United states securities and exchange commission

71

The components of the Company’s deferred tax assets and liabilities are as follows (in millions):

As of December 31	2016				2015
Deferred tax assets:
Employee benefit plans	$	661			$	635
Net operating/capital loss and tax credit carryforwards	399				336
Accrued interest	166				293
Other accrued expenses	102				98
Brokerage fee arrangements (1)	66				66
Deferred revenue	57				65
Investment basis differences	48				56
Other	60				57
Total	1,559				1,606
Valuation allowance on deferred tax assets	(130		)		(162		)
Total	$	1,429			$	1,444
Deferred tax liabilities:
Intangibles and property, plant and equipment	$	(982	)		$	(961	)
Other accrued expenses	(101		)		(99		)
Deferred costs	(20		)		(30		)
Unrealized foreign exchange gains	(26		)		(29		)
Unremitted earnings	(29		)		(18		)
Other	(50		)		(44		)
Total	$	(1,208	)		$	(1,181	)
Net deferred tax asset	$	221			$	263

(1) Refer to Note 1 “Basis of Presentation” for details regarding the Revision of Previously Issued Financial Statements.

Deferred income taxes (assets and liabilities have been netted by jurisdiction) have been classified in the Consolidated Statements of Financial Position as follows (in millions):

As of December 31	2016				2015
Deferred tax assets — non-current (2)	$	322			$	300
Deferred tax liabilities — non-current (2)	(101		)		(37		)
Net deferred tax asset	$	221			$	263

(2) For the year ended December 31, 2015, Aon reclassified its current deferred tax positions to non-current and netted the new balances by jurisdiction. Refer to Note 2 “Summary of Significant Accounting Principles and Practices” for additional details.

Valuation allowances have been established primarily with regard to the tax benefits of certain net operating loss, capital loss and interest expense carryforwards.  Valuation allowances decreased by $32 million as of December 31, 2016 , when compared to December 31, 2015 , primarily attributable to the reversal of a valuation allowance and the impact of foreign currency translation.

The Company recognized, as an adjustment to additional paid-in-capital, income tax benefits attributable to employee stock compensation of $(4) million , $126 million and $89 million in 2016 , 2015 , and 2014 , respectively. The year-over-year change is primarily attributable to excess tax benefits not recorded in 2016 because the deduction did not decrease income taxes payable.

Deferred income taxes of $11 million were accrued in 2016 on undistributed earnings that are not permanently reinvested. Undistributed earnings of non-U.S. entities were approximately $2.3 billion at December 31, 2016 . U.S. income taxes have not been provided on these undistributed earnings because they are considered to be permanently reinvested in those subsidiaries. It is not practicable to estimate the amount of unrecognized deferred tax liabilities, if any, for these undistributed foreign earnings.

72

The Company had the following operating and capital loss carryforwards (in millions):

As of December 31	2016				2015
UK
Operating loss carryforwards	$	325			$	449
Capital loss carryforwards	294				360
US
Federal operating loss carryforwards	$	196			$	8
State operating loss carryforwards	474				443
Other Non-US
Operating loss carryforwards	$	350			$	245
Capital loss carryforwards	218				206

As of December 31, 2016, the Company had $126 million of federal operating loss carryforwards and $110 million of state operating loss carryforwards for which a benefit will be recorded in APIC when realized.

The U.K. operating losses and capital losses have an indefinite carryforward. The federal operating loss carryforwards as of December 31, 2016 expire at various dates from 2020 to 2036 and the state operating losses as of December 31, 2016 expire at various dates from 2017 to 2036. Operating and capital losses in other non-US jurisdictions have various carryforward periods and will begin to expire in 2019.
During 2012, the Company was granted a tax holiday for the period from October 1, 2012 through September 30, 2022, with respect to withholding taxes and certain income derived from services in Singapore. This tax holiday and reduced withholding tax rate may be extended when certain conditions are met or may be terminated early if certain conditions are not met. The benefit realized was approximately $46 million , $23 million , and $7 million during the years ended December 31, 2016 , 2015 , and 2014 , respectively. The impact of this tax holiday on diluted earnings per share was $0.17 , $0.08 , and $0.02 during the years ended December 31, 2016, 2015, and 2014, respectively.

Uncertain Tax Positions

The following is a reconciliation of the Company’s beginning and ending amount of uncertain tax positions (in millions):

	2016				2015
Balance at January 1	$	238			$	211
Additions based on tax positions related to the current year	36				31
Additions for tax positions of prior years	20				53
Reductions for tax positions of prior years	(12		)		(18		)
Settlements	—				(32		)
Business combinations	2				—
Lapse of statute of limitations	(5		)		(5		)
Foreign currency translation	(1		)		(2		)
Balance at December 31	$	278			$	238