Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

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):



	2019			2018			2017
Federal income tax expense (benefit):
Current
Operations	$	698		$	975		$	(189	)
One-time charge due to tax legislation ^(a)	—			(6		)	43
Deferred
Operations	235			(194		)	1,607
One-time charge due to tax legislation ^(a)	—			(37		)	1,843
Total federal income tax expense	933			738			3,304
Foreign income tax expense (benefit):
Current	91			67			53
Deferred	(13		)	(13		)	(1		)
Total foreign income tax expense	78			54			52
Total income tax expense	$	1,011		$	792		$	3,356


^(a)	Represents one-time charge in 2017 primarily due to the re-measurement of certain net deferred tax assets using the lower U.S. corporate income tax rate and a deemed repatriation tax, and true-up to this charge in 2018.

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

Our reconciliation of the U.S. federal statutory income tax rate (21% in 2019 and 2018 and 35% in 2017) to actual income tax expense for continuing operations is as follows (dollars in millions):



	2019					2018					2017
	Amount			Rate		Amount			Rate		Amount			Rate
Income tax expense at the U.S. federal statutory tax rate	$	1,521		21.0	%	$	1,226		21.0	%	$	1,836		35.0	%
Research and development tax credit	(148		)	(2.0	)	(138		)	(2.4	)	(115		)	(2.2	)
Foreign derived intangible income deduction	(122		)	(1.7	)	(61		)	(1.0	)	—			—
Excess tax benefits for share-based payment awards	(63		)	(0.9	)	(55		)	(0.9	)	(106		)	(2.0	)
Tax deductible dividends	(62		)	(0.9	)	(59		)	(1.0	)	(94		)	(1.8	)
Tax accounting method change ^(a)	(15		)	(0.2	)	(61		)	(1.0	)	—			—
Deferred tax write-down and transition tax ^(b)	—			—		(43		)	(0.7	)	1,886			35.9
U.S. manufacturing deduction benefit ^(c)	—			—		—			—		(7		)	(0.1	)
Other, net ^(d)	(100		)	(1.3	)	(17		)	(0.4	)	(44		)	(0.8	)
Income tax expense	$	1,011		14.0	%	$	792		13.6	%	$	3,356		64.0	%


^(a)	Recognized tax benefit of $15 million and $61 million in 2019 and 2018, from our change in a tax accounting method related to restoration of tax basis.


^(b)	Includes a deferred tax re-measurement and transition tax true-up in 2018 and one-time charge in 2017 primarily due to the re-measurement of certain net deferred tax assets using the lower U.S. corporate income tax rate and a deemed repatriation tax.

^(c)

Includes a reduction in our 2017 manufacturing benefit as a result of our decision to accelerate contributions to our pension funds in 2018. The Tax Act repealed the manufacturing benefit for years after 2017.

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):



	2019			2018
Deferred tax assets related to:
Accrued compensation and benefits	$	659		$	584
Pensions	3,057			2,623
Other postretirement benefit obligations	71			148
Contract accounting methods	349			539
Foreign company operating losses and credits	49			38
Other ^(a)	345			160
Valuation allowance ^(b)	(28		)	(20		)
Deferred tax assets, net	4,502			4,072
Deferred tax liabilities related to:
Goodwill and purchased intangibles	330			296
Property, plant and equipment	340			296
Exchanged debt securities and other ^(a)	525			294
Deferred tax liabilities	1,195			886
Net deferred tax assets	$	3,307		$	3,186


^(a)	Includes deferred tax assets and liabilities related to lease liability and ROU asset.


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