Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Table Text Block [Abstract]

Components of income tax expense

The components of income tax expense for the years ended December 31 included in the Consolidated Statements of Income were as follows:

(Millions)				2017		2016		2015
Current income tax expense:
	U.S. federal(a)		$	3,408	$	2,179	$	2,107
	U.S. state and local			259		272		335
	Non-U.S.			386		342		416
		Total current income tax expense		4,053		2,793		2,858
Deferred income tax (benefit) expense:
	U.S. federal(b)			541		(45)		(23)
	U.S. state and local			(7)		(8)		(5)
	Non-U.S.			91		(52)		(55)
		Total deferred income tax (benefit) expense		625		(105)		(83)
Total income tax expense			$	4,678	$	2,688	$	2,775

• 2017 includes a charge of $1.7 billion related to the Tax Act deemed repatriation tax on certain non-U.S. earnings.
• 2017 includes charges related to the Tax Act of $0.6 billion due to the remeasurement of certain federal net deferred tax assets to the lower federal tax rate of 21 percent and $0.3 billion due to deferred state income and foreign withholding tax consequences of future cash distributions from non-U.S. subsidiaries.

Effective income tax rate

A reconciliation of the U.S. federal statutory rate of 35 percent as of December 31, 2017, to the Company’s actual income tax rate for the years ended December 31 on continuing operations was as follows:

			2017		2016		2015
U.S. statutory federal income tax rate			35.0	%	35.0	%	35.0	%
(Decrease) increase in taxes resulting from:
	Tax-exempt income		(1.7)		(1.7)		(1.7)
	State and local income taxes, net of federal benefit		2.3		2.7		2.8
	Non-U.S. subsidiaries' earnings(a)		(5.7)		(2.0)		(1.8)
	Tax settlements(b)		(0.7)		(0.6)		(0.2)
	Non deductible expenses(c)		―		―		0.9
	U.S. Tax Act(d)		34.8		―		―
	Other		(0.9)		(0.2)		―
		Actual tax rates	63.1	%	33.2	%	35.0	%

• Results for all years primarily included tax benefits associated with the undistributed earnings of certain non-U.S. subsidiaries that were deemed to be reinvested indefinitely. In addition, 2017 included tax benefits of $156 million, which decreased the actual tax rate by 2.1 percent, related to the realization of certain foreign tax credits.
• Relates to the resolution of tax matters in various jurisdictions.
• Relates to the nondeductible portion of the Prepaid Services goodwill impairment in 2015.
• Relates to the $2.6 billion charge for the impacts of the Tax Act.

Components of deferred tax assets and liabilities

The significant components of deferred tax assets and liabilities as of December 31 are reflected in the following table:

(Millions)				2017		2016
Deferred tax assets:
	Reserves not yet deducted for tax purposes		$	2,724	$	3,889
	Employee compensation and benefits			403		595
	Other			409		592
		Gross deferred tax assets		3,536		5,076
		Valuation allowance		(46)		(54)
		Deferred tax assets after valuation allowance		3,490		5,022
Deferred tax liabilities:
	Intangibles and fixed assets			1,057		1,691
	Deferred revenue			306		441
	Deferred interest			183		305
	Investment in joint ventures			137		209
	Other			259		121
		Gross deferred tax liabilities		1,942		2,767
Net deferred tax assets			$	1,548	$	2,255

Changes in unrecognized tax benefits

The following table presents changes in unrecognized tax benefits:

(Millions)			2017		2016		2015
Balance, January 1		$	974	$	870	$	909
Increases:
	Current year tax positions		200		167		81
	Tax positions related to prior years		39		117		177
Decreases:
	Tax positions related to prior years(a)		(289)		(81)		(256)
	Settlements with tax authorities		(77)		(76)		(15)
	Lapse of statute of limitations		(26)		(22)		(26)
	Effects of foreign currency translations		―		(1)		―
Balance, December 31		$	821	$	974	$	870

Decrease due to the resolution with the IRS of an uncertain tax position in January 2017, which resulted in the recognition of $289 million in AOCI.