Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes

Income Taxes

13. Income Taxes

The provision for income taxes reflects an estimated annual effective tax rate of 29 percent for the first nine months of 2011 compared to 28 percent for the first nine months of 2010, excluding the discrete items discussed below.   The 2011 estimated annual effective tax rate of 29 percent is higher than the comparable full-year 2010 rate of 25 percent primarily due to an expected change in our geographic mix of profits from a tax perspective.

The provision for income taxes for 2011 also includes a benefit of $113 million due to planned repatriation of non-U.S. earnings with available foreign tax credits in excess of the U.S. tax liability on the dividend offset by a $41 million increase in prior year unrecognized tax benefits.  The 2010 provision for income taxes included a charge of $90 million due to the enactment of U.S. healthcare legislation, effectively making government subsidies received for Medicare equivalent prescription drug coverage taxable, offset by a $34 million benefit related to the recognition of refund claims for prior tax years and a $26 million benefit for the release of a valuation allowance.

It is reasonably possible that changes in the amount of valuation allowances against deferred tax assets of certain non-U.S. entities may be required in the next twelve months.