INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of geographic allocation of income



Geographic Allocation of Income and Provision (Credit) for Income Taxes
In millions	2018			2017			2016
Income (Loss) before income taxes
Domestic	$	1,305		$	856		$	49
Foreign	(3		)	(6		)	8
Income before income taxes	$	1,302		$	850		$	57
Current tax expense (benefit)
Federal	$	166		$	226		$	265
State and local	6			2			(3		)
Foreign	40			3			3
Total current tax expense	$	212		$	231		$	265
Deferred tax expense (benefit)
Federal ¹	$	27		$	392		$	(285	)
State and local	8			22			(12		)
Total deferred tax expense (benefit)	$	35		$	414		$	(297	)
Provision (Credit) for income taxes	$	247		$	645		$	(32	)
Net income	$	1,055		$	205		$	89


1.	2018 and 2017 includes the impact of The Act; 2016 includes the impact of the asbestos-related charge.

Schedule of Effective Income Tax Rate Reconciliation



Reconciliation to U.S. Statutory Rate	2018		2017		2016
Statutory U.S. federal income tax rate	21.0	%	35.0	%	35.0	%
U.S. manufacturing deductions	—		—		(14.0	)
Unrecognized tax benefits	(0.3	)	(0.4	)	(45.6	)
Foreign Derived Intangible Income ("FDII") deduction	(2.2	)	—		—
Federal tax accrual adjustments	(0.3	)	(1.1	)	(12.3	)
Impact of U.S. tax reform	(0.2	)	29.4		—
Deferred intercompany gain	—		11.4		—
State and local tax impact	1.0		2.2		(24.6	)
Other - net	—		(0.6	)	5.4
Effective Tax Rate ¹	19.0	%	75.9	%	(56.1	)%


1.	The tax rate for 2018 was favorably impacted by The Act and the FDII deduction. The tax rate for 2017 was unfavorably impacted by The Act and the recognition of a deferred gain. The tax rate for 2016 was favorably impacted by the release of a reserve in excess of the settlement of an uncertain tax position and from the asbestos-related charge.

Schedule of Deferred Tax Assets and Liabilities



Deferred Tax Balances at Dec 31	2018					2017
In millions	Assets			Liabilities		Assets			Liabilities
Property	$	—		$	129	$	—		$	132
Tax loss and credit carryforwards	42			—		47			—
Postretirement benefit obligations	234			—		251			—
Other accruals and reserves	326			8		349			1
Inventory	8			—		8			—
Other - net	11			2		9			1
Subtotal	$	621		$	139	$	664		$	134
Valuation allowances ¹	(19		)	—		(19		)	—
Total	$	602		$	139	$	645		$	134


1.	Primarily related to the realization of recorded tax benefits on state tax loss carryforwards from operations in the United States.

Summary of Operating Loss Carryforwards



Operating Loss and Tax Credit Carryforwards	2018		2017
In millions	Asset		Asset
Operating loss carryforwards
Expire within 5 years	$	31	$	29
Expire after 5 years or indefinite expiration	5		12
Total operating loss carryforwards	$	36	$	41
Tax credit carryforwards
Expire within 5 years	$	—	$	1
Expire after 5 years or indefinite expiration	6		5
Total tax credit carryforwards	$	6	$	6

Schedule of Total Gross Unrecognized Tax Benefits

The following table provides a reconciliation of the Corporation's unrecognized tax benefits:



Total Gross Unrecognized Tax Benefits
In millions	2018			2017			2016
Total unrecognized tax benefits at Jan 1	$	1		$	1		$	68
Increases related to positions taken on items from prior years	—			—			139
Settlement of uncertain tax positions with tax authorities	—			—			(206		)
Total unrecognized tax benefits at Dec 31	$	1		$	1		$	1
Total unrecognized tax benefits that, if recognized, would impact the effective tax rate	$	1		$	1		$	1
Total amount of interest and penalties (benefit) recognized in "Provision (Credit) for income taxes"	$	(5	)	$	(6	)	$	(36	)

In the fourth quarter of 2016, a settlement in the amount of $206 million was reached for a tax matter regarding a historical change in the legal ownership structure of a nonconsolidated affiliate. As a result of the settlement, the Corporation recorded a net decrease to uncertain tax positions of $67 million in "Other noncurrent obligations" in the consolidated balance sheets.

Schedule of Tax Years Subject to Examination by Major Tax Jurisdiction

Tax years that remain subject to examination for the Corporation's major tax jurisdictions are shown below:



Tax Years Subject to Examination by Major Tax Jurisdiction at Dec 31, 2018	Earliest Open Year
Jurisdiction	Earliest Open Year
United States:
Federal income tax	2004
State and local income tax	2004