Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

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)				2018		2017		2016
Current income tax expense:
	U.S. federal		$	70	$	3,408	$	2,180
	U.S. state and local			150		259		272
	Non-U.S.			681		387		340
		Total current income tax expense		901		4,054		2,792
Deferred income tax (benefit) expense:
	U.S. federal			276		544		(63)
	U.S. state and local			78		(12)		(10)
	Non-U.S.			(54)		91		(52)
		Total deferred income tax (benefit) expense		300		623		(125)
Total income tax expense			$	1,201	$	4,677	$	2,667

Effective income tax rate

A reconciliation of the U.S. federal statutory rate of 21 percent as of December 31, 2018, and 35 percent as of both December 31, 2017 and 2016, to our actual income tax rate on continuing operations was as follows:

			2018		2017		2016
U.S. statutory federal income tax rate			21.0	%	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		2.8		2.3		2.7
	Non-U.S. subsidiaries' earnings(a)		(0.5)		(5.7)		(2.0)
	Tax settlements(b)		(1.9)		(0.7)		(0.6)
	U.S. Tax Act(c)		(1.1)		34.8		―
	U.S. Tax Act - related adjustments(d)		(3.2)		―		―
	Other		(0.6)		(1.0)		(0.2)
		Actual tax rates	14.8	%	63.0	%	33.2	%

• Results for 2017 and 2016 primarily included tax benefits associated with the undistributed earnings of certain non-U.S. subsidiaries that were previously 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.
• Results for 2018 relate to the settlement of the IRS examination for tax years 2008-2014, as well as the resolution of certain tax matters in various jurisdictions.
• Relates to the $2.6 billion provisional charge for the impacts of the Tax Act in 2017 and the adjustments thereto in 2018.
• Relates to changes to the tax method of accounting for certain expenses.

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)				2018		2017
Deferred tax assets:
	Reserves not yet deducted for tax purposes		$	2,612	$	2,724
	Employee compensation and benefits			360		403
	Other			431		409
		Gross deferred tax assets		3,403		3,536
		Valuation allowance		(61)		(46)
		Deferred tax assets after valuation allowance		3,342		3,490
Deferred tax liabilities:
	Intangibles and fixed assets			1,083		1,057
	Deferred revenue			435		306
	Deferred interest			171		183
	Investment in joint ventures			137		137
	Other			210		269
		Gross deferred tax liabilities		2,036		1,952
Net deferred tax assets			$	1,306	$	1,538

Changes in unrecognized tax benefits

The following table presents changes in unrecognized tax benefits:

(Millions)			2018		2017		2016
Balance, January 1		$	821	$	974	$	870
Increases:
	Current year tax positions		152		200		167
	Tax positions related to prior years		47		39		117
Decreases:
	Tax positions related to prior years(a)		(74)		(289)		(81)
	Settlements with tax authorities(b)		(192)		(77)		(76)
	Lapse of statute of limitations		(44)		(26)		(22)
	Effects of foreign currency translations		(9)		―		(1)
Balance, December 31		$	701	$	821	$	974

• Decrease in 2017 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.
• 2018 relates to the settlement of the IRS examination for tax years 2008-2014, as well as the resolution of certain tax matters in various jurisdictions.