Entity information:
 INCOME TAXES
The provision (benefit) for income taxes allocated to continuing operations consisted of the following:
 
Year Ended September 30,
 
2017
 
2016
 
2015
 
(In millions)
Current:
 
 
 
 
 
Federal
$
104.5

 
$
89.7

 
$
66.9

State
12.4

 
11.8

 
8.1

Foreign
8.1

 
4.3

 
1.7

Total Current
125.0

 
105.8

 
76.7

Deferred:
 
 
 
 
 
Federal
(7.4
)
 
30.7

 
(1.3
)
State
(0.5
)
 
2.5

 
1.2

Foreign
(0.5
)
 
(1.4
)
 
(0.3
)
Total Deferred
(8.4
)
 
31.8

 
(0.4
)
Provision for income taxes
$
116.6

 
$
137.6

 
$
76.3



The domestic and foreign components of income from continuing operations before income taxes were as follows:
 
Year Ended September 30,
 
2017
 
2016
 
2015
 
(In millions)
Domestic
$
296.0

 
$
357.0

 
$
173.5

Foreign
18.9

 
26.7

 
31.5

Income from continuing operations before income taxes
$
314.9

 
$
383.7

 
$
205.0



A reconciliation of the federal corporate income tax rate and the effective tax rate on income from continuing operations before income taxes is summarized below:
 
Year Ended September 30,
 
2017
 
2016
 
2015
Statutory income tax rate
35.0
 %
 
35.0
 %
 
35.0
 %
Effect of foreign operations
3.1

 
0.3

 
0.9

State taxes, net of federal benefit
2.9

 
2.9

 
3.4

Domestic Production Activities Deduction permanent difference
(3.1
)
 
(2.5
)
 
(3.1
)
Effect of other permanent differences
0.4

 
0.4

 
0.1

Research and Experimentation and other federal tax credits
(0.4
)
 
(0.3
)
 
(0.3
)
Resolution of prior tax contingencies
0.9

 
(0.1
)
 
0.4

Other
(1.8
)
 
0.2

 
0.8

Effective income tax rate
37.0
 %
 
35.9
 %
 
37.2
 %




Deferred income taxes arise from temporary differences between financial reporting and tax reporting bases of assets and liabilities, and operating loss and tax credit carryforwards for tax purposes. The components of the deferred income tax assets and liabilities were as follows:
 
September 30,
 
2017
 
2016
 
(In millions)
DEFERRED TAX ASSETS
 
 
 
Inventories
$
8.0

 
$
9.2

Accrued liabilities
58.9

 
41.8

Postretirement benefits
19.9

 
28.2

Accounts receivable
5.3

 
5.9

Federal NOL carryovers
20.3

 
—

State NOL carryovers
1.3

 
0.4

Foreign NOL carryovers
3.7

 
4.6

Foreign tax credit carryovers
7.6

 
7.4

Interest rate swaps
—

 
2.4

Other
(1.6
)
 
(0.5
)
Gross deferred tax assets
123.4

 
99.4

Valuation allowance
(29.7
)
 
(4.1
)
Total deferred tax assets
93.7

 
95.3

DEFERRED TAX LIABILITIES
 
 
 
Property, plant and equipment
(68.5
)
 
(65.5
)
Intangible assets
(127.5
)
 
(100.9
)
Outside basis difference in equity investments
(47.5
)
 
(83.5
)
Other
(7.7
)
 
(17.4
)
Total deferred tax liabilities
(251.2
)
 
(267.3
)
Net deferred tax liability
$
(157.5
)
 
$
(172.0
)


During fiscal 2017, the Company adopted accounting guidance that requires all deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. The Company adopted this guidance on a retrospective basis effective September 30, 2017. As a result, deferred tax assets totaling $43.7 million have been presented as noncurrent and are included in other liabilities on the Consolidated Balance Sheets as of September 30, 2016. These amounts were previously reported within prepaid and other current assets.

GAAP requires that a valuation allowance be recorded against a deferred tax asset if it is more likely than not that the tax benefit associated with the asset will not be realized in the future. As shown in the table above, valuation allowances were recorded against $29.7 million and $4.1 million of deferred tax assets as of September 30, 2017 and 2016, respectively. Most of these valuation allowances relate to certain credits and net operating losses, as explained further below.
Foreign net operating losses of certain controlled foreign corporations were $14.4 million as of September 30, 2017, the majority of which have indefinite carryforward periods. Due to a history of losses in many of these entities, a full valuation allowance has also been placed against the statutory tax benefit associated with all but $2.0 million of these losses at September 30, 2017.
Foreign tax credits were $7.6 million and $7.4 million at September 30, 2017 and 2016, respectively. A valuation allowance in the amount of $7.6 million has been established against those foreign tax credits the Company does not expect to utilize prior to their expiration.
The Company, through increased ownership of AeroGrow International, Inc. during fiscal 2017, may potentially utilize up to $63.2 million in federal net operating losses (NOLs) of AeroGrow International, Inc., subject to limitations under IRC §382 from current and prior ownership changes. The Company determined that $50.0 million of these NOLs will expire unutilized due to the closing of statutes of limitation and a valuation allowance has been established on these NOLs, accordingly. The Company estimates that $11.4 million of the remaining $13.2 million of NOLs will be utilized as of the tax year ending September 30, 2018 with the remainder utilized gradually through the tax year ending September 30, 2032.
Deferred tax assets related to state net operating losses were $2.8 million as of September 30, 2017, with carryforward periods ranging from 5 to 20 years. Any losses not utilized within a specific state’s carryforward period will expire. A valuation allowance was recorded against $1.2 million of deferred tax assets as of September 30, 2017 for state net operating losses that the company does not expect to realize within their respective carryover periods. Tax benefits associated with state tax credits will expire if not utilized and amounted to $1.0 million and $0.7 million at September 30, 2017 and 2016, respectively. A valuation allowance in the amount of $0.2 million has been established related to state credits the Company does not expect to utilize.
Deferred taxes have not been provided on unremitted earnings of $119.0 million for certain foreign subsidiaries and foreign corporate joint ventures as such earnings have been indefinitely reinvested. These foreign entities held cash and cash equivalents of $39.3 million and $39.9 million at September 30, 2017 and 2016, respectively. Our current plans do not demonstrate a need to, nor do we project we will, repatriate the retained earnings from these subsidiaries as the earnings are indefinitely reinvested. In the future, if we determine it is necessary to repatriate these funds, or we sell or liquidate any of these subsidiaries, we may be required to pay associated taxes on the repatriation. We may also be required to withhold foreign taxes depending on the foreign jurisdiction from which the funds are repatriated. The effective rate of tax on such repatriations may materially differ from the federal statutory tax rate and could have a material impact on tax expense in the year of repatriation. As such, the Company cannot reasonably estimate the amount of such a tax event.
The Company had $10.2 million, $5.1 million and $9.2 million of gross unrecognized tax benefits related to uncertain tax positions at September 30, 2017, 2016 and 2015, respectively. Included in the September 30, 2017, 2016 and 2015 balances were $8.5 million, $3.5 million and $6.6 million, respectively, of unrecognized tax benefits that, if recognized, would have an impact on the effective tax rate.
A reconciliation of the unrecognized tax benefits is as follows: 
 
Year Ended September 30,
 
2017
 
2016
 
2015
 
(In millions)
Balance at beginning of year
$
5.1

 
$
9.2

 
$
11.2

Additions for tax positions of the current year
1.4

 
0.3

 
0.2

Additions for tax positions of prior years
3.9

 
1.9

 
4.1

Reductions for tax positions of prior years
(0.2
)
 
(2.6
)
 
(3.2
)
Settlements with tax authorities
0.9

 
(2.7
)
 
(2.7
)
Expiration of statutes of limitation
(0.9
)
 
(1.0
)
 
(0.4
)
Balance at end of year
$
10.2

 
$
5.1

 
$
9.2



The Company continues to recognize accrued interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes. As of September 30, 2017, 2016 and 2015, respectively, the Company had $1.1 million, $1.1 million and $1.8 million accrued for the payment of interest that, if recognized, would impact the effective tax rate. As of September 30, 2017, 2016 and 2015, respectively, the Company had $0.4 million, $0.5 million and $0.7 million accrued for the payment of penalties that, if recognized, would impact the effective tax rate. For the fiscal year ended September 30, 2017, the Company recognized a benefit of $1.7 million for tax interest and tax penalties in its Consolidated Statement of Operations.
The Scotts Miracle-Gro Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. Subject to the following exceptions, the Company is no longer subject to examination by these tax authorities for fiscal years prior to 2014. The Company is currently under examination by the Internal Revenue Service and certain foreign and U.S. state and local tax authorities. The U.S. federal examination is limited to fiscal years 2011 2012, and 2013. With respect to the foreign jurisdictions, a German audit covering fiscal years 2009 through 2012 closed in the third quarter of fiscal 2017 with no material impact to the financial statements. In regard to the multiple U.S. state and local audits, the tax periods under examination are limited to fiscal years 2011 through 2015. In addition to the aforementioned audits, certain other tax deficiency notices and refund claims for previous years remain unresolved.
The Company currently anticipates that few of its open and active audits will be resolved within the next twelve months. The Company is unable to make a reasonably reliable estimate as to when or if cash settlements with taxing authorities may occur. Although audit outcomes and the timing of audit payments are subject to significant uncertainty, the Company does not anticipate that the resolution of these tax matters or any events related thereto will result in a material change to its consolidated financial position, results of operations or cash flows.