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Tax
 3 Months Ended
Mar. 31, 2012
Tax [Abstract]  
Tax

8. Tax

The effective tax rate for the three months ended March 31, 2012 was 30.8%, compared to 31.9% for the same period in 2011. Compared to the U.S. statutory rate, the effective tax rate was positively impacted in the period by the effect of foreign exchange loss for tax reporting in Norway.

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
March  31,		  
    2012     2011  

Federal income tax at U.S. federal statutory rate

   $ 306     $ 208  

Foreign income tax rate differential

     (23 )      (24 ) 

State income tax, net of federal benefit

     8       6  

Nondeductible expenses

     13       10  

Tax benefit of manufacturing deduction

     (9 )      (6 ) 

Foreign dividends, net of foreign tax credits

     6       5  

Tax impact of foreign exchange

     (30 )      —    

Tax rate change on temporary differences

     —         (13 ) 

Other

     (2 )      3  
   

 

 

    

 

 

  

Provision for income taxes

   $ 269     $ 189  
   

 

 

    

 

 

  

The balance of unrecognized tax benefits at March 31, 2012 was $131 million, of which $58 million would be recorded as a reduction of income tax expense if ultimately realized. The Company recognized no material changes in the balance of unrecognized tax benefits for the three months ended March 31, 2012.

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 tax years after 2007 and outside the U.S. for tax years ending after 2005.

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.