Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of Effective Income Tax Rate Reconciliation

The following table summarizes the difference between income tax expense at the United States statutory rate of 35% and the income tax expense at effective worldwide tax rates for the respective periods:



Millions of dollars	2017			2016			2015
Earnings before income taxes
United States	$	671		$	605		$	555
Foreign	216			509			476
Earnings before income taxes	887			1,114			1,031

Income tax computed at United States statutory rate	310			390			361
U.S. government tax incentives	(13		)	(9		)	(13		)
Foreign government tax incentives, including BEFIEX	(29		)	(11		)	(19		)
Foreign tax rate differential	(14		)	(50		)	(36		)
U.S. foreign tax credits	17			(86		)	(103		)
Valuation allowances	(68		)	(121		)	(95		)
State and local taxes, net of federal tax benefit	29			20			18
Foreign withholding taxes	41			36			16
U.S. tax on foreign dividends and subpart F income	12			63			57
Settlement of global tax audits	48			(40		)	16
U.S. Transition Tax	190			—			—
Changes in enacted tax rates	49			32			—
Other items, net	(22		)	(38		)	7
Income tax computed at effective worldwide tax rates	$	550		$	186		$	209

Schedule of Components of Income Tax Expense (Benefit)

The following table summarizes our income tax (benefit) provision for 2017, 2016 and 2015:



	2017					2016					2015
Millions of dollars	Current		Deferred			Current		Deferred			Current		Deferred
United States	$	138	$	386		$	34	$	120		$	98	$	55
Foreign	213		(233		)	167		(154		)	181		(143		)
State and local	12		34			7		12			10		8
	$	363	$	187		$	208	$	(22	)	$	289	$	(80	)
Total income tax expense			$	550				$	186				$	209

Schedule of Deferred Tax Assets and Liabilities

The following table summarizes the significant components of our deferred tax liabilities and assets at December 31, 2017 and 2016:



Millions of dollars	2017			2016
Deferred tax liabilities
Intangibles	$	610		$	765
Property, net	185			199
LIFO inventory	38			59
Other	177			156
Total deferred tax liabilities	1,010			1,179
Deferred tax assets
U.S. general business credit carryforwards, including Energy Tax Credits	927			964
Pensions	220			322
Loss carryforwards	880			668
Postretirement obligations	109			144
Foreign tax credit carryforwards	—			310
Research and development capitalization	129			273
Employee payroll and benefits	56			111
Accrued expenses	170			106
Product warranty accrual	55			64
Receivable and inventory allowances	56			59
Other	521			344
Total deferred tax assets	3,123			3,365
Valuation allowances for deferred tax assets	(178		)	(150		)
Deferred tax assets, net of valuation allowances	2,945			3,215
Net deferred tax assets	$	1,935		$	2,036

Reconciliation of Unrecognized Tax Benefits

The following table represents a reconciliation of the beginning and ending amount of unrecognized tax benefits that if recognized would impact the effective tax rate, excluding federal benefits of state and local tax positions, and interest and penalties:



Millions of dollars	2017			2016			2015
Balance, January 1	$	102		$	143		$	141
Additions for tax positions of the current year	25			14			12
Additions for tax positions of prior years	110			1			27
Reductions for tax positions of prior years	(1		)	(33		)	(25		)
Settlements during the period	(10		)	(20		)	(5		)
Positions assumed in acquisitions	—			—			—
Lapses of applicable statute of limitation	(7		)	(3		)	(7		)
Balance, December 31	$	219		$	102		$	143