16.	INCOME TAXES

Income before income taxes consisted of the following:

 

		Year Ended December 31,
		2014				2015				2016
Income before income taxes:
U.S.		$	205,521			$	259,652			$	274,756
Foreign			84,542				88,015				85,890
Total		$	290,063			$	347,667			$	360,646

Current and deferred income taxes were as follows:

 

		Year Ended December 31,
		2014				2015				2016
Current:
Federal		$	61,732			$	71,288			$	65,303
Foreign			27,681				35,874				32,047
State			6,125				10,682				11,936
Total current expense		$	95,538			$	117,844			$	109,286
Deferred:
Federal		$	6,322			$	10,420			$	(13,667	)
Foreign			(6,437	)			(3,339	)			1,674
State			641				4,014				6,526
Total deferred taxes			526				11,095				(5,467	)
Income taxes		$	96,064			$	128,939			$	103,819

 

A reconciliation between income tax expense and taxes computed by applying the applicable statutory federal income tax rate to income before income taxes follows:

 

		Year Ended December 31,
		2014				2015				2016
Computed statutory tax expense		$	101,522			$	121,683			$	126,226
Foreign inflation adjustments			641				(1,295	)			(281	)
State and local income taxes, net of federal income tax impact			4,549				9,559				11,999
Foreign losses not benefited and changes in valuation allowance			(275	)			(2,408	)			(34,757	)
Foreign tax rate differential			(2,125	)			(2,660	)			(942	)
Foreign dividends			1,083				—				68,684
Foreign tax credits			—				—				(62,815	)
Sale of Mexican subsidiaries and related changes in intangible assets			(10,065	)			—				—
Changes in uncertain tax positions			(1,540	)			3,717				921
Other — net			2,274				343				(5,216	)
Income taxes		$	96,064			$	128,939			$	103,819

The Company reinvests the accumulated undistributed earnings of its non-U.S. subsidiaries. As of December 31, 2016, the Company has not provided deferred taxes on approximately $251,000 of accumulated undistributed earnings of non-U.S. subsidiaries, as it is the Company’s policy to indefinitely reinvest these earnings in non-U.S. operations. However, the Company may periodically repatriate a portion of these earnings to the extent that it does not incur an additional U.S. tax liability. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested accumulated earnings is not practicable.

 

Deferred Income Taxes

The tax effects of significant temporary differences and tax loss and tax credit carryforwards comprising the net long-term deferred income tax liabilities as of December 31, 2015 and 2016 consisted of the following:

 

		December 31,
		2015				2016
Deferred liabilities:
Theatre properties and equipment		$	141,155			$	176,781
Tax impact of items in accumulated other comprehensive loss			158				—
Intangible asset — other			28,889				36,052
Intangible asset — tradenames			112,413				112,747
Investment in partnerships			108,733				107,066
Total deferred liabilities			391,348				432,646
Deferred assets:
Deferred lease expenses			26,966				24,026
Exchange (gain) loss			3,736				(731	)
Deferred revenue — NCM			128,642				130,005
Capital lease obligations			75,966				85,721
Tax loss carryforwards			7,379				7,396
Alternative minimum tax and other credit carryforwards			41,300				56,520
Other expenses, not currently deductible for tax purposes			20,204				11,270
Total deferred assets			304,193				314,207
Net deferred income tax liability before valuation allowance			87,155				118,439
Valuation allowance against deferred assets — non-current			50,636				14,524
Net deferred income tax liability		$	137,791			$	132,963
Net deferred tax liability — Foreign		$	4,212			$	7,571
Net deferred tax liability — U.S.			133,579				125,392
Total		$	137,791			$	132,963

The Company’s foreign tax credit carryforwards began to expire in 2015. Some foreign net operating losses will expire in the next reporting period; however, some losses may be carried forward indefinitely. State net operating losses may be carried forward for periods of between five and twenty years with the last expiring year being 2036.

The Company’s valuation allowance changed from $50,636 at December 31, 2015 to $14,524 at December 31, 2016. The decrease was a result of the implementation of a foreign holding and financing structure, which increased the Company’s ability to use foreign tax credits that previously had a full valuation allowance.

 

Uncertain Tax Positions

The following is a reconciliation of the total amounts of unrecognized tax benefits excluding interest and penalties, for the years ended December 31, 2014, 2015 and 2016:

 

		Year Ended December 31,
		2014				2015				2016
Balance at January 1,		$	18,780			$	16,515			$	17,133
Gross increases — tax positions in prior periods			10				40				13
Gross decreases — tax positions in prior periods			(2,379	)			—				—
Gross increases — current period tax positions			1,324				2,112				923
Settlements			(963	)			(871	)			(924	)
Foreign currency translation adjustments			(257	)			(663	)			258
Balance at December 31,		$	16,515			$	17,133			$	17,403

The Company had $17,008 and $18,190 of unrecognized tax benefits, including interest and penalties, as of December 31, 2015 and 2016, respectively. Of these amounts, $17,008 and $18,190 represent the amount of unrecognized tax benefits that if recognized would impact the effective income tax rate for the years ended December 31, 2015 and 2016, respectively. The Company had $3,198 and $4,111 accrued for interest and penalties as of December 31, 2015 and 2016, respectively.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and in certain state and foreign jurisdictions and are routinely under audit by many different tax authorities. The Company believes that its accrual for tax liabilities is adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. The Company is no longer subject to income tax audits from the Internal Revenue Service for years before 2013. The Company is no longer subject to state income tax examinations by tax authorities in its major state jurisdictions for years before 2012. Certain state returns were amended as a result of the Internal Revenue Service examination closures for 2007 through 2009, and the statutes remain open for those amendments. The Company is no longer subject to non-U.S. income tax examinations by tax authorities in its major non-U.S. tax jurisdictions for years before 2004.

The Company is currently under audit in the non-U.S. tax jurisdictions of Brazil and Chile. The Company believes that it is reasonably possible that the Chile audit will be completed within the next twelve months.