9.	INCOME TAXES

Income taxes are recognized for the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. The effects of income taxes are measured based on enacted tax laws and rates.

The provision for income taxes from operations consisted of the following:


	Year ended December 31
In thousands	2015			2014			2013
Current taxes
Federal	$	5,047		$	3,291		$	625
State		(1,680	)		238			(4,365	)
Foreign		12,536			24,027			17,268
		15,903			27,556			13,528
Deferred taxes and other
Federal		(7,287	)		(3,975	)		(10,973	)
State		564			(147	)		(474	)
Foreign		4,821			(5,297	)		(38	)
		(1,902	)		(9,419	)		(11,485	)
Income tax provision	$	14,001		$	18,137		$	2,043

The amounts set forth above for total deferred taxes and other included a deferred tax benefit of $2.7 million, $9.6 million and $15.1 million in 2015, 2014 and 2013, respectively. Other taxes totaled an expense of $0.8 million, $0.2 million and $3.6 million in 2015, 2014 and 2013, respectively, associated with the deferred tax impact of uncertain tax positions.

The following are the domestic and foreign components of pretax income from operations:


	Year ended December 31
In thousands	2015		2014		2013
United States	$	2,382	$	4,637	$	(3,052	)
Foreign		76,194		82,746		72,253
Total pretax income	$	78,576	$	87,383	$	69,201

A reconciliation between the income tax provision, computed by applying the statutory federal income tax rate of 35% to income before income taxes, and the actual income tax provision is as follows:


	Year ended December 31
	2015			2014			2013
Federal income tax provision at statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal income tax benefit		0.3			0.2			0.5
Foreign income tax rate differential		(8.6	)		(5.0	)		(5.0	)
Change in statutory tax rates		–			(2.2	)		(0.6	)
Tax credits		(1.9	)		(2.0	)		(4.4	)
Change in unrecognized tax benefits, net		(2.1	)		1.3			(22.7	)
Permanent differences on non-U.S. earnings		(4.4	)		(2.8	)		(0.4	)
Valuation allowance		0.4			(2.7	)		–
Other		(0.9	)		(1.0	)		0.6
Provision for income taxes		17.8	%		20.8	%		3.0	%

The sources of deferred income taxes were as follows at December 31:


	2015					2014
In thousands		Current Asset (Liability)		Non current Asset (Liability)			Current Asset (Liability)			Non current Asset (Liability)
Reserves	$	–	$	11,931		$	5,032		$	7,987
Compensation		–		8,250			3,087			5,075
Post-retirement benefits		–		19,476			1,531			21,338
Property		–		(84,009	)		–			(89,432	)
Intangible assets		–		(17,748	)		–			(21,285	)
Pension		–		(26,885	)		532			(30,412	)
Inventories		–		3,445			2,758			–
Other		–		605			(783	)		1,171
Research & development expenses		–		8,925			–			–
Tax carryforwards		–		8,413			8,560			12,660
Subtotal		–		(67,597	)		20,717			(92,898	)
Valuation allowance		–		(3,773	)		(934	)		(2,288	)
Total	$	–	$	(71,370	)	$	19,783		$	(95,186	)

Current and non-current deferred tax assets and liabilities are included in the following balance sheet captions:


	December 31
In thousands		2015		2014
Prepaid expenses and other current assets	$	–	$	20,017
Other assets		5,088		8,830
Other current liabilities		–		234
Deferred income taxes		76,458		104,016

We early adopted Accounting Standards Update 2015-17, Income Taxes (Topic 740) effective December 31, 2015 on a prospective basis. Adoption of this ASU required the reclassification of our current deferred tax assets and liabilities to non-current deferred tax assets and liabilities in our consolidated balance sheet as of December 31, 2015. No prior periods were retrospectively adjusted. The adoption of ASU 2015-17 had no impact on our consolidated results of income or financial position.

At December 31, 2015 we had state and foreign tax net operating loss (“NOL”) carryforwards of $80.9 million and $4.2 million, respectively. These NOL carryforwards are available to offset future taxable income, if any. The state NOL carryforwards expire at various times and in various amounts beginning in 2016 and through 2035. Certain foreign NOL carryforwards begin to expire in 2019.

The state and foreign NOL carryforwards on the income tax returns filed included unrecognized tax benefits taken in prior years. The NOLs for which a deferred tax asset is recognized for financial statement purposes in accordance with ASC 740 are presented net of these unrecognized tax benefits.

In addition, we had various state tax credit carryforwards totaling $0.4 million, which begin to expire in 2016, and foreign investment tax credits of $2.3 million which begin to expire in 2028.

As of December 31, 2015 and 2014, we had valuation allowances of $3.8 million and $3.2 million, respectively, against net deferred tax assets, primarily due to uncertainty regarding the ability to utilize state and foreign tax NOL carryforwards and certain state tax credits. The change in the valuation allowance was primarily due to the inability to utilize certain state NOLs before they expire.

Tax credits and other incentives reduce tax expense in the year the credits are claimed. We recorded tax credits of $1.5 million, $1.8 million and $3.0 million in 2015, 2014 and 2013, respectively, related to research and development credits and fuels tax credits.

At December 31, 2015 and 2014, unremitted earnings of subsidiaries outside the United States deemed to be indefinitely reinvested totaled $338.6 million and $305.6 million, respectively. Because the unremitted earnings of subsidiaries are deemed to be indefinitely reinvested as of December 31, 2015 and because we have no need, or plans, to repatriate such earnings, no deferred tax liability has been recognized in our consolidated financial statements. It is not practicable to determine the amount of additional taxes that have not been provided.

As of December 31, 2015, 2014 and 2013, we had $12.2 million, $14.9 million and $14.9 million of gross unrecognized tax benefits, respectively. As of December 31, 2015, if such benefits were to be recognized, approximately $10.8 million would be recorded as a component of income tax expense, thereby affecting our effective tax rate.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:


In millions		2015			2014			2013
Balance at January 1	$	14.9		$	14.9		$	30.4
Increases in tax positions for prior years		–			0.7			0.2
Decreases in tax positions for prior years		(4.3	)		(0.5	)		(4.9	)
Acquisition related:
Purchase Accounting		–			0.3			1.3
Increases in tax positions for current year		1.9			3.4			1.7
Settlements		–			(1.3	)		–
Lapse in statutes of limitation		(0.3	)		(2.6	)		(13.8	)
Balance at December 31	$	12.2		$	14.9		$	14.9

We, or one of our subsidiaries, file income tax returns with the United States Internal Revenue Service, as well as various state and foreign authorities. The following table summarizes tax years that remain subject to examination by major jurisdiction:


	Open Tax Years
Jurisdiction	Examinations not yet initiated	Examination in progress
United States
Federal	2013 – 2015	N/A
State	2011 – 2015	2012 – 2014
Canada⁽¹⁾	2010 – 2015	N/A
Germany⁽¹⁾	2012 – 2015	2007 – 2011
France	2013 – 2015	2011 – 2012
United Kingdom	2014 – 2015	N/A
Philippines	2012, 2014 – 2015	2013

(1)	includes provincial or similar local jurisdictions, as applicable.

The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities, which often result in proposed assessments. Management performs a comprehensive review of its global tax positions on a quarterly basis and accrues amounts for uncertain tax positions. Based on these reviews and the result of discussions and resolutions of matters with certain tax authorities and the closure of tax years subject to tax audit, reserves are adjusted as necessary. However, future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are determined or resolved or as such statutes are closed. Due to potential for resolution of federal, state and foreign examinations, and the expiration of various statutes of limitation, it is reasonably possible our gross unrecognized tax benefits balance may decrease within the next twelve months by a range of zero to $1.7 million. Substantially all of this range relates to tax positions taken in Germany.

We recognize interest and penalties related to uncertain tax positions as income tax expense. The following table summarizes information related to interest and penalties on uncertain tax positions:


	As of or for the year ended December 31
In millions		2015		2014		2013
Accrued interest payable	$	0.6	$	0.6	$	0.6
Interest expense (income)		–		–		(0.8	)
Penalties		–		–		–