Income taxes (Tables)

12 Months Ended

Dec. 31, 2014

Components of profit (loss) before taxes



The components of profit before taxes were:
	Years ended December 31,
(Millions of dollars)	2014		2013		2012
U.S.	$	2,022	$	1,938	$	4,090
Non-U.S.	3,061		3,190		4,146
	$	5,083	$	5,128	$	8,236

Components of the provision (benefit) for income taxes



The components of the provision (benefit) for income taxes were:
	Years ended December 31,
(Millions of dollars)	2014			2013			2012
Current tax provision (benefit):
U.S.	$	715		$	407		$	971
Non-U.S.	883			805			1,250
State (U.S.)	48			33			56
	1,646			1,245			2,277

Deferred tax provision (benefit):
U.S.	(167		)	79			332
Non-U.S.	(77		)	(7		)	(89		)
State (U.S.)	(22		)	2			8
	(266		)	74			251
Total provision (benefit) for income taxes	$	1,380		$	1,319		$	2,528

Reconciliation of the U.S. federal statutory rate to effective rate

Reconciliation of the U.S. federal statutory rate to effective rate:



	Years ended December 31,
(Millions of dollars)	2014					2013					2012
Taxes at U.S. statutory rate	$	1,779		35.0	%	$	1,795		35.0	%	$	2,882		35.0	%
(Decreases) increases in taxes resulting from:
Non-U.S. subsidiaries taxed at other than 35%	(249		)	(4.9	)%	(268		)	(5.2	)%	(342		)	(4.2	)%
State and local taxes, net of federal	17			0.3	%	23			0.4	%	55			0.7	%
Interest and penalties, net of tax	12			0.2	%	4			0.1	%	22			0.3	%
U.S. research and production incentives	(125		)	(2.4	)%	(91		)	(1.8	)%	(80		)	(1.0	)%
Other—net	(10		)	(0.2	)%	(2		)	—	%	(27		)	(0.3	)%
	1,424			28.0	%	1,461			28.5	%	2,510			30.5	%

Prior year tax and interest adjustments	(21		)	(0.4	)%	(55		)	(1.1	)%	(300		)	(3.7	)%
Nondeductible goodwill	—			—	%	—			—	%	318			3.9	%
Release of valuation allowances	(23		)	(0.5	)%	—			—	%	—			—	%
Tax law changes	—			—	%	(87		)	(1.7	)%	—			—	%
Provision (benefit) for income taxes	$	1,380		27.1	%	$	1,319		25.7	%	$	2,528		30.7	%

Deferred income tax assets and liabilities

The amount of deferred income taxes at December 31, included on the following lines in Statement 3, are as follows:



	December 31,
(Millions of dollars)	2014		2013		2012
Assets:
Deferred and refundable income taxes	$	992	$	877	$	979
Noncurrent deferred and refundable income taxes	1,267		456		1,863
	2,259		1,333		2,842
Liabilities:
Other current liabilities	62		86		66
Other liabilities	414		447		484
Deferred income taxes—net	$	1,783	$	800	$	2,292



Deferred income tax assets and liabilities:
	December 31,
(Millions of dollars)	2014			2013			2012
Deferred income tax assets:
Pension	$	1,513		$	903		$	2,100
Postemployment benefits other than pensions	1,514			1,435			1,678
Tax carryforwards	826			760			663
Warranty reserves	346			313			358
Stock-based compensation	327			320			281
Inventory	123			112			195
Allowance for credit losses	198			184			170
Post sale discounts	175			146			141
Deferred compensation	132			126			110
Other—net	549			524			491
	5,703			4,823			6,187

Deferred income tax liabilities:
Capital and intangible assets	(2,625		)	(2,815		)	(2,759		)
Bond discount	(233		)	(240		)	(249		)
Translation	(252		)	(133		)	(173		)
Undistributed profits of non-U.S. subsidiaries	(69		)	(90		)	(128		)
	(3,179		)	(3,278		)	(3,309		)
Valuation allowance for deferred tax assets	(741		)	(745		)	(586		)
Deferred income taxes—net	$	1,783		$	800		$	2,292

Summary of net operating loss carryforwards

At December 31, 2014, amounts and expiration dates of net operating loss carryforwards in various non-U.S. taxing jurisdictions were:



(Millions of dollars)
2015		2016		2017		2018		2019-2035		Unlimited		Total
$	7	$	5	$	14	$	96	$	700	$	1,389	$	2,211

Reconciliation of unrecognized tax benefits



Reconciliation of unrecognized tax benefits: ¹
	Years ended December 31,
(Millions of dollars)	2014			2013			2012
Balance at January 1,	$	759		$	715		$	958

Additions for tax positions related to current year	58			63			64
Additions for tax positions related to prior years	84			52			178
Reductions for tax positions related to prior years	(31		)	(31		)	(266		)
Reductions for settlements ²	(18		)	(15		)	(191		)
Reductions for expiration of statute of limitations	(6		)	(25		)	(28		)

Balance at December 31,	$	846		$	759		$	715

Amount that, if recognized, would impact the effective tax rate	$	804		$	726		$	669


¹	Foreign currency translation amounts are included within each line as applicable.


²	Includes cash payment or other reduction of assets to settle liability.

- 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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