Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Provision for Federal & Foreign Income Tax Expense

Our provision for federal and foreign income tax expense for continuing operations consisted of the following (in millions):



	2017			2016			2015
Federal income tax expense (benefit):
Current
Operations	$	(189	)	$	1,327		$	1,573
One-time charge due to tax legislation ^(a)	43			—			—
Deferred
Operations	1,613			(231		)	(473		)
One-time charge due to tax legislation ^(a)	1,819			—			—
Total federal income tax expense	3,286			1,096			1,100
Foreign income tax expense (benefit):
Current	53			56			39
Deferred	1			(19		)	34
Total foreign income tax expense	54			37			73
Total income tax expense	$	3,340		$	1,133		$	1,173


^(a)	Represents one-time charge due primarily to the re-measurement of certain net deferred tax assets using the lower U.S. corporate income tax rate and a deemed repatriation tax.

Reconciliation of Income Tax Expense Computed Using U.S. Statutory Federal Tax Rate to Actual Income Tax Expense

Our reconciliation of the 35% U.S. federal statutory income tax rate to actual income tax expense for continuing operations is as follows (dollars in millions):



	2017					2016					2015
	Amount			Rate		Amount			Rate		Amount			Rate
Income tax expense at the U.S. federal statutory tax rate	$	1,844		35.0	%	$	1,710		35.0	%	$	1,505		35.0	%
Deferred tax write down and transition tax ^(a)	1,862			35.3		—			—		—			—
Excess tax benefits for share-based payment awards	(106		)	(2.0	)	(152		)	(3.1	)	—			—
U.S. manufacturing deduction benefit ^(b)	(7		)	(0.1	)	(117		)	(2.4	)	(123		)	(2.9	)
Research and development tax credit	(115		)	(2.2	)	(107		)	(2.2	)	(70		)	(1.6	)
Tax deductible dividends	(94		)	(1.8	)	(92		)	(1.9	)	(87		)	(2.0	)
Other, net	(44		)	(0.8	)	(109		)	(2.2	)	(52		)	(1.2	)
Income tax expense	$	3,340		63.4	%	$	1,133		23.2	%	$	1,173		27.3	%


^(a)	Includes one-time charge due primarily to the re-measurement of certain net deferred tax assets using the lower U.S. corporate income tax rate and a deemed repatriation tax.


^(b)	Includes a reduction in our 2017 manufacturing benefit as a result of our decision to accelerate contributions to our pension fund in 2018.

Components of Federal and Foreign Deferred Tax Assets and Liabilities

The primary components of our federal and foreign deferred income tax assets and liabilities at December 31 were as follows (in millions):



	2017^(a)			2016
Deferred tax assets related to:
Accrued compensation and benefits	$	595		$	1,012
Pensions ^(b)	2,495			5,197
Other postretirement benefit obligations	153			302
Contract accounting methods	487			878
Foreign company operating losses and credits	27			30
Other	154			327
Valuation allowance ^(c)	(20		)	(15		)
Deferred tax assets, net	3,891			7,731
Deferred tax liabilities related to:
Goodwill and purchased intangibles	266			378
Property, plant and equipment	239			346
Exchanged debt securities and other	303			418
Deferred tax liabilities	808			1,142
Net deferred tax assets	$	3,083		$	6,589


^(a)	Components of our federal and foreign deferred income tax assets and liabilities at December 31, 2017 after taking into account the estimated impacts of the Tax Act and related items.


^(b)	The decrease in 2017 was primarily due to the enactment of the Tax Act and our decision to accelerate contributions of cash to our defined benefit pension plans, partially offset by the reduction in the discount rate used to measure our postretirement benefit plans (see “Note 11 – Postretirement Benefit Plans”).


^(c)	A valuation allowance was provided against certain foreign company deferred tax assets arising from carryforwards of unused tax benefits.