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Tax
 6 Months Ended
Jun. 30, 2012
Tax [Abstract]  
Tax
8. Tax

The effective tax rate for the three and six months ended June 30, 2012 was 32.1% and 31.5%, respectively, compared to 32.0% and 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 lower tax rates on income earned in foreign jurisdictions.

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
June 30,		     Six Months Ended
June 30,		  
    2012     2011     2012     2011  

Federal income tax at U.S. federal statutory rate

   $ 310     $ 247     $ 616     $ 455  

Foreign income tax rate differential

     (57 )      (41 )      (80 )      (65 ) 

State income tax, net of federal benefit

     9       5       17       11  

Nondeductible expenses

     10       14       23       24  

Tax benefit of manufacturing deduction

     (9 )      (6 )      (18 )      (12 ) 

Foreign dividends, net of foreign tax credits

     14       5       20       10  

Tax impact of foreign exchange

     12       —         (18 )      —    

Tax rate change on temporary differences

     —         —         —         (13 ) 

Other

     (4 )      2       (6 )      5  
   

 

 

    

 

 

    

 

 

    

 

 

  

Provision for income taxes

   $ 285     $ 226     $ 554     $ 415  
   

 

 

    

 

 

    

 

 

    

 

 

  

The balance of unrecognized tax benefits at June 30, 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 and six months ended June 30, 2012.

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.

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 after 2005.

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.