Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Source of pre-tax income and components of income tax expense

The source of pre-tax income and the components of income tax expense are as follows:

	Year Ended December 31,
(in millions)	2014			2013			2012
Income components:
Domestic	$	118		$	49		$	106
Foreign	303			249			282
Total pre-tax income	$	421		$	298		$	388
Income tax expense components:
Current:
Domestic – federal	$	44		$	37		$	27
Domestic – state and local	7			1			7
Foreign	62			46			56
Total Current	113			84			90
Deferred:
Domestic – federal	$	(14	)	$	(6	)	$	10
Domestic – state and local	—			—			(2		)
Foreign	(15		)	(8		)	(7		)
Total Deferred	(29		)	(14		)	1
Total income tax provision	$	84		$	70		$	91
Effective income tax rate	19.8		%	23.5		%	23.4		%

Schedule of effective income tax rate reconciliation

Reconciliations between taxes at the U.S. federal income tax rate and taxes at our effective income tax rate on earnings before income taxes are as follows:

	Year Ended December 31,
	2014		2013		2012
Tax provision at U.S. statutory rate	35.0	%	35.0	%	35.0	%
Increase (decrease) in tax rate resulting from:
State income taxes	1.0		0.7		1.2
Settlements of tax examinations	0.4		—		0.2
Valuation allowance	22.9		39.4		8.9
Tax exempt interest	(26.3	)	(43.0	)	(18.2	)
Foreign tax rate differential	(4.2	)	(4.1	)	(3.4	)
Repatriation of foreign earnings, net of foreign tax credits	(1.7	)	5.1		0.4
Tax incentives	(6.2	)	(8.1	)	—
Other – net	(1.1	)	(1.5	)	(0.7	)
Effective income tax rate	19.8	%	23.5	%	23.4	%

Components of net deferred tax assets and liabilities

The following is a summary of the components of the net deferred tax assets and liabilities recognized in the Consolidated Balance Sheets:

	December 31,
(in millions)	2014			2013
Deferred tax assets:
Employee benefits	$	124		$	114
Accrued expenses	25			20
Loss and other tax credit carryforwards	456			374
Inventory	6			6
Other	3			1
	$	614		$	515
Valuation allowance	(427		)	(349		)
Net deferred tax asset	$	187		$	166
Deferred tax liabilities:
Intangibles	$	173		$	180
Investment in foreign subsidiaries	8			15
Property, plant, and equipment	22			19
Other	30			42
Total deferred tax liabilities	$	233		$	256

Reconciliation of Deferred Tax Asset Valuation Allowance

A reconciliation of our valuation allowance on deferred tax assets is as follows:

(in millions)	2014			2013		2012
Valuation allowance — January 1	$	349		$	229	$	195
Change in assessment	(4		)	—		—
Current year operations	82			120		34
Valuation allowance — December 31	$	427		$	349	$	229

Deferred taxes classification

Deferred taxes are classified net of unrecognized tax benefits in the Consolidated Balance Sheets as follows:

	December 31,
(in millions)	2014			2013
Current assets	$	38		$	41
Non-current assets	79			64
Current liabilities	(5		)	(4		)
Non-current liabilities	(158		)	(191		)
Total net deferred tax liabilities	$	(46	)	$	(90	)

Tax attributes available to reduce future taxable income

Tax attributes available to reduce future taxable income begin to expire as follows:

(in millions)	December 31, 2014		First Year of Expiration
U.S. net operating loss	$	8	December 31, 2024
State net operating loss	53		December 31, 2015
U.S. tax credits	38		December 31, 2020
Foreign net operating loss	1,496		December 31, 2015

Reconciliation of the beginning and ending amount of unrecognized tax benefits

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

(in millions)	2014			2013			2012
Unrecognized tax benefits — January 1	$	30		$	8		$	5
Additions for:
Current year tax positions	9			23			1
Prior year tax positions	7			—			2
Reductions for:
Settlements	(2		)	(1		)	—
Unrecognized tax benefits — December 31	$	44		$	30		$	8

Earliest open tax years by major jurisdiction

The following table summarizes the earliest open tax years by major jurisdiction:

Jurisdiction	Earliest Open Year
Canada	2009
Germany	2005
Italy	2009
Luxembourg	2010
Poland	2007
Sweden	2009
Switzerland	2010
United Kingdom	2011
United States	2009