Income from continuing operations before taxes

			Years Ended December 31,
			2014		2013		2012
	U.S.	$	3,340	$	3,002	$	1,761
	Non-U.S.		2,478		2,410		2,114
		$	5,818	$	5,412	$	3,875

Tax expense (benefit)
			Years Ended December 31,
			2014		2013		2012
	Tax expense (benefit) consists of
	Current:
	U.S. Federal	$	746	$	663	$	470
	U.S. State		39		97		10
	Non-U.S.		572		428		380
		$	1,357	$	1,188	$	860

	Deferred:
	U.S. Federal	$	114	$	160	$	85
	U.S. State		63		72		19
	Non-U.S.		(45)		30		(20)
			132		262		84
		$	1,489	$	1,450	$	944


	Years Ended December 31,
	2014		2013		2012
The U.S. federal statutory income tax rate is reconciled to our effective income tax rate as follows:
U.S. federal statutory income tax rate	35.0	%	35.0	%	35.0	%
Taxes on non-U.S. earnings below U.S. tax rate⁽¹⁾	(7.0)		(7.2)		(7.1)
U.S. state income taxes⁽¹⁾	1.2		1.8		0.8
Manufacturing incentives	(1.0)		(0.9)		(1.7)
ESOP dividend tax benefit	(0.4)		(0.5)		(0.6)
Tax credits	(1.0)		(1.8)		(0.4)
Reserves for tax contingencies	(0.2)		0.6		(0.4)
All other items—net	(1.0)		(0.2)		(1.2)
	25.6	%	26.8	%	24.4	%

(1) Net of changes in valuation allowance

The effective tax rate decreased by 1.2 percentage points in 2014 compared to 2013. The decrease was primarily attributable to lower tax expense from the resolution of audits, partially offset by the impact of more income in jurisdictions with higher tax rates and additional reserves. The Company's non-U.S. effective tax rate for 2014 was 21.3%, an increase of approximately 2.3 percentage points compared to 2013. The increase in the non-U.S. effective tax rate was primarily attributable to additional reserves and the impact of more income in jurisdictions with higher tax rates, partially offset by the tax impact of dispositions. The effective tax rate was lower than the U.S. federal statutory rate of 35% primarily due to overall non-U.S. earnings taxed at lower rates.

The effective tax rate increased by 2.4 percentage points in 2013 compared to 2012. The increase was primarily attributable to lower mark-to-market pension expense in the U.S. Other factors causing an increase in the effective tax rate include higher tax expense related to an increase in tax reserves and higher state tax expense. These increases in the effective tax rate were partially offset by tax benefits from retroactive law changes in the U.S. The Company's non-U.S. effective tax rate for 2013 was 19.0%, an increase of approximately 2.0 percentage points compared to 2012. The increase in the non-U.S. effective tax rate was primarily attributable to higher expense related to retroactive tax law changes in Germany and additional reserves in various jurisdictions, coupled with higher earnings in higher tax rate jurisdictions. The effective tax rate was lower than the U.S. federal statutory rate of 35% primarily due to overall non-U.S. earnings taxed at lower rates.

The tax effects of temporary differences and tax carryforwards which give rise to future income tax benefits and payables are as follows:

	December 31,
Deferred tax assets:	2014		2013
Pension	$	573	$	32
Postretirement benefits other than pensions		441		499
Asbestos and environmental		477		437
Employee compensation and benefits		387		382
Other accruals and reserves		672		702
Net operating and capital losses		639		838
Tax credit carryforwards		199		266
Gross deferred tax assets		3,388		3,156
Valuation allowance		(560)		(614)
Total deferred tax assets	$	2,828	$	2,542

Deferred tax liabilities:
Property, plant and equipment	$	(612)	$	(654)
Intangibles		(1,060)		(1,126)
Other asset basis differences		(286)		(350)
Other		(7)		(22)
Total deferred tax liabilities		(1,965)		(2,152)
Net deferred taxes	$	863	$	390

The net deferred tax assets are included as components of Current and Non-Current Deferred Income Taxes and Accrued Liabilities within the Consolidated Balance Sheet.

Our net deferred tax asset of $863 million consists of $305 million related to non-U.S. operations which are comprised principally of net deductible temporary differences and net operating loss, capital loss and tax credit carryforwards (mainly in Canada and the United Kingdom). We maintain a valuation allowance of $557 million against a portion of the non-U.S. gross deferred tax assets. Our valuation allowance decreased by $54 million in 2014, increased by $16 million in 2013 and increased by $7 million in 2012. The amount of the change in the valuation allowance that was credited to income tax expense for 2014 was $10 million and the amounts charged to income tax expense for 2013 and 2012 were $49 million and $18 million, respectively. In the event we determine that we will not be able to realize our net deferred tax assets in the future, we will reduce such amounts through a charge to income in the period such determination is made. Conversely, if we determine that we will be able to realize net deferred tax assets in excess of the carrying amounts, we will decrease the recorded valuation allowance through a credit to income tax expense in the period that such determination is made.

As of December 31, 2014, our net operating loss, capital loss and tax credit carryforwards were as follows:

			Net Operating
	Expiration		and Capital Loss		Tax Credit
Jurisdiction	Period		Carryforwards		Carryforwards
U.S. Federal	2032	$	1	$	51
U.S. State	2034		2,200		35
Non-U.S.	2034		2,463		148
Total		$	4,664	$	234

Many jurisdictions impose limitations on the timing and utilization of net operating loss and tax credit carryforwards. In those instances whereby there is an expected permanent limitation on the utilization of the net operating loss or tax credit carryforward the deferred tax asset and amount of the carryforward have been reduced.

U.S. federal income taxes have not been provided on undistributed earnings of the vast majority of our international subsidiaries as it is our intention to reinvest these earnings into the respective subsidiaries. At December 31, 2014 Honeywell has not provided for U.S. federal income and non-U.S. withholding taxes on approximately $15.0 billion of such earnings of our non-U.S. operations. It is not practicable to estimate the amount of tax that might be payable if some or all of such earnings were to be repatriated, and the amount of foreign tax credits that would be available to reduce or eliminate the resulting U.S. income tax liability.

	2014		2013		2012
Change in unrecognized tax benefits:
Balance at beginning of year	$	729	$	722	$	815
Gross increases related to current period tax positions		65		41		25
Gross increases related to prior periods tax positions		204		118		44
Gross decreases related to prior periods tax positions		(277)		(21)		(62)
Decrease related to resolutions of audits with tax authorities		(32)		(92)		(40)
Expiration of the statute of limitations for the assessment of taxes		(10)		(30)		(64)
Foreign currency translation		(20)		(9)		4
Balance at end of year	$	659	$	729	$	722

As of December 31, 2014, 2013, and 2012 there were $659 million, $729 million and $722 million of unrecognized tax benefits that if recognized would be recorded as a component of income tax expense.

Generally, our uncertain tax positions are related to tax years that remain subject to examination by the relevant tax authorities. The following table summarizes these open tax years by major jurisdiction as of December 31, 2014:

	Open Tax Years
	Based on Originally Filed Returns
Jurisdiction	Examination in	Examination not yet
Jurisdiction	progress	initiated
U.S. Federal	2010 - 2013	2013 - 2014
U.S. State	2007 - 2013	2006 - 2014
United Kingdom	N/A	2012 - 2014
Canada⁽¹⁾	2007 - 2013	2014
Germany⁽¹⁾	2006 - 2012	2013 - 2014
France	2008 - 2013	2004 - 2007, 2014
Netherlands	2009	2010 - 2014
Australia	N/A	2009 - 2014
China	2003 - 2012	2013 - 2014
India	1999 - 2012	2013 - 2014
Italy	2008 - 2013	2014

(1) Includes provincial or similar local jurisdictions, as applicable.

Based on the outcome of these examinations, or as a result of the expiration of statute of limitations for specific jurisdictions, it is reasonably possible that certain unrecognized tax benefits for tax positions taken on previously filed tax returns will materially change from those recorded as liabilities for uncertain tax positions in our financial statements. In addition, the outcome of these examinations may impact the valuation of certain deferred tax assets (such as net operating losses) in future periods.

Unrecognized tax benefits for examinations in progress were $403 million, $431 million and $443 million, as of December 31, 2014, 2013, and 2012, respectively. Estimated interest and penalties related to the underpayment of income taxes are classified as a component of Tax Expense in the Consolidated Statement of Operations and totaled $24 million, $17 million and $37 million for the years ended December 31, 2014, 2013, and 2012, respectively. Accrued interest and penalties were $325 million, $301 million and $284 million, as of December 31, 2014, 2013, and 2012, respectively.