Income and Other Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Schedule of Income before Income Tax, Domestic and Foreign

Income before income taxes (pre-tax income) was as follows:



	Year Ended December 31,
	2013		2012		2011
Domestic income	$	948	$	876	$	914
Foreign income	364		456		621
Income Before Income Taxes	$	1,312	$	1,332	$	1,535

Schedule of Components of Income Tax Expense (Benefit)

Provisions (benefits) for income taxes were as follows:



	Year Ended December 31,
	2013		2012		2011
Federal Income Taxes
Current	$	27	$	23	$	51
Deferred	72		84		134
Foreign Income Taxes
Current	89		119		95
Deferred	35		—		38
State Income Taxes
Current	38		34		28
Deferred	15		12		31
Total Provision	$	276	$	272	$	377

Schedule of Effective Income Tax Rate Reconciliation

A reconciliation of the U.S. federal statutory income tax rate to the consolidated effective income tax rate was as follows:



	Year Ended December 31,
	2013		2012		2011
U.S. federal statutory income tax rate	35.0	%	35.0	%	35.0	%
Nondeductible expenses	1.4	%	2.6	%	2.0	%
Effect of tax law changes	(0.6	)%	0.7	%	0.2	%
Change in valuation allowance for deferred tax assets	0.2	%	(0.7	)%	(0.3	)%
State taxes, net of federal benefit	2.6	%	2.1	%	2.4	%
Audit and other tax return adjustments	(2.4	)%	(4.8	)%	(1.0	)%
Tax-exempt income, credits and incentives	(3.8	)%	(2.6	)%	(3.2	)%
Foreign rate differential adjusted for U.S. taxation of foreign profits⁽¹⁾	(11.9	)%	(12.0	)%	(10.6	)%
Other	0.5	%	0.1	%	0.1	%
Effective Income Tax Rate	21.0	%	20.4	%	24.6	%

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(1)	The “U.S. taxation of foreign profits” represents the U.S. tax, net of foreign tax credits, associated with actual and deemed repatriations of earnings from our non-U.S. subsidiaries.

Schedule of Allocation of Income Tax Expense Benefit

Total income tax expense (benefit) was allocated as follows:



	Year Ended December 31,
	2013			2012			2011
Pre-tax income	$	276		$	272		$	377
Discontinued operations	4			5			9
Common shareholders' equity:
Changes in defined benefit plans	318			(233		)	(277		)
Stock option and incentive plans, net	(13		)	(5		)	1
Cash flow hedges	—			(24		)	3
Translation adjustments	(9		)	(9		)	2
Total Income Tax Expense (Benefit)	$	576		$	6		$	115

Summary of Income Tax Contingencies

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



	2013			2012			2011
Balance at January 1	$	201		$	225		$	186
Additions related to current year	60			28			43
Additions related to prior years positions	39			5			38
Reductions related to prior years positions	(19		)	(36		)	(17		)
Settlements with taxing authorities⁽¹⁾	—			(13		)	(14		)
Reductions related to lapse of statute of limitations	(14		)	(8		)	(8		)
Currency	—			—			(3		)
Balance at December 31	$	267		$	201		$	225

____________________________


(1)	Majority of settlements did not result in the utilization of cash.

Schedule of Deferred Tax Assets and Liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred taxes were as follows:



	December 31,
	2013			2012
Deferred Tax Assets
Research and development	$	647		$	793
Post-retirement medical benefits	310			359
Anticipated foreign repatriations	—			264
Net operating losses	597			630
Operating reserves and accruals	374			403
Tax credit carryforwards	694			177
Deferred compensation	268			312
Pension	431			696
Other	87			195
Subtotal	3,408			3,829
Valuation allowance	(614		)	(654		)
Total	$	2,794		$	3,175

Deferred Tax Liabilities
Unearned income and installment sales	$	959		$	947
Intangibles and goodwill	1,253			1,252
Anticipated foreign repatriations	55			—
Other	53			48
Total	$	2,320		$	2,247

Total Deferred Taxes, Net	$	474		$	928

- 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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