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Rollforward of Level 3 Pension Plan Assets 2015 2014 Balance on January 1 $ 33 $ 22 Actual return on plan assets held at the reporting date (2) 11 Balance on December 31 $ 31 $ 33 Estimated Future Benefit Payments 2016 2017 2018 2019 2020 2021-2025 $ 14 $ 14 $ 13 $ 14 $ 13 $ 77 We expect to contribute $18 to our defined benefit pension plans in 2016. NOTE 12 - INCOME TAXES Our effective tax rate was 17.1%, 55.6% and 17.0% for 2015, 2014 and 2013. The effective income tax rate for 2014 includes the tax impacts of the establishment of a European regional headquarters and the cash repatriation which was executed in 2015. In 2015 we retroactively adopted ASU 2015-17 Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes that amends the balance sheet classification of deferred taxes. Earnings Before Income Taxes 2015 2014 2013 United States $ 475 $ 355 $ 193 International 1,260 805 1,019 Total $ 1,735 $ 1,160 $ 1,212 Components of Income Tax Expense 2015 2014 2013 Current income tax expense United States federal $ 78 $ 213 $ 79 United States state and local 23 26 29 International 108 346 75 Total current income tax expense $ 209 $ 585 $ 183 Deferred income tax expense (benefit) United States federal $ 2 $ 9 $ (52) United States state and local 8 (16) (4) International 77 67 79 Total deferred income tax expense $ 87 $ 60 $ 23 Total income tax expense $ 296 $ 645 $ 206 Interest and penalties included in other income (expense), net were ($4), $8 and $12 in 2015, 2014 and 2013. In 2013 we recorded income tax benefits related to favorable audit resolutions in multiple jurisdictions. The United States federal deferred income tax expense (benefit) includes the utilization of net operating loss carryforwards of $79, $78 and $16 in 2015, 2014 and 2013. Reconciliation of the United States Federal Statutory Income Tax Rate to our Effective Income Tax Rate 2015 2014 2013 United States federal statutory rate 35.0 % 35.0 % 35.0 % Add (deduct): United States state and local income taxes, less federal deduction 2.1 2.2 1.4 Foreign income tax at rates other than 35% (17.6 ) 4.9 (13.7 ) Tax related to repatriation of foreign earnings (3.9 ) 10.1 — Other 1.5 3.4 (5.7) 17.1% 55.6% 17.0% Deferred Income Tax Assets and Liabilities 2015 2014 Deferred income tax assets: Inventories $ 513 $ 585 Product related liabilities 116 167 Other accrued expenses 206 226 Depreciation and amortization 4 44 State income taxes 43 68 Share-based compensation 79 90 Net operating loss carryforwards 47 123 Other 143 143 Total deferred income tax assets $ 1,151 $ 1,446 Less valuation allowances (47) (42) Total deferred income tax assets, net $ 1,104 $ 1,404 Deferred income tax liabilities: Depreciation and amortization $ (586) $ (666) Undistributed earnings (50) (132) Other (26) (54) Total deferred income tax liabilities $ (662) $ (852) Net deferred income tax assets $ 442 $ 552 Reported as: Noncurrent assets—Other $ 477 $ 594 Noncurrent liabilities—Other liabilities (35) (42) Total $ 442 $ 552 Accrued interest and penalties were $30 and $26, which was reported in accrued expenses and other liabilities, both current and noncurrent, on December 31, 2015 and 2014. Net operating loss carryforwards totaling $152 on December 31, 2015 are available to reduce future taxable earnings of certain domestic and foreign subsidiaries. United States loss carryforwards of $81 expire through 2028. International loss carryforwards of $71 began to expire in 2015; however, some have no expiration. Of these carryforwards, $43 are subject to a full valuation allowance. We also have a tax credit carryforward of $36 with a full valuation allowance. These credits have no expiration; however, we do not anticipate generating income tax in excess of the credits in the foreseeable future. No provision has been made for United States federal and state income taxes or international income taxes that may result from future remittances of the undistributed earnings of foreign subsidiaries that are determined to be indefinitely reinvested ($7,166 on December 31, 2015). Determination of the amount of any unrecognized deferred income tax liability on these is not practicable. Changes in the Amounts Recorded for Uncertain Income Tax Positions 2015 2014 Balance at beginning of year $ 315 $ 204 Increases related to current year income tax positions 21 133 Increases related to prior year income tax positions 3 23 Decreases related to prior year income tax positions: Settlements and resolutions of income tax audits (9) (33) Statute of limitations expirations (6) (1) Foreign currency translation (11) (6) Other — (5) Balance at end of year $ 313 $ 315 Reported as: Current liabilities—Income taxes $ 9 $ 3 Noncurrent liabilities—Other liabilities 304 312 Total $ 313 $ 315 STRYKER CORPORATION 2015 Form 10-K 31 Dollar amounts in millions except per share amounts or as otherwise specified.