Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income from Continuing Operations Before Income Taxes

Income from continuing operations before income taxes is summarized in the table below.

	Year Ended December 31,
	2018		2017		2016
	(in millions)
Domestic	$	630	$	649	$	608
Foreign	294		222		196
Income from continuing operations before income taxes	$	924	$	871	$	804

Components of Current and Deferred Portions of Provision for Income Taxes on Continuing Operations

The components of the Company’s current and deferred portions of the provision for income taxes on continuing operations are presented in the table below.

	Year Ended December 31,
	2018			2017			2016
	(in millions)
Current income tax provision:
Federal	$	30		$	44		$	88
State and local	18			10			8
Foreign	62			56			48
Subtotal	110			110			144
Deferred income tax provision/(benefit):
Federal	(7		)	(16		)	25
State and local	—			6			2
Foreign	—			2			—
Subtotal	(7		)	(8		)	27
Total provision for income taxes	$	103		$	102		$	171

Reconciliation of Statutory Federal Income Tax Rate to Effective Income Tax Rate on Continuing Operations

A reconciliation of the statutory federal income tax rate to the effective income tax rate on continuing operations of the Company is presented in the table below.

	Year Ended December 31,
	2018		2017		2016
Statutory federal income tax rate	21.0	%	35.0	%	35.0	%
State and local income taxes, net of federal income tax benefit	2.6		2.0		2.0
Foreign income taxes	(0.9	)	(6.7	)	(3.0	)
Manufacturing benefits	—		(1.4	)	(2.2	)
Research and experimentation and other tax credits	(5.2	)	(4.1	)	(4.6	)
Resolution of tax contingencies	(3.8	)	(0.4	)	(3.1	)
Tax deductible dividends	(0.5	)	(0.9	)	(1.0	)
Equity compensation - excess income tax benefits	(4.0	)	(2.3	)	(2.1	)
Mergers, acquisitions and divestitures	1.3		—		—
Tax reform	(0.1	)	(9.1	)	—
Other, net	0.7		(0.4	)	0.3
Effective income tax rate on continuing operations	11.1	%	11.7	%	21.3	%

Components of Net Deferred Tax Assets and Liabilities

The significant components of the Company’s net deferred tax assets and liabilities are presented in the table below.

	December 31,
	2018			2017
	(in millions)
Deferred tax assets:
Inventoried costs	$	47		$	44
Compensation and benefits	90			94
Pension and postretirement benefits	271			281
Loss carryforwards	13			12
Tax credit carryforwards	4			5
Other	67			57
Deferred tax assets	492			493
Less: valuation allowance	(14		)	(10		)
Deferred tax assets, net of valuation allowance	478			483
Deferred tax liabilities:
Goodwill and other intangible assets	$	(549	)	$	(514	)
Income recognition on contracts in process	(18		)	(24		)
Property, plant and equipment	(66		)	(59		)
Other	(36		)	(41		)
Deferred tax liabilities	(669		)	(638		)
Total deferred tax liabilities, net of valuation allowance	$	(191	)	$	(155	)

Classification of Deferred Tax Assets and Liabilities

The classification of the Company’s deferred tax assets and liabilities are presented in the table below.

	December 31,
	2018			2017
	(in millions)
Non-current deferred tax assets	$	5		$	3
Non-current deferred tax liabilities	(196		)	(158		)
Total net deferred tax liabilities	$	(191	)	$	(155	)

Summary of Loss and Tax Credit Carryforwards

The following table presents the Company’s loss and tax credit carryforwards at December 31, 2018 on a tax-return basis. The Company has established a valuation allowance as indicated in those instances in which it does not believe that it is more likely than not it will generate sufficient taxable income, of the appropriate character and in the applicable subsidiary, to utilize the carryforwards.

	Year Ended December 31, 2018
	Carryforwards				Valuation Allowances
	Gross		Tax Effected		Gross			Tax Effected			Expiration Periods
	(in millions)
Federal net operating loss carryforwards	$	23	$	5	$	(5	)	$	(1	)	2026-2034
Foreign net operating loss carryforwards	18		4		(10		)	(3		)	Indefinite
State net operating loss carryforwards	291		4		(131		)	(3		)	2019-2038
Total loss carryforwards			$	13				$	(7	)
State tax credit carryforwards	5		4		(4		)	(3		)	2019-2033
Total tax credit carryforwards			$	4				$	(3	)

Reconciliation of Change in Unrecognized Income Tax Benefits, Excluding Interest and Penalties

At December 31, 2018, the total amount of unrecognized tax benefits was $183 million, $150 million of which would reduce the effective income tax rate, if recognized. A reconciliation of the change in unrecognized income tax benefits, excluding potential interest and penalties, is presented in the table below.

	2018			2017			2016
	(in millions)
Balance at January 1	$	178		$	110		$	124
Additions for tax positions related to the current year	13			14			16
Additions for tax positions related to prior years	37			66			2
Reductions for tax positions related to prior years	(20		)	(4		)	(24		)
Reductions for tax positions related to settlements with taxing authorities	(7		)	—			(1		)
Reduction for tax positions related to prior years as a result of a lapse of statute of limitations	(18		)	(8		)	(7		)
Balance at December 31	$	183		$	178		$	110