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Income Taxes
9 Months Ended
Sep. 30, 2016
Income Tax Disclosure [Abstract]  
Income Taxes [Text Block]
Income Taxes

We estimate the effective tax rate expected to be applicable for the full fiscal year and use that rate to provide for income taxes in interim reporting periods. We also recognize the tax impact of certain unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur.

We have generally not recognized tax benefits on losses generated in several entities, including those in the U.S., where the recent history of operating losses does not allow us to satisfy the “more likely than not” criterion for the recognition of deferred tax assets. Consequently, there is no income tax expense or benefit recognized on the pre-tax income or losses in these jurisdictions as valuation allowances are adjusted to offset the associated tax expense or benefit.

We record interest and penalties related to uncertain tax positions as a component of income tax expense. Net interest expense for the periods presented herein is not significant.

We reported income tax expense (benefit) related to operations of $13 and $(77) for the quarters ended September 30, 2016 and 2015 and $66 and $(10) for the respective nine-month periods. The third-quarter and nine-month net tax benefits in 2015 included a $100 release of valuation allowances on U.S. deferred tax assets in connection with the planned sale of an affiliate's stock and certain operating assets by a U.S. subsidiary of the company to a non-U.S. affiliate. As a consequence of proposed Internal Revenue Service regulations issued in last year's third quarter providing guidance on the tax treatment afforded a component of the tax planning actions we were undertaking, we revised the estimated forecasted income being generated upon completion of the transaction which led to the third quarter 2015 release. Upon completion of this intercompany transaction in the fourth quarter of 2015, we recognized a prepaid tax asset. Our effective tax rates were 26% and 37% in the first nine months of 2016 and 2015, exclusive of $8 from the amortization of the prepaid tax asset in 2016 and $100 of valuation allowance released on U.S. deferred tax assets in the third quarter of 2015. Our effective income tax rates vary from the U.S. federal statutory rate of 35% due to establishment, release and adjustment of valuation allowances in several countries, nondeductible expenses, local tax incentives in several countries outside the U.S., different statutory tax rates outside the U.S. and withholding taxes related to repatriations of international earnings. In 2016, jurisdictions with valuation allowances reported higher aggregate pre-tax income, thereby decreasing the effective rate. In 2015, these jurisdictions had lower pre-tax income, which increased the effective rate.

We provide for U.S. federal income and non-U.S. withholding taxes on the earnings of our non-U.S. operations that are not considered to be permanently reinvested. Accordingly, we continue to analyze and adjust the estimated tax impact of the income and non-U.S. withholding tax liabilities based on the amount and source of these earnings. As part of the annual effective tax rate, we recognized net expense of $1 for both quarters ended September 30, 2016 and 2015 and $5 and $4 in the nine-month periods of 2016 and 2015 related to future income taxes and non-U.S. withholding taxes on repatriations from operations that are not permanently reinvested. We also paid withholding taxes of $2 and $1 for the quarters ended September 30, 2016 and 2015 and $4 and $7 for the respective nine-month periods related to the actual transfer of funds to the U.S. and transfers of funds between foreign subsidiaries.

At September 30, 2016, we have a valuation allowance against our deferred tax assets in the U.S. When evaluating the continued need for this valuation allowance we consider all components of comprehensive income, and we weight the positive and negative evidence, putting greater reliance on objectively verifiable historical evidence than on projections of future profitability that are dependent on actions that have not occurred as of the assessment date. We also consider changes to historical profitability of actions occurring in the year of assessment that have a sustained effect on future profitability, the effect on historical profits of nonrecurring events, as well as tax planning strategies. These effects included items such as the lost future interest income resulting from the prepayment on and subsequent sale of a payment-in-kind callable note receivable, the additional interest expense resulting from the $750 senior unsecured notes payable issued in July 2013, the effects of a 2015 intercompany transfer of an affiliate's stock and certain operating assets by a U.S. subsidiary of the company to a non-U.S. affiliate and, as discussed in Note 11, the recent debt refinancing transaction which included an issuance of new debt by an international subsidiary and repayment of certain debt obligations held by the U.S. parent company. Management believes a sustained period of profitability, after considering historical changes from implemented actions and nonrecurring events, along with positive expectations for future profitability is important evidence for a determination that a valuation allowance should be released.

While our U.S. operations have experienced improved profitability, there is considerable uncertainty around demand levels in the U.S. in certain of our end markets. After weighting the positive and negative evidence at September 30, 2016, in our judgment, release of the valuation allowance against U.S. deferred tax assets was not appropriate. Within the next twelve months, to the extent our operating performance demonstrates sustained profitability as defined above, certain of our end markets stabilize and we are able to affirm sustained profitability in our forecasts, we believe that release of U.S. valuation allowances approximating $500 is reasonably possible.