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Taxes (Tables)

12 Months Ended

Dec. 31, 2013

($ in millions)

For the year ended December 31:		2013		2012		2011
Income before income taxes
	U.S. operations	$	6,857	$	9,668	$	9,716
	Non-U.S. operations		12,667		12,234		11,287
Total income before income taxes		$	19,524	$	21,902	$	21,003

Provision for income taxes by geographic operations

The provision for income taxes by geographic operations is as follows:

($ in millions)

For the year ended December 31:	2013		2012		2011
U.S. operations	$	993	$	2,582	$	2,141
Non-U.S. operations		2,048		2,716		3,007
Total provision for income taxes	$	3,041	$	5,298	$	5,148

Components of the provision for income taxes by taxing jurisdiction

The components of the provision for income taxes by taxing jurisdiction are as follows:

($ in millions)

For the year ended December 31:		2013		2012		2011
U.S. federal
	Current	$	1,406	$	1,361	$	268
	Deferred		(652)		403		909
			754		1,764		1,177
U.S. state and local
	Current		178		134		429
	Deferred		(321)		289		81
			(143)		423		510
Non-U.S.
	Current		3,067		3,006		3,239
	Deferred		(637)		105		222
			2,430		3,111		3,461
Total provision for income taxes			3,041		5,298		5,148
Provision for social security, real estate, personal property
	and other taxes		4,198		4,331		4,289
Total taxes included in net income		$	7,239	$	9,629	$	9,437

Income tax reconciliation

A reconciliation of the statutory U.S. federal tax rate to the company’s effective tax rate is as follows:

For the year ended December 31:	2013*		2012*		2011*
Statutory rate	35	%	35	%	35	%
Foreign tax differential	(14)		(11)		(10)
State and local	(0)		1		2
Domestic incentives	(3)		(1)		(1)
Other	(2)		(0)		(1)
Effective rate	16	%	24	%	25	%

Components of deferred tax assets (liabilities)

Deferred Tax Assets

($ in millions)

At December 31:	2013		2012*
Retirement benefits	$	3,704	$	5,870
Share-based and other compensation		1,262		1,666
Domestic tax loss/credit carryforwards		982		954
Deferred income		964		1,018
Foreign tax loss/credit carryforwards		651		681
Bad debt, inventory and warranty reserves		592		586
Depreciation		382		456
Other		1,774		1,659
Gross deferred tax assets		10,311		12,890
Less: valuation allowance		734		1,187
Net deferred tax assets	$	9,577	$	11,703

* Reclassified to conform with 2013 presentation.

Deferred Tax Liabilities

($ in millions)

At December 31:	2013		2012*
Depreciation	$	1,346	$	1,378
Retirement benefits		1,219		257
Goodwill and intangible assets		1,173		957
Leases		1,119		2,216
Software development costs		558		542
Deferred transition costs		424		440
Other		841		993
Gross deferred tax liabilities	$	6,680	$	6,783

* Reclassified to conform with 2013 presentation.

Reconciliation of the beginning and ending amount of unrecognized tax benefits

($ in millions)

		2013		2012		2011
Balance at January 1		$	5,672	$	5,575	$	5,293
Additions based on tax positions related to the current year			829		401		672
Additions for tax positions of prior years			417		215		379
Reductions for tax positions of prior years (including
	impacts due to a lapse in statute)		(2,201)		(425)		(538)
Settlements			(259)		(94)		(231)
Balance at December 31		$	4,458	$	5,672	$	5,575

- 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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