Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

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):


	2016			2015			2014
Federal income tax expense (benefit):
Current	$	1,327		$	1,573		$	1,770
Deferred		(231	)		(473	)		(351)
Total federal income tax expense		1,096			1,100			1,419
Foreign income tax expense (benefit):
Current		56			39			13
Deferred		(19	)		34			(8)
Total foreign income tax expense		37			73			5
Total income tax expense	$	1,133		$	1,173		$	1,424

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):


	2016				2015				2014
	Amount		Rate		Amount		Rate		Amount		Rate
Income tax expense at the U.S. federal statutory tax rate		$1,710		35.0%		$1,505		35.0%		$1,637		35.0%
Adoption of stock-based compensation ASU		(152)		(3.1)		—		—		—		—
U.S. manufacturing deduction benefit		(117)		(2.4)		(123)		(2.9)		(124)		(2.6)
Research and development tax credit		(107)		(2.2)		(70)		(1.6)		(63)		(1.3)
Tax deductible dividends		(92)		(1.9)		(87)		(2.0)		(82)		(1.8)
Other, net		(109)		(2.2)		(52)		(1.2)		56		1.1
Income tax expense		$1,133		23.2%		$1,173		27.3%		$1,424		30.4%

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):


	2016			2015
Deferred tax assets related to:
Accrued compensation and benefits	$	1,012		$	919
Pensions ^(a)		5,197			4,462
Other postretirement benefit obligations		302			375
Contract accounting methods		878			1,039
Foreign company operating losses and credits		30			62
Other		327			418
Valuation allowance ^(b)		(15	)		(73)
Deferred tax assets, net		7,731			7,202
Deferred tax liabilities related to:
Goodwill and purchased intangibles		378			274
Property, plant and equipment		346			457
Exchanged debt securities and other ^(c)		418			408
Deferred tax liabilities		1,142			1,139
Net deferred tax assets	$	6,589		$	6,063

^(a)	The increase in 2016 was primarily due to the reduction in the discount rate used to measure our postretirement benefit plans (see “Note 11 – Postretirement Plans”).

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

^(c)	Includes deferred taxes associated with the exchange of debt securities in prior years.