Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

An analysis of the provision for income taxes follows:

	Year Ended December 31
	2015			2014			2013
Current income taxes
United States	$	223		$	350		$	292
State	56			48			99
Other countries	394			387			286
Total	673			785			677
Deferred income taxes
United States	(180		)	67			85
State	(74		)	(16		)	14
Other countries	(1		)	20			52
Total	(255		)	71			151
Total provision for income taxes	$	418		$	856		$	828

Income from continuing operations before income taxes is earned in the following tax jurisdictions:

	Year Ended December 31
	2015		2014		2013
United States	$	451	$	1,571	$	1,557
Other countries	884		684		1,084
Total income before income taxes	$	1,335	$	2,255	$	2,641

Deferred income tax assets and liabilities are composed of the following:

	December 31
	2015			2014
Deferred tax assets
Pension and other postretirement benefits	$	682		$	883
Tax credits and loss carryforwards	443			538
Other	599			667
	1,724			2,088
Valuation allowance	(274		)	(215		)
Total deferred tax assets	1,450			1,873
Deferred tax liabilities
Pension and other postretirement benefits	254			260
Property, plant and equipment, net	1,118			1,162
Investments in subsidiaries	186			223
Other	281			339
Total deferred tax liabilities	1,839			1,984
Net deferred tax assets (liabilities)	$	(389	)	$	(111	)

Valuation allowances at the end of 2015 primarily relate to tax credits and income tax loss carryforwards of $0.8 billion. If these items are not utilized against taxable income, $357 of the loss carryforwards will expire from 2016 through 2035. The remaining $458 have no expiration date.

Realization of income tax loss carryforwards is dependent on generating sufficient taxable income prior to expiration of these carryforwards. Although realization is not assured, we believe it is more likely than not that all of the deferred tax assets, net of applicable valuation allowances, will be realized. The amount of the deferred tax assets considered realizable could be reduced or increased due to changes in the tax environment or if estimates of future taxable income change during the carryforward period.

Presented below is a reconciliation of the income tax provision computed at the U.S. federal statutory tax rate to the actual effective tax rate:

	Year Ended December 31
	2015		2014		2013
U.S. statutory rate applied to income before income taxes	35.0	%	35.0	%	35.0	%
Rate of state income taxes, net of federal tax benefit	(0.9	)	0.7		2.7
Statutory rates other than U.S. statutory rate	(6.9	)	(3.0	)	(3.0	)
Venezuela deconsolidation, balance sheet remeasurement and inflationary impacts	4.5		4.9		(0.8	)
Uncertain tax positions adjustment(a)	3.7		—		—
Routine tax incentives(b)	(7.4	)	(3.6	)	(3.9	)
Net tax cost on foreign income(b)	5.1		3.6		1.6
Other - net(c)	(1.8	)	0.4		(0.2	)
Effective income tax rate	31.3	%	38.0	%	31.4	%

(a) In the fourth quarter of 2015, we updated our assessment of uncertain tax positions for certain international operations and as a result we recorded an immaterial income tax charge of $49 related to prior years.

(b) In 2015, we aggregated certain items to provide additional information on impacts to our effective tax rate. Prior years have been recast to conform with the 2015 presentation.

(c) Other - net is composed of numerous items, none of which is greater than 1.75 percent of income before income taxes.

At December 31, 2015, U.S. income taxes and foreign withholding taxes have not been provided on $8.8 billion of unremitted earnings of subsidiaries operating outside the U.S. These earnings, which are considered to be invested indefinitely, would become subject to income tax if they were remitted as dividends, were lent to one of our U.S. entities, or if we were to sell our stock in the subsidiaries. Determination of the amount of unrecognized deferred U.S. income tax liability on these unremitted earnings is not practicable because of the complexities associated with this hypothetical calculation. We do not expect restrictions or taxes on repatriation of cash held outside of the U.S. to have a material effect on our overall liquidity, financial condition or results of operations in the foreseeable future.

Presented below is a reconciliation of the beginning and ending amounts of unrecognized income tax benefits:

	2015			2014			2013
Balance at January 1	$	416		$	473		$	435
Gross increases for tax positions of prior years	80			36			73
Gross decreases for tax positions of prior years	(61		)	(91		)	(31		)
Gross increases for tax positions of the current year	59			87			37
Settlements	(63		)	(77		)	(35		)
Other	(25		)	(12		)	(6		)
Balance at December 31	$	406		$	416		$	473

Of the amounts recorded as unrecognized tax benefits at December 31, 2015, $307 would reduce our effective tax rate if recognized.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. During each of the three years ended December 31, 2015, the net cost in interest and penalties was not significant. Total accrued penalties and net accrued interest was $40 and $28 at December 31, 2015 and 2014, respectively.

It is reasonably possible that a number of uncertainties could be resolved within the next 12 months. The aggregate resolution of the uncertainties could be up to $170, while none of the uncertainties is individually significant. Resolution of these matters is not expected to have a material effect on our financial condition, results of operations or liquidity.

As of December 31, 2015, the following tax years remain subject to examination for the major jurisdictions where we conduct business:

Jurisdiction	Years
United States	2012 to 2015
United Kingdom	2012 to 2015
Brazil	2010 to 2015
Korea	2014 to 2015
China	2006 to 2015

Our U.S. federal income tax returns have been audited through 2011. We have various federal income tax return positions in administrative appeals for 2004, 2005, 2007, 2010 and 2011.

State income tax returns are generally subject to examination for a period of 3 to 5 years after filing of the respective return. The state effect of any changes to filed federal positions remains subject to examination by various states for a period of up to two years after formal notification to the states. We have various state income tax return positions in the process of examination, administrative appeals or litigation.