Income Taxes

An analysis of the provision for income taxes follows:



	Year Ended December 31
	2016			2015			2014
Current income taxes
United States	$	523		$	223		$	350
State	53			56			48
Other countries	361			394			387
Total	937			673			785
Deferred income taxes
United States	(40		)	(180		)	67
State	31			(74		)	(16		)
Other countries	(6		)	(1		)	20
Total	(15		)	(255		)	71
Total provision for income taxes	$	922		$	418		$	856

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



	Year Ended December 31
	2016		2015		2014
United States	$	2,088	$	451	$	1,571
Other countries	921		884		684
Total income before income taxes	$	3,009	$	1,335	$	2,255

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



	December 31
	2016			2015
Deferred tax assets
Pension and other postretirement benefits	$	499		$	682
Tax credits and loss carryforwards	450			443
Share based compensation	86			82
Other	512			517
	1,547			1,724
Valuation allowances	(225		)	(274		)
Total deferred tax assets	1,322			1,450

Deferred tax liabilities
Pension and other postretirement benefits	15			254
Property, plant and equipment, net	1,079			1,118
Investments in subsidiaries	190			186
Goodwill	83			64
Other	253			217
Total deferred tax liabilities	1,620			1,839
Net deferred tax assets (liabilities)	$	(298	)	$	(389	)

Valuation allowances at the end of 2016 primarily relate to tax credits, capital loss carryforwards, and income tax loss carryforwards of $0.7 billion. If these items are not utilized against taxable income, $473 of the income tax loss carryforwards will expire from 2017 through 2036. The remaining $251 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
	2016		2015		2014
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	1.8		(0.9	)	0.7
Statutory rates other than U.S. statutory rate	(2.7	)	(6.9	)	(3.0	)
Venezuela deconsolidation, balance sheet remeasurement and inflationary impacts	(0.1	)	4.5		4.9
Uncertain tax positions adjustment^(a)	—		3.7		—
Routine tax incentives	(4.0	)	(7.4	)	(3.6	)
Net tax cost on foreign income	0.1		5.1		3.6
Other - net^(b)	0.5		(1.8	)	0.4
Effective income tax rate	30.6	%	31.3	%	38.0	%


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

At December 31, 2016, U.S. income taxes and foreign withholding taxes have not been provided on $8.9 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:



	2016			2015			2014
Balance at January 1	$	406		$	416		$	473
Gross increases for tax positions of prior years	20			80			36
Gross decreases for tax positions of prior years	(104		)	(61		)	(91		)
Gross increases for tax positions of the current year	39			59			87
Settlements	(29		)	(63		)	(77		)
Other	(11		)	(25		)	(12		)
Balance at December 31	$	321		$	406		$	416

Of the amounts recorded as unrecognized tax benefits at December 31, 2016, $251 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, 2016, the net impact in interest and penalties was not significant. Total accrued penalties and net accrued interest was $47 and $40 at December 31, 2016 and 2015, 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 $140, 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, 2016, the following tax years remain subject to examination for the major jurisdictions where we conduct business:



Jurisdiction	Years
United States	2014 to 2016
United Kingdom	2012 to 2016
Brazil	2011 to 2016
Korea	2014 to 2016
China	2007 to 2016

Our U.S. federal income tax returns have been audited through 2013. We have various federal income tax return positions in administrative appeals for 2004, 2005, 2007 and 2010 through 2013.

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.