Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Components Of Earnings Before Income Taxes Between Domestic and Foreign Jurisdictions

The components of earnings before income taxes were:



Years ended December 31,	2015		2014		2013
U.S.		$6,828		$6,829		$5,946
Non-U.S.	327		308		286
Total		$7,155		$7,137		$6,232

Schedule Of Income Tax Expense/(Benefit)

Income tax expense/(benefit) consisted of the following:



Years ended December 31,	2015			2014			2013
Current tax expense
U.S. federal		$2,102			$676			($82	)
Non-U.S.	122			91			76
U.S. state	21			69			11
Total current	2,245			836			5
Deferred tax expense
U.S. federal	(297		)	828			1,531
Non-U.S.	4			34			41
U.S. state	27			(7		)	69
Total deferred	(266		)	855			1,641
Total income tax expense		$1,979			$1,691			$1,646

Reconciliation Of U.S. Federal Statutory Tax Rate To Our Effective Income Tax Rate schedule

The following is a reconciliation of the U.S. federal statutory tax rate of 35% to our effective income tax rates:



Years ended December 31,	2015		2014		2013
U.S. federal statutory tax	35.0	%	35.0	%	35.0	%
Research and development credits ⁽¹⁾	(3.4	)	(2.9	)	(4.9	)
Amendments to the R&E regulations ⁽²⁾					(3.4	)
Tax basis adjustment ⁽³⁾			(3.6	)
U.S. manufacturing activity tax benefit	(2.9	)	(1.2	)	(0.6	)
Tax on international activities	(0.6	)	(0.2	)	(0.1	)
Federal audit settlements⁽⁴⁾			(3.6	)
Other provision adjustments	(0.4	)	0.2		0.4
Effective income tax rate	27.7	%	23.7	%	26.4	%


⁽¹⁾	In the fourth quarter of 2015 and 2014, we recorded tax benefits of $235 and $188, respectively related to the reinstatement of the research tax credit. Research tax credits for the 2013 and 2012 tax years were both recorded in 2013.


⁽²⁾	In 2013, we recorded $212 for the issuance of favorable regulations related to research and experimental (R&E) expenditures.


⁽³⁾	In the second quarter of 2014 we recorded an incremental tax benefit of $265 related to the application of a 2012 Federal Court of Claims decision which held that the tax basis in certain assets could be increased and realized upon the assets' disposition (tax basis adjustment).


⁽⁴⁾	In the second quarter of 2014, tax benefits of $116 and $143 were recorded as a result of the 2007-2008 and 2009-2010 federal tax audit settlements.

Significant Components Of Deferred Tax Assets Net Of Deferred Tax Liabilities

Significant components of our deferred tax (liabilities)/assets at December 31 were as follows:



	2015			2014
Inventory and long-term contract methods of income recognition	(10,401		)	(10,156		)
Pension benefits	6,303			6,145
Retiree health care benefits	2,513			2,572
Fixed assets, intangibles and goodwill (net of valuation allowance $16 and $18)	(1,837		)	(1,782		)
Other employee benefits	1,339			1,477
Customer and commercial financing	(777		)	(853		)
Accrued expenses and reserves	609			733
Net operating loss, credit and capital loss carryovers (net of valuation allowance of $89 and $63)⁽¹⁾	216			266
Other	(92		)	(292		)
Net deferred tax (liabilities)/assets⁽²⁾		($2,127	)		($1,890	)


⁽¹⁾	Of the deferred tax asset for net operating loss and credit carryovers, $208 expires in years ending from December 31, 2016 through December 31, 2035 and $8 may be carried over indefinitely.


⁽²⁾	Included in the net deferred tax (liabilities)/assets as of December 31, 2015 and 2014 are deferred tax assets in the amounts of $7,277 and $8,007 related to Accumulated other comprehensive loss.

Net Deferred Tax Assets and Liabilities

Net deferred tax (liabilities)/assets at December 31 were as follows:



	2015			2014
Deferred tax assets		$13,128			$14,219
Deferred tax liabilities	(15,150		)	(16,028		)
Valuation allowance	(105		)	(81		)
Net deferred tax (liabilities)/assets		($2,127	)		($1,890	)

Schedule of Deferred Tax Assets and Liabilities Restated for ASU No.2015-17

As discussed in Note 1, during the year ended December 31, 2015, the Company retrospectively adopted ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. The effects of the accounting change on the December 31, 2014 Statement of Financial Position were as follows:



	2014
	Revised			As Reported
Current deferred tax asset					$18
Non-current deferred tax asset	317			6,576
Current deferred tax liability				(8,484		)
Non-current deferred tax liability	(2,207		)
Net deferred tax (liabilities)/assets		($1,890	)		($1,890	)

Schedule Of Unrecognized Tax Benefits Roll Forward

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



	2015			2014			2013
Unrecognized tax benefits – January 1		$1,312			$1,141			$1,055
Gross increases – tax positions in prior periods	38			403			10
Gross decreases – tax positions in prior periods	(25		)	(251		)	(125		)
Gross increases – current-period tax positions	292			217			202
Gross decreases – current-period tax positions							(1		)
Settlements				(197		)
Lapse of statute of limitations				(1		)
Unrecognized tax benefits – December 31		$1,617			$1,312			$1,141