INCOME TAXES

Our effective tax rate was 14.3%, 17.1% and 55.6% for 2016, 2015 and 2014. The effective income tax rate for 2014 includes the tax impacts of the establishment of a European regional headquarters and the cash repatriation that affected 2014 but was executed in 2015. The establishment of the European regional headquarters contributed to the lower effective income tax rates in 2015 and 2016.



Effective Income Tax Rate Reconciliation
	2016		2015		2014
United States federal statutory rate	35.0	%	35.0	%	35.0	%
United States state and local income taxes, less federal deduction	1.7		2.1		2.2
Foreign income tax at rates other than 35%	(22.2	)	(17.6	)	4.9
Tax related to repatriation of foreign earnings	(0.3	)	(3.9	)	10.1
Other	0.1		1.5		3.4
Effective income tax rate	14.3	%	17.1	%	55.6	%



Earnings Before Income Taxes
	2016		2015		2014
United States	$	542	$	475	$	355
International	1,379		1,260		805
Total	$	1,921	$	1,735	$	1,160



Components of Income Tax Expense
Current income tax expense:	2016			2015		2014
United States federal	$	94		$	78	$	213
United States state and local	50			23		26
International	176			108		346
Total current income tax expense	$	320		$	209	$	585
Deferred income tax expense (benefit):
United States federal	$	(17	)	$	2	$	9
United States state and local	(12		)	8		(16		)
International	(17		)	77		67
Total deferred income tax expense (benefit)	$	(46	)	$	87	$	60
Total income tax expense	$	274		$	296	$	645

Interest and penalties included in other income (expense), net were ($1), ($4) and $8 in 2016, 2015 and 2014. The United States federal deferred income tax expense (benefit) includes the utilization of net operating loss carryforwards of $28, $79 and $78 in 2016, 2015 and 2014.



Deferred Income Tax Assets and Liabilities
Deferred income tax assets:	2016			2015
Inventories	$	583		$	513
Product related liabilities	115			116
Other accrued expenses	248			206
Depreciation and amortization	—			4
State income taxes	52			43
Share-based compensation	80			79
Net operating loss carryforwards	74			47
Other	117			143
Total deferred income tax assets	$	1,269		$	1,151
Less valuation allowances	(51		)	(47		)
Net deferred income tax assets	$	1,218		$	1,104
Deferred income tax liabilities:
Depreciation and amortization	$	(871	)	$	(586	)
Undistributed earnings	(50		)	(50		)
Other	(50		)	(26		)
Total deferred income tax liabilities	$	(971	)	$	(662	)
Net deferred income tax assets	$	247		$	442
Reported as:
Noncurrent assets—Other	$	302		$	477
Noncurrent liabilities—Other liabilities	(55		)	(35		)
Total	$	247		$	442

Accrued interest and penalties were $34 and $30, which was reported in accrued expenses and other liabilities, both current and noncurrent, on December 31, 2016 and 2015.

Net operating loss carryforwards totaling $185 on December 31, 2016 are available to reduce future taxable earnings of certain domestic and foreign subsidiaries. United States loss carryforwards of $160 expire through 2028. International loss carryforwards of $25 began to expire in 2016; however, some have no expiration. Of these carryforwards, $45 are subject to a full valuation allowance. We also have a tax credit carryforward of $40 with a full valuation allowance. These credits have no expiration; however, we do not anticipate generating income tax in excess of the credits in the foreseeable future.

No provision was made for United States federal and state income taxes or international income taxes that may result from future remittances of the undistributed earnings of foreign subsidiaries that are determined to be indefinitely reinvested $8,391 on December 31, 2016. Determination of the amount of any unrecognized deferred income tax liability on these is not practicable.



Uncertain Income Tax Positions
	2016			2015
Balance at beginning of year	$	313		$	315
Increases related to current year income tax positions	47			21
Increases related to prior year income tax positions	22			3
Decreases related to prior year income tax positions:
Settlements and resolutions of income tax audits	(82		)	(9		)
Statute of limitations expirations	(9		)	(6		)
Foreign currency translation	(4		)	(11		)
Balance at end of year	$	287		$	313
Reported as:
Current liabilities—Income taxes	$	—		$	9
Noncurrent liabilities—Other liabilities	287			304
Total	$	287		$	313

Our income tax expense would have been reduced by $281 and $304 on December 31, 2016 and 2015 had these uncertain income tax positions been favorably resolved. It is reasonably possible that the amount of unrecognized tax benefits will significantly change due to one or more of the following events in the next twelve months: expiring statutes, audit activity, tax payments, competent authority proceedings related to transfer pricing or final decisions in matters that are the subject of controversy in various taxing jurisdictions in which we operate, including inventory transfer pricing, cost sharing, product royalty and foreign branch arrangements. We are not able to reasonably estimate the amount or the future periods in which changes in unrecognized tax benefits may be resolved. Interest and penalties incurred associated with uncertain tax positions are included in other income (expense), net.

In the normal course of business, income tax authorities in various income tax jurisdictions both within the United States and internationally conduct routine audits of our income tax returns filed in prior years. These audits are generally designed to determine if individual income tax authorities are in agreement with our interpretations of complex income tax regulations regarding the allocation of income to the various income tax jurisdictions. Income tax years are open from 2012 through the current year for the United States federal jurisdiction. Income tax years open for our other major jurisdictions range from 2005 through the current year.