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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income before Income Taxes and Noncontrolling Interests

The domestic and foreign components of our income before income taxes and noncontrolling interests are as follows:



	Year Ended December 31,
	2013		2012		2011
	(Millions)
U.S. income before income taxes	$	150	$	166	$	55
Foreign income before income taxes	194		157		216
Income before income taxes and noncontrolling interests	$	344	$	323	$	271

Comparative Analysis of Components of Income Tax Expense

Following is a comparative analysis of the components of income tax expense:



	Year Ended December 31,
	2013			2012			2011
	(Millions)
Current —
U.S. federal	$	25		$	—		$	—
State and local	4			4			2
Foreign	81			89			91
	110			93			93
Deferred —
U.S. federal	(4		)	(25		)	—
State and local	2			(20		)	—
Foreign	14			(29		)	(5		)
	12			(74		)	(5		)
Income tax expense	$	122		$	19		$	88

Reconciliation of Income Taxes Computed at Statutory U.S. Federal Income Tax Rate to Income Tax Expense

Following is a reconciliation of income taxes computed at the statutory U.S. federal income tax rate (35 percent for all years presented) to the income tax expense reflected in the statements of income:



	Year Ended December 31,
	2013			2012			2011
	(Millions)
Income tax expense computed at the statutory U.S. federal income tax rate	$	120		$	113		$	95
Increases (reductions) in income tax expense resulting from:
Foreign income taxed at different rates	(21		)	(21		)	(14		)
Taxes on repatriation of dividends	9			8			6
Remeasurement of estimated tax on unremitted earnings	(17		)	—			—
State and local taxes on income, net of U.S. federal income tax benefit	6			4			2
Changes in valuation allowance for tax loss carryforwards and credits	27			(91		)	(11		)
Foreign tax holidays	(5		)	(5		)	(4		)
Investment and R&D tax credits	(8		)	(1		)	(4		)
Foreign earnings subject to U.S. federal income tax	5			23			6
Adjustment of prior years taxes	(1		)	(5		)	—
Impact of tax law changes	(3		)	(1		)	—
Tax contingencies	6			(6		)	3
Goodwill impairment	—			—			3
Other	4			1			6
Income tax expense	$	122		$	19		$	88

Components of Our Net Deferred Tax Assets

The components of our net deferred tax assets were as follows:



	Year Ended December 31,
	2013			2012
	(Millions)
Deferred tax assets —
Tax loss carryforwards:
U.S. federal	$	—		$	—
State	23			23
Foreign	78			63
Tax credit benefits	88			51
Postretirement benefits other than pensions	43			50
Pensions	36			87
Bad debts	1			1
Sales allowances	6			6
Payroll and other accruals	132			119
Valuation allowance	(135		)	(118		)
Total deferred tax assets	272			282
Deferred tax liabilities —
Tax over book depreciation	56			57
Other	51			70
Total deferred tax liabilities	107			127
Net deferred tax assets	$	165		$	155

Reconciliation of Deferred Taxes to Deferred Taxes Shown In Balance Sheet

Following is a reconciliation of deferred taxes to the deferred taxes shown in the balance sheet:



	Year Ended December 31,
	2013			2012
	(Millions)
Balance Sheet:
Current portion — deferred tax asset	$	71		$	72
Non-current portion — deferred tax asset	125			116
Current portion — deferred tax liability shown in other current liabilities	(3		)	(6		)
Non-current portion — deferred tax liability	(28		)	(27		)
Net deferred tax assets	$	165		$	155

Reconciliation of our Uncertain Tax Positions

A reconciliation of our uncertain tax positions is as follows:



	2013			2012			2011
	(Millions)
Uncertain tax positions —
Balance January 1	$	107		$	119		$	111
Gross increases in tax positions in current period	15			13			19
Gross increases in tax positions in prior period	—			1			3
Gross decreases in tax positions in prior period	(1		)	(12		)	(10		)
Gross decreases — settlements	—			(5		)	—
Gross decreases — statute of limitations expired	(6		)	(9		)	(4		)
Balance December 31	$	115		$	107		$	119

Tax Years Open to Examination in Primary Jurisdictions

We are subject to taxation in the U.S. and various state and foreign jurisdictions. As of December 31, 2013, our tax years open to examination in primary jurisdictions are as follows:



	Open To Tax Year
United States	2000
China	2003
Spain	2003
Canada	2007
Brazil	2008
Mexico	2008
Belgium	2011
Germany	2011
United Kingdom	2012

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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