Income Taxes (Unaudited)

9 Months Ended

Sep. 30, 2014

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

	Three Months Ended September 30						Nine Months Ended September 30
$ in millions	2014			2013			2014			2013
Federal and foreign income tax expense	$	221		$	223		$	673		$	682
Effective income tax rate	31.8		%	31.0		%	30.1		%	31.6		%

The company's lower effective tax rate for the nine months ended September 30, 2014, reflects a $51 million benefit for the partial resolution of the 2007-2009 Internal Revenue Service (IRS) examination, offset in part by the absence of research tax credits in 2014.

The IRS is conducting an examination of the company’s tax returns for the years 2007 through 2011. In the first quarter of 2014, the U.S. Congressional Joint Committee on Taxation approved the company's partial resolution of the IRS examination of the company’s 2007-2009 tax returns. As a result, the company recorded a reduction of income tax expense of $51 million. The company also reduced its unrecognized tax benefits by $59 million and related accrued interest by $12 million.

The company believes it is reasonably possible that within the next 12 months we will resolve the remaining matters on our 2007-2009 tax returns and the IRS will complete its examination of our 2010 and 2011 tax returns. The combined resolution of these items, excluding interest, could result in a reduction of our unrecognized tax benefits up to $75 million and a reduction of our income tax expense up to $40 million. Open tax years related to state and foreign jurisdictions remain subject to examination, but are not expected to have a material effect on the company’s unaudited condensed consolidated financial statements.