Income and Other Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Schedule of Income before Income Tax, Domestic and Foreign

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

	Year Ended December 31,
	2016		2015		2014
Domestic income	$	415	$	613	$	635
Foreign income	153		311		455
Income Before Income Taxes	$	568	$	924	$	1,090

Schedule of Components of Income Tax Expense (Benefit)

(Benefit) provision for income taxes from continuing operations were as follows:

	Year Ended December 31,
	2016			2015			2014
Federal Income Taxes
Current	$	(15	)	$	(225	)	$	(58	)
Deferred	(4		)	300			150
Foreign Income Taxes
Current	71			73			83
Deferred	(13		)	7			(16		)
State Income Taxes
Current	15			(38		)	21
Deferred	8			76			18
Total (Benefit) Provision	$	62		$	193		$	198

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,
	2016		2015		2014
U.S. federal statutory income tax rate	35.0	%	35.0	%	35.0	%
Nondeductible expenses	2.9	%	1.1	%	1.3	%
Effect of tax law changes	1.2	%	(1.0	)%	(5.2	)%
Change in valuation allowance for deferred tax assets	(1.4	)%	(1.6	)%	(1.4	)%
State taxes, net of federal benefit	3.0	%	2.2	%	2.0	%
Audit and other tax return adjustments	(4.1	)%	1.3	%	(3.0	)%
Tax-exempt income, credits and incentives	(4.0	)%	(1.8	)%	(1.9	)%
Foreign rate differential adjusted for U.S. taxation of foreign profits(1)	(22.6	)%	(15.3	)%	(9.0	)%
Other	0.9	%	1.0	%	0.4	%
Effective Income Tax Rate	10.9	%	20.9	%	18.2	%

_____________

(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,
	2016			2015			2014
Pre-tax income	$	62		$	193		$	198
Discontinued operations(1)	(250		)	(134		)	23
Common shareholders' equity:
Changes in defined benefit plans	15			59			(408		)
Stock option and incentive plans, net	—			(18		)	(18		)
Cash flow hedges	(8		)	15			—
Translation adjustments	2			—			(2		)
Total Income Tax Expense (Benefit)	$	(179	)	$	115		$	(207	)

_____________

(1) Refer to Note 4 - Divestitures for additional information regarding discontinued operations.

Summary of Income Tax Contingencies

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

	2016			2015			2014
Balance at January 1	$	222		$	207		$	225
Additions (Reductions) related to current year	(9		)	36			12
Additions related to prior years positions	—			—			9
Reductions related to prior years positions	(31		)	(5		)	(23		)
Settlements with taxing authorities(1)	—			(6		)	(8		)
Reductions related to lapse of statute of limitations	(2		)	(9		)	(6		)
Currency	(2		)	(1		)	(2		)
Tax Positions assumed in Conduent Separation	(13		)	—			—
Balance at December 31	$	165		$	222		$	207

_____________

(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,
	2016			2015
Deferred Tax Assets
Research and development	$	289		$	370
Post-retirement medical benefits	276			311
Net operating losses	407			367
Operating reserves, accruals and deferrals	190			171
Tax credit carryforwards	751			666
Deferred compensation	197			167
Pension	539			553
Other	81			138
Subtotal	2,730			2,743
Valuation allowance	(416		)	(383		)
Total	$	2,314		$	2,360
Deferred Tax Liabilities
Unearned income and installment sales	$	633		$	705
Intangibles and goodwill	200			208
Other	48			48
Total	$	881		$	961
Total Deferred Taxes, Net	$	1,433		$	1,399