Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Income Taxes [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,
	2017		2016		2015
	(in millions)
Domestic	$	649	$	608	$	509
Foreign		222		196		130
Income from continuing operations before income taxes	$	871	$	804	$	639

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,
	2017			2016		2015
	(in millions)
Current income tax provision:
Federal	$	44		$	88	$	81
State and local		10			8		7
Foreign		56			48		26
Subtotal		110			144		114
Deferred income tax provision/(benefit):
Federal		(16	)		25		9
State and local		6			2		7
Foreign		2			—		2
Subtotal		(8	)		27		18
Total provision for income taxes	$	102		$	171	$	132

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,
	2017			2016			2015
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal income tax benefit		2.0			2.0			2.0
Foreign income taxes		(6.7	)		(3.0	)		(7.1	)
Manufacturing benefits		(1.4	)		(2.2	)		(2.2	)
Research and experimentation and other tax credits		(4.1	)		(4.6	)		(6.5	)
Resolution of tax contingencies		(0.4	)		(3.1	)		(1.4	)
Tax deductible dividends		(0.9	)		(1.0	)		(1.2	)
Equity compensation - excess income tax benefits		(2.3	)		(2.1	)		—
Goodwill impairment		—			—			1.9
Tax Reform		(9.1	)		—			—
Other, net		(0.4	)		0.3			0.2
Effective income tax rate on continuing operations		11.7	%		21.3	%		20.7	%

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,
	2017			2016
	(in millions)
Deferred tax assets:
Inventoried costs	$	44		$	53
Compensation and benefits		94			139
Pension and postretirement benefits		281			413
Loss carryforwards		12			19
Tax credit carryforwards		5			6
Other		57			87
Deferred tax assets		493			717
Less: valuation allowance		(10	)		(12	)
Deferred tax assets, net of valuation allowance		483			705
Deferred tax liabilities:
Goodwill and other intangible assets	$	(514	)	$	(722	)
Income recognition on contracts in process		(24	)		(22	)
Property, plant and equipment		(59	)		(93	)
Other		(41	)		(55	)
Deferred tax liabilities		(638	)		(892	)
Total deferred tax liabilities, net of valuation allowance	$	(155	)	$	(187	)

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,
	2017			2016
	(in millions)
Non-current deferred tax assets	$	3		$	2
Non-current deferred tax liabilities		(158	)		(189	)
Total net deferred tax liabilities	$	(155	)	$	(187	)

Summary of Loss and Tax Credit Carryforwards

The following table presents the Company’s loss and tax credit carryforwards at December 31, 2017 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, 2017
	Carryforwards				Valuation Allowances
	Gross		Tax Effected		Gross			Tax Effected			Expiration Periods
			(in millions)
Federal net operating loss carryforwards		29		6		(5	)		(1	)	2026-2036
Foreign net operating loss carryforwards		12		3		(6	)		(2	)	Indefinite
State net operating loss carryforwards		160		3		(135	)		(2	)	2018-2037
Total loss carryforwards			$	12				$	(5	)
State tax credit carryforwards		6		5		(5	)		(4	)	2018-2032
Total tax credit carryforwards			$	5				$	(4	)

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

At December 31, 2017, the total amount of unrecognized tax benefits was $178 million, $157 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.

	2017			2016			2015
	(in millions)
Balance at January 1	$	110		$	124		$	150
Additions for tax positions related to the current year		14			16			14
Additions for tax positions related to prior years		66			2			2
Reductions for tax positions related to prior years		(4	)		(24	)		(34	)
Reductions for tax positions related to settlements with taxing authorities		—			(1	)		(1	)
Reduction for tax positions related to prior years as a result of a lapse of statute of limitations		(8	)		(7	)		(7	)
Balance at December 31	$	178		$	110		$	124