% are as follows:



	2014			2013			2012
	(In millions of dollars)
Income tax based on statutory rate	$	5.8		$	17.1		$	24.1
State income taxes, net of federal benefit	0.7			1.2			2.6
General business credits	(17.5		)	(26.2		)	(7.9		)
Life insurance cash surrender value	(2.2		)	(5.8		)	(3.4		)
Foreign items	(0.2		)	0.3			1.6
Foreign business taxes	4.2			3.9			4.5
Foreign tax law change	(2.2		)	(4.6		)	—
Non-deductible expenses	2.1			1.6			3.1
Change in deferred tax realizability	2.2			2.8			(0.7		)
Uncertain tax positions	—			—			(4.8		)
Other, net	—			(0.4		)	—
Total	$	(7.1	)	$	(10.1	)	$	19.1

General business credits primarily represent U.S. work opportunity credits. In 2012, the work opportunity credit was available only for veterans and pre-2012 hires. The full credit was retroactively reinstated on January 2, 2013, resulting in the inclusion of $9.3 million of tax benefits during 2013 that would have been recognized in 2012 if the law had been in effect. Foreign business taxes include the French business tax and other taxes based on revenue less certain expenses and are classified as income taxes under ASC Topic 740 (“ASC 740”), Income Taxes. The Company closed income tax examinations in 2012, resulting in a $5.1 million benefit, the majority of which is included in uncertain tax positions in the table above.

The Company has U.S. general business credit carryforwards of $100.8 million which will expire from 2031 to 2034, foreign tax credit carryforwards of $2.0 million that expire from 2022 to 2024 and $0.2 million of state credit carryforwards that expire from 2016 to 2034, or have no expiration. The net tax effect of state and foreign loss carryforwards at year-end 2014 totaled $47.2 million, which expire as follows (in millions of dollars):



Year	Amount
2015-2017	$	1.9
2018-2020	2.5
2021-2024	1.2
2025-2031	0.3
No expiration	41.3
Total	$	47.2

The Company has established a valuation allowance for loss carryforwards and future deductible items in certain foreign jurisdictions, and for U.S. foreign tax credit carryforwards. The valuation allowance is determined in accordance with the provisions of ASC 740, which requires an assessment of both negative and positive evidence when measuring the need for a valuation allowance. The Company’s recent losses in these foreign jurisdictions, and its recent lack of adequate U.S. foreign source income to fully utilize foreign tax credit carryforwards, represented sufficient negative evidence to require a valuation allowance under ASC 740. The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support realization of the foreign deferred tax assets.

Provision has not been made for U.S. or additional foreign income taxes on an estimated $111.2 million of undistributed earnings of foreign subsidiaries, which are permanently reinvested. If these earnings were to be repatriated, the Company would be subject to additional U.S. income taxes, adjusted for foreign tax credits. It is not practicable to determine the income tax liability that might be incurred if these earnings were to be repatriated.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



	2014			2013			2012
	(In millions of dollars)
Balance at beginning of the year	$	2.8		$	2.9		$	7.8

Additions for prior years’ tax positions	—			—			0.4
Reductions for prior years’ tax positions	(0.4		)	(0.1		)	(5.3		)
Additions for settlements	—			—			—
Reductions for settlements	—			—			—
Reductions for expiration of statutes	—			—			—

Balance at end of the year	$	2.4		$	2.8		$	2.9

If the $2.4 million in 2014, $2.8 million in 2013 and $2.9 million in 2012 of unrecognized tax benefits were recognized, they would have a favorable effect of $1.5 million in 2014, $1.8 million in 2013 and $1.9 million in 2012 on income tax expense.

The Company recognizes both interest and penalties as part of the income tax provision. The Company recognized expense of $0.1 million in 2014, expense of $0.1 million in 2013 and a benefit of $0.3 million in 2012 for interest and penalties. Accrued interest and penalties were $0.4 million at year-end 2014 and $0.3 million at year-end 2013.

The Company files income tax returns in the U.S. and in various states and foreign countries. The tax periods open to examination by the major taxing jurisdictions to which the Company is subject include the U.S. for fiscal years 2010 through 2014, Canada for fiscal years 2007 through 2014, France for fiscal years 2012 through 2014, Mexico for fiscal years 2009 through 2014, Switzerland for fiscal years 2005 through 2014, and Russia for fiscal years 2012 through 2014.

The Company and its subsidiaries have various income tax returns in the process of examination. The unrecognized tax benefit and related interest and penalty balances include approximately $0.3 million for 2014, related to tax positions which are reasonably possible to change within the next twelve months due to income tax audits, settlements and statute expirations.