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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income Tax Provisions Federal and foreign income tax expense for continuing operations consisted of the following (in millions):
|  | 2022 |  | 2021 |  | 2020
Federal income tax expense (benefit): |  |  |  |  |  |
Current |  | $ | 1,618 |  |  | $ | 1,325 |  |  | $ | 1,292 |
Deferred |  | (776) |  |  | (194) |  |  | 21 |
Total federal income tax expense |  | 842 |  |  | 1,131 |  |  | 1,313 |
Foreign income tax expense (benefit): |  |  |  |  |  |
Current |  | 87 |  |  | 93 |  |  | 50 |
Deferred |  | 19 |  |  | 11 |  |  | (16) |
Total foreign income tax expense |  | 106 |  |  | 104 |  |  | 34 |
Total federal and foreign income tax expense |  | $ | 948 |  |  | $ | 1,235 |  |  | $ | 1,347 |
Our total net state income tax expense was $124 million for 2022, $195 million for 2021, and $197 million for 2020. State income taxes are allowable costs in establishing prices for the products and services we sell to the U.S. Government. Therefore, state income tax expenses are included in our cost of sales, as general and administrative costs. As a result, the impact of certain transactions on our operating profit and of other matters presented in these consolidated financial statements is disclosed net of state income taxes. A reconciliation of the U.S. federal statutory income tax expense to actual income tax expense for continuing operations is as follows (in millions):
|  | 2022 |  | 2021 |  | 2020
|  | Amount |  | Rate |  | Amount |  | Rate |  | Amount |  | Rate
Income tax expense at the U.S. federal statutory tax rate |  | $ | 1,403 |  |  | 21.0 | % |  | $ | 1,585 |  |  | 21.0 | % |  | $ | 1,729 |  |  | 21.0 | %
Research and development tax credit |  | (178) |  |  | (2.7) |  |  | (118) |  |  | (1.6) |  |  | (97) |  |  | (1.2) |
Foreign derived intangible income deduction |  | (176) |  |  | (2.6) |  |  | (170) |  |  | (2.3) |  |  | (170) |  |  | (2.1) |
Tax deductible dividends |  | (67) |  |  | (1.0) |  |  | (65) |  |  | (0.9) |  |  | (64) |  |  | (0.8) |
Excess tax benefits for stock-based payment awards |  | (42) |  |  | (0.6) |  |  | (28) |  |  | (0.4) |  |  | (52) |  |  | (0.6) |
Other, net |  | 8 |  |  | 0.1 |  |  | 31 |  |  | 0.6 |  |  | 1 |  |  | 0.1 |
Income tax expense |  | $ | 948 |  |  | 14.2 | % |  | $ | 1,235 |  |  | 16.4 | % |  | $ | 1,347 |  |  | 16.4 | %
The rate for 2022 was lower than the rate for 2021 primarily due to increased research and development tax credits. The rate for all years benefited from tax deductions for foreign derived intangible income, dividends paid to our defined contribution plans with an employee stock ownership plan feature, and employee equity awards. Uncertain Tax Positions The change in unrecognized tax benefits were as follows (in millions):
|  | 2022 |  | 2021 |  | 2020
Balance at January 1 |  | $ | 69 |  |  | $ | 50 |  |  | $ | 56 |
Additions based on tax positions related to the current year |  | 1,572 |  |  | 23 |  |  | 14 |
Additions for tax positions of prior years |  | 5 |  |  | 30 |  |  | 1 |
Reductions for tax positions of prior years |  | (2) |  |  | (19) |  |  | (20) |
Settlements with tax authorities |  | (23) |  |  | (14) |  |  | — |
Other, net |  | 1 |  |  | (1) |  |  | (1) |
Balance at December 31 |  | $ | 1,622 |  |  | $ | 69 |  |  | $ | 50 |
As of December 31, 2021, our liabilities associated with uncertain tax positions were not material. For the year ended December 31, 2022, our liabilities associated with uncertain tax positions increased to $1.6 billion with a corresponding increase to net deferred tax assets primarily resulting from the Tax Cuts and Jobs Act of 2017’s elimination of the option for taxpayers to deduct research and development expenditures immediately in the year incurred and instead requiring taxpayers to amortize such expenditures over five years. It is reasonably possible that within the next twelve months, our liabilities associated with uncertain tax positions may increase by approximately $1.3 billion related to this provision. This uncertain tax position will have an immaterial impact to our effective tax rate if recognized. We recognize accrued interest and penalties related to unrecognized tax benefits as part of our income tax expense. As of December 31, 2022 and 2021, our accrued interest and penalties related to unrecognized tax benefits were not material. Deferred Income Taxes The primary components of our federal and foreign deferred income tax assets and liabilities at December 31 were as follows (in millions):
|  | 2022 |  | 2021
Deferred tax assets related to: |  |  |  |
Pensions |  | $ | 1,340 |  |  | $ | 1,985 |
Accrued compensation and benefits |  | 718 |  |  | 957 |
Contract accounting methods |  | 510 |  |  | 470 |
Research and development expenditures |  | 2,268 |  |  | — |
Foreign company operating losses and credits |  | 20 |  |  | 40 |
Other (a) |  | 471 |  |  | 473 |
Valuation allowance |  | (31) |  |  | (15) |
Deferred tax assets, net |  | 5,296 |  |  | 3,910 |
Deferred tax liabilities related to: |  |  |  |
Goodwill and intangible assets |  | 449 |  |  | 401 |
Property, plant and equipment |  | 503 |  |  | 518 |
Exchanged debt securities and other (a) |  | 605 |  |  | 709 |
Deferred tax liabilities |  | 1,557 |  |  | 1,628 |
Net deferred tax assets |  | $ | 3,739 |  |  | $ | 2,282 |
(a)Includes deferred tax assets and liabilities related to lease liability and ROU asset. We and our subsidiaries file federal income tax returns in the U.S. and income tax returns in various foreign jurisdictions. With few exceptions, the statute of limitations for these jurisdictions is no longer open for audit or examination for the years before 2015 with respect to various foreign jurisdictions and before 2018 for federal income taxes in the U.S. We withdrew from the IRS Compliance Assurance Process (CAP) program in 2022 starting with our 2021 tax return. Examinations of the years 2018 to 2020 remain under IRS review under the CAP program. We are also subject to taxation in various states and foreign jurisdictions including Australia, Canada, India, Italy, Japan, Poland, and the United Kingdom. We are under, or may be subject to, audit or examination and additional assessments by the relevant authorities. Our federal and foreign income tax payments, net of refunds, were $1.6 billion in 2022 and $1.4 billion in 2021 and 2020.

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