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15. INCOME TAXES

ÌýÌýÌýÌýÌýÌýÌýÌýWe use the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial and tax reporting purposes. We evaluate deferred tax assets to determine whether it is more likely than not that they will be realized. Valuation allowances are reviewed on an individual tax jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets. These conclusions require significant judgment. In evaluating the objective evidence that historical results provide, we consider the cyclicality of our businesses and cumulative income or losses during the applicable period. Cumulative losses incurred over the applicable period limits our ability to consider other subjective evidence such as our projections for the future. Changes in expected future income in applicable jurisdictions could affect the realization of deferred tax assets in those jurisdictions.

ÌýÌýÌýÌýÌýÌýÌýÌýDuring the nine months ended SeptemberÌý30, 2016 and 2015, for unrecognized tax benefits that impact tax expense, we recorded a net decrease in unrecognized tax benefits and a corresponding income tax benefit of $6Ìýmillion and a net decrease in unrecognized benefits and a corresponding income tax benefit of $5Ìýmillion, respectively. Additional increases and decreases in unrecognized tax benefits were offset by cash settlements or decreases in net deferred tax assets and, therefore, did not affect income tax expense.

ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation

ÌýÌýÌýÌýÌýÌýÌýÌýWe recorded income tax expense of $58Ìýmillion and $85Ìýmillion for the nine months ended SeptemberÌý30, 2016 and 2015, respectively. Our tax expense is significantly affected by the mix of income and losses in the tax jurisdictions in which we operate, as impacted by the presence of valuation allowances in certain tax jurisdictions. Notably, we continue to earn a significant portion of our pre-tax income in the United States with an approximate 35% federal and state blended effective tax rate. Our MTBE earnings are taxed at the U.S. statutory rate of 35%. Variability in our MTBE earnings has a meaningful impact on our effective tax rate. The combination of significantly lower MTBE earnings, weather related and other production outages in the U.S., and higher earnings in countries with valuation allowances, resulted in an unusually low effective tax rate in the third quarter of 2016.

ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International

ÌýÌýÌýÌýÌýÌýÌýÌýÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International recorded income tax expense of $58Ìýmillion and $85Ìýmillion for the nine months ended SeptemberÌý30, 2016 and 2015, respectively. Our tax expense is significantly affected by the mix of income and losses in the tax jurisdictions in which we operate, as impacted by the presence of valuation allowances in certain tax jurisdictions. Notably, we continue to earn a significant portion of our pre-tax income in the United States with an approximate 35% federal and state blended effective tax rate. Our MTBE earnings are taxed at the U.S. statutory rate of 35%. Variability in our MTBE earnings has a meaningful impact on our effective tax rate. The combination of significantly lower MTBE earnings, weather related and other production outages in the U.S., and higher earnings in countries with valuation allowances, resulted in an unusually low effective tax rate in the third quarter of 2016.