TAXES (Tables)

12 Months Ended

Dec. 31, 2016

TAXES

Income before income taxes

($ in millions)

For the year ended
December 31:	2016		2015		2014
Income from continuing operations before income taxes
U.S. operations	$	3,650	$	5,915	$	7,509
Non-U.S. operations	8,680		10,030		12,477
Total income from continuing operations before income taxes	$	12,330	$	15,945	$	19,986

Components of the provision for income taxes by geographic operations and taxing jurisdiction

($ in millions)

For the year ended
December 31:	2016		2015		2014
U.S. operations	$	38	$	849	$	2,093
Non-U.S. operations	411		1,732		2,141
Total continuing operations provision for income taxes	$	449	$	2,581	$	4,234

($ in millions)

For the year ended
December 31:	2016			2015			2014
U.S. federal
Current	$	186		$	(321	)	$	1,134
Deferred	(746		)	553			105
	$	(560	)	$	232		$	1,239
U.S. state and local
Current	$	244		$	128		$	541
Deferred	(44		)	116			(105		)
	$	200		$	244		$	436
Non-U.S.
Current	$	988		$	2,101		$	2,825
Deferred	(179		)	4			(266		)
	$	809		$	2,105		$	2,559
Total continuing operations provision for income taxes	$	449		$	2,581		$	4,234
Discontinued operations provision for income taxes	(2		)	(117		)	(1,617		)
Provision for social security, real estate, personal property and other taxes	3,417			3,497			4,068
Total taxes included in net income	$	3,864		$	5,961		$	6,685

Effective income tax rate reconciliation

For the year ended
December 31:	2016		2015		2014
Statutory rate	35	%	35	%	35	%
Foreign tax differential	(21	)	(17	)	(14	)
Japan resolution	(10	)	0		0
State and local	1		1		1
Domestic incentives	(1	)	(2	)	(2	)
Other	0		(1	)	1
Effective rate	4	%	16	%	21	%

Percentages rounded for disclosure purposes.

Components of deferred tax assets and liabilities

Deferred Tax Assets

($ in millions)

At December 31:	2016		2015*
Retirement benefits	$	4,671	$	4,621
Share-based and other compensation	1,132		963
Domestic tax loss/credit carryforwards	1,676		1,055
Deferred income	741		762
Foreign tax loss/credit carryforwards	816		767
Bad debt, inventory and warranty reserves	473		528
Depreciation	270		329
Accruals	624		904
Other	1,503		1,000
Gross deferred tax assets	11,906		10,929
Less: valuation allowance	916		740
Net deferred tax assets	$	10,990	$	10,189

* Reclassified to conform to 2016 presentation

Deferred Tax Liabilities

($ in millions)

At December 31:	2016		2015
Depreciation	$	856	$	919
Retirement benefits	406		252
Goodwill and intangible assets	1,800		1,407
Leases	651		916
Software development costs	672		554
Deferred transition costs	351		395
Other	1,455		1,177
Gross deferred tax liabilities	$	6,191	$	5,620

Reconciliation of the beginning and ending amount of unrecognized tax benefits

($ in millions)

	2016			2015			2014
Balance at January 1	$	4,574		$	5,104		$	4,458
Additions based on tax positions related to the current year	560			464			697
Additions for tax positions of prior years	334			569			586
Reductions for tax positions of prior years (including impacts due to a lapse in statute)	(1,443		)	(1,348		)	(579		)
Settlements	(285		)	(215		)	(58		)
Balance at December 31	$	3,740		$	4,574		$	5,104