Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Components of the Provision for Income Taxes

The components of the provision for income taxes were as follows:



In millions	2017			2016			2015
U.S. federal income taxes:
Current	$	1,117		$	756		$	503
Deferred	(10		)	(224		)	8
Total U.S. federal income taxes	1,107			532			511
Foreign income taxes:
Current	296			290			310
Deferred	102			(5		)	(11		)
Benefit of net operating loss carryforwards	—			—			(48		)
Total foreign income taxes	398			285			251
State income taxes:
Current	106			90			66
Deferred	(28		)	(34		)	(8		)
Total state income taxes	78			56			58
Total provision for income taxes	$	1,583		$	873		$	820

Income from Continuing Operations Before Income Taxes

Income before taxes for domestic and foreign operations was as follows:



In millions	2017		2016		2015
Domestic	$	1,806	$	1,653	$	1,660
Foreign	1,464		1,255		1,059
Total income before taxes	$	3,270	$	2,908	$	2,719

Reconciliation Between the U.S. Federal Statutory Tax Rate and the Effective Tax Rate

The reconciliation between the U.S. federal statutory tax rate and the effective tax rate was as follows:



	2017		2016		2015
U.S. federal statutory tax rate	35.0	%	35.0	%	35.0	%
Tax effect of U.S. federal tax law change	20.1		—		—
State income taxes, net of U.S. federal tax benefit	1.2		1.3		1.4
Differences between U.S. federal statutory and foreign tax rates	(3.5	)	(3.6	)	(3.1	)
Nontaxable foreign interest income	(1.7	)	(2.1	)	(3.3	)
Tax effect of foreign dividends	0.9		1.5		2.8
Tax relief for U.S. manufacturers	(1.4	)	(1.4	)	(1.6	)
Excess tax benefits from stock-based compensation	(1.5	)	—		—
Other, net	(0.7	)	(0.7	)	(1.1	)
Effective tax rate	48.4	%	30.0	%	30.1	%

Components of Deferred Income Tax Assets and Liabilities

The components of deferred income tax assets and liabilities at December 31, 2017 and 2016 were as follows:



	2017						2016
In millions	Asset			Liability			Asset			Liability
Goodwill and intangible assets	$	195		$	(506	)	$	240		$	(716	)
Inventory reserves, capitalized tax cost and LIFO inventory	31			(3		)	40			(5		)
Investments	15			(180		)	23			(206		)
Plant and equipment	18			(64		)	23			(79		)
Accrued expenses and reserves	45			—			76			—
Employee benefit accruals	177			—			306			—
Foreign tax credit carryforwards	13			—			6			—
Net operating loss carryforwards	507			—			610			—
Capital loss carryforwards	98			—			42			—
Allowances for uncollectible accounts	9			—			13			—
Pension liabilities	—			(25		)	25			—
Deferred intercompany deductions	405			—			430			—
Unrealized loss (gain) on foreign debt instruments	—			(19		)	—			(140		)
Other	99			(15		)	97			(16		)
Gross deferred income tax assets (liabilities)	1,612			(812		)	1,931			(1,162		)
Valuation allowances	(459		)	—			(454		)	—
Total deferred income tax assets (liabilities)	$	1,153		$	(812	)	$	1,477		$	(1,162	)

Net Operating Loss Carryforwards

At December 31, 2017, the Company had net operating loss carryforwards available to offset future taxable income in the U.S. and certain foreign jurisdictions, which expire as follows:



	Gross Carryforwards Related
In millions	to Net Operating Losses
2018	$	15
2019	17
2020	86
2021	79
2022	24
2023	19
2024	17
2025-2037	17
Do not expire	1,685
Total gross carryforwards related to net operating losses	$	1,959

Changes in Amount of Unrecognized Tax Benefits

The changes in the amount of unrecognized tax benefits for the years ended 2017, 2016 and 2015 were as follows:



In millions	2017			2016			2015
Beginning balance	$	210		$	259		$	218
Additions based on tax positions related to the current year	42			19			39
Additions for tax positions of prior years	100			126			54
Reductions for tax positions of prior years	(24		)	(97		)	(41		)
Settlements	(53		)	(96		)	(6		)
Foreign currency translation	10			(1		)	(5		)
Ending balance	$	285		$	210		$	259

Open Tax Years for Company's Major Jurisdictions

The following table summarizes the open tax years for the Company’s major jurisdictions:



Jurisdiction		Open Tax Years
United States – Federal		2014-2017
United Kingdom		2016-2017
Germany		2012-2017
France		2014-2017
Australia		2013-2017