TAXES (Tables)

12 Months Ended

Dec. 31, 2017

TAXES

Income before income taxes

($ in millions)

For the year ended December 31:	2017		2016		2015
Income from continuing operations before income taxes
U.S. operations	$	560	$	3,650	$	5,915
Non-U.S. operations	10,840		8,680		10,030
Total income from continuing operations before income taxes	$	11,400	$	12,330	$	15,945

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

($ in millions)

For the year ended December 31:	2017		2016		2015
U.S. operations	$	2,923	$	38	$	849
Non-U.S. operations	2,719		411		1,732
Total continuing operations provision for income taxes	$	5,642	$	449	$	2,581

($ in millions)

For the year ended December 31:	2017			2016			2015
U.S. federal
Current	$	2,388		$	186		$	(321	)
Deferred	77			(746		)	553
	$	2,465		$	(560	)	$	232
U.S. state and local
Current	$	55		$	244		$	128
Deferred	28			(44		)	116
	$	83		$	200		$	244
Non-U.S.
Current	$	3,891		$	988		$	2,101
Deferred	(797		)	(179		)	4
	$	3,094		$	809		$	2,105
Total continuing operations provision for income taxes	$	5,642		$	449		$	2,581
Discontinued operations provision for income taxes	(3		)	(2		)	(117		)
Provision for social security, real estate, personal property and other taxes	3,434			3,417			3,497
Total taxes included in net income	$	9,073		$	3,864		$	5,961

Effective income tax rate reconciliation

For the year ended December 31:	2017		2016		2015
Statutory rate	35	%	35	%	35	%
U.S. Tax Cuts and Jobs Act	48		—		—
Foreign tax differential	(26	)	(21	)	(17	)
Intra-entity transfers	(5	)	—		—
Domestic incentives	(2	)	(1	)	(2	)
State and local	1		1		1
Japan resolution	—		(10	)	—
Other	(2	)	0		(1	)
Effective rate	49	%	4	%	16	%

Percentages rounded for disclosure purposes.

Components of deferred tax assets and liabilities

Deferred Tax Assets

($ in millions)

At December 31:	2017		2016
Retirement benefits	$	3,477	$	4,671
Share-based and other compensation	646		1,132
Domestic tax loss/credit carryforwards	718		1,676
Deferred income	605		741
Foreign tax loss/credit carryforwards	1,024		816
Bad debt, inventory and warranty reserves	395		473
Depreciation	293		270
Accruals	387		624
Intangible assets	585		—
Other	1,396		1,503
Gross deferred tax assets	9,526		11,906
Less: valuation allowance	1,004		916
Net deferred tax assets	$	8,522	$	10,990

Deferred Tax Liabilities

($ in millions)

At December 31:	2017		2016
Depreciation	$	641	$	856
Retirement benefits	483		406
Goodwill and intangible assets	1,226		1,800
Leases	584		651
Software development costs	360		672
Deferred transition costs	254		351
Other	658		1,455
Gross deferred tax liabilities	$	4,206	$	6,191

Reconciliation of the beginning and ending amount of unrecognized tax benefits

($ in millions)

	2017			2016			2015
Balance at January 1	$	3,740		$	4,574		$	5,104
Additions based on tax positions related to the current year	3,029			560			464
Additions for tax positions of prior years	803			334			569
Reductions for tax positions of prior years (including impacts due to a lapse in statute)	(367		)	(1,443		)	(1,348		)
Settlements	(174		)	(285		)	(215		)
Balance at December 31	$	7,031		$	3,740		$	4,574