Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Income from continuing operations before income tax

Income before income tax and the provision for income tax consist of the following (in millions):



Years ended December 31	2014			2013			2012
Income before income taxes:
U.K.	$	347		$	96		$	36
U.S.	(55		)	349			468
Other	1,473			1,093			876
Total	$	1,765		$	1,538		$	1,380
Income tax expense (benefit):
Current:
U.K.	$	1		$	(18	)	$	(10	)
U.S. federal	156			111			170
U.S. state and local	75			52			57
Other	236			259			238
Total current tax expense	$	468		$	404		$	455
Deferred tax expense (benefit):
U.K.	$	38		$	43		$	46
U.S. federal	(133		)	(48		)	(83		)
U.S. state and local	(24		)	10			(10		)
Other	(15		)	(19		)	(48		)
Total deferred tax benefit	$	(134	)	$	(14	)	$	(95	)
Total income tax expense	$	334		$	390		$	360

Reconciliation of the income tax provisions based on the U.S. statutory corporate tax rate to the provisions reflected in the Consolidated Financial Statements

The reconciliation to the provisions reflected in the Consolidated Financial Statements is as follows:



Years ended December 31	2014	2013	2012
Statutory tax rate	21.5%	23.0%	24.0%
U.S. state income taxes, net of U.S. federal benefit	1.5	2.6	2.2
Taxes on international operations (1)	(8.9)	(4.4)	0.6
Nondeductible expenses	1.7	1.4	2.0
Adjustments to prior year tax requirements	0.9	0.1	(1.3)
Deferred tax adjustments, including statutory rate changes	(0.7)	1.4	0.7
Deferred tax adjustments, international earnings	1.0	3.3	—
Adjustments to valuation allowances	0.6	(1.7)	(5.6)
Change in uncertain tax positions	1.7	(0.3)	3.1
Other — net	(0.4)	—	0.4
Effective tax rate	18.9%	25.4%	26.1%


(1)	The Company determines the adjustment for taxes on international operations based on the difference between the statutory tax rate applicable to earnings in each foreign jurisdiction and the enacted rate of 21.5%, 23% and 24% at December 31, 2014, 2013 and 2012, respectively.

Components of Aon's deferred tax assets and liabilities

The components of the Company's deferred tax assets and liabilities are as follows (in millions):



As of December 31	2014			2013
Deferred tax assets:
Employee benefit plans	$	739		$	623
Net operating/capital loss and tax credit carryforwards	295			354
Other accrued expenses	44			48
Investment basis differences	45			50
Accrued interest	303			94
Other	46			58
Total	1,472			1,227
Valuation allowance on deferred tax assets	(205		)	(127		)
Total	$	1,267		$	1,100
Deferred tax liabilities:
Intangibles and property, plant and equipment	$	(1,058	)	$	(1,074	)
Unremitted earnings	(28		)	(51		)
Deferred revenue	(28		)	(27		)
Other accrued expenses	(40		)	(39		)
Unrealized investment gains	(8		)	—
Unrealized foreign exchange gains	(44		)	(27		)
Other	(20		)	(64		)
Total	$	(1,226	)	$	(1,282	)
Net deferred tax asset (liability)	$	41		$	(182	)

Deferred income taxes (assets and liabilities netted by jurisdiction) as classified in the Consolidated Statements of Financial Position

Deferred income taxes (assets and liabilities have been netted by jurisdiction) have been classified in the Consolidated Statements of Financial Position as follows (in millions):



As of December 31,	2014			2013
Deferred tax assets — current (1)	$	212		$	93
Deferred tax assets — non-current	144			193
Deferred tax liabilities — current (1)	(2		)	(48		)
Deferred tax liabilities — non-current	(313		)	(420		)
Net deferred tax asset (liability)	$	41		$	(182	)


(1)	Included in Other current assets and Other current liabilities.

Reconciliation of the beginning and ending amount of unrecognized tax benefits

The following is a reconciliation of the Company's beginning and ending amount of uncertain tax positions (in millions):



	2014			2013
Balance at January 1	$	164		$	156
Additions based on tax positions related to the current year	31			22
Additions for tax positions of prior years	10			69
Reductions for tax positions of prior years	(6		)	(70		)
Settlements	—			(10		)
Business combinations	5			—
Lapse of statute of limitations	(11		)	(3		)
Foreign currency translation	(2		)	—
Balance at December 31	$	191		$	164

- 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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