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Tax
9 Months Ended
Sep. 30, 2011
Tax [Abstract] 
Tax
8. Tax
The effective tax rate for the three and nine months ended September 30, 2011 was 32.3% and 32.1%, respectively, compared to 29.5% and 31.1% for the same period in 2010. The effective tax rate was positively impacted in the period by the effect of tax rate reductions on timing differences in foreign jurisdictions, an increase in the benefit of the manufacturing deduction as a result of increasing income in the U.S., plus the recognition of reduced tax expense related to prior periods. This was offset by additional current and prior period taxes on foreign dividends. The impact of these prior period discrete items is not material to any individual prior period.
The difference between the effective tax rate reflected in the provision for income taxes and the U.S. federal statutory rate of 35% was as follows (in millions):
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Federal income tax at U.S. federal statutory rate
  $ 273     $ 201     $ 728     $ 621  
Foreign income tax rate differential
    (29 )     (28 )     (94 )     (86 )
State income tax, net of federal benefit
    6       3       17       10  
Nondeductible expenses
    9       6       33       30  
Tax benefit of manufacturing deduction
    (14 )     (8 )     (26 )     (14 )
Foreign dividends, net of foreign tax credits
    33       2       43       9  
Tax rate change on temporary differences
    (5 )     —       (18 )     —  
Other
    (21 )     (7 )     (16 )     (18 )
 
                       
Provision for income taxes
  $ 252     $ 169     $ 667     $ 552  
 
                       
The balance of unrecognized tax benefits at September 30, 2011 was $117 million. The Company recognized no material changes in the balance of unrecognized tax benefits for the three and nine months ended September 30, 2011.
The Company is subject to taxation in the U.S., various states and foreign jurisdictions. The Company has significant operations in the U.S., Canada, the U.K., the Netherlands and Norway. Tax years that remain subject to examination by major tax jurisdiction vary by legal entity, but are generally open in the U.S. for the tax years after 2007 and outside the U.S. for tax years ending after 2004.
The Company does not anticipate that its total unrecognized tax benefits will significantly change due to the settlement of audits or the expiration of statutes of limitation within 12 months of this reporting date.
To the extent penalties and interest would be assessed on any underpayment of income tax, such accrued amounts have been classified as a component of income tax expense in the financial statements.