Tax

The effective tax rate for the three months ended March 31, 2015 was 37.6%, compared to 30.4% for the same period in 2014. Compared to the U.S. statutory rate, the effective tax rate was positively impacted in the periods by the effect of lower tax rates on income earned in foreign jurisdictions, and the deduction in the U.S. for manufacturing activities. The effective tax rate was negatively impacted by foreign dividends net of foreign tax credits, nondeductible expenses and an increase in uncertain tax positions due to a foreign tax exposure identified in the current period. Excluding discrete items, the effective tax rate for the quarter is 28.9%.

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,
	2015			2014
Federal income tax at U.S. federal statutory rate	$	176		$	276
Foreign income tax rate differential		(46	)		(47	)
State income tax, net of federal benefit		4			6
Nondeductible expenses		5			11
Tax benefit of manufacturing deduction		(10	)		(7	)
Foreign dividends, net of foreign tax credits		7			9
Tax impact of foreign exchange		1			(8	)
Tax rate change on temporary differences		(4	)		—
Change in tax reserves		69			—
Other		(13	)		(1	)

Provision for income taxes	$	189		$	239

The balance of unrecognized tax benefits at March 31, 2015 was $185 million, $112 million of which if ultimately realized, would be recorded as an income tax benefit. Included in the change in the balance of unrecognized tax benefits is an uncertain tax position identified in a foreign jurisdiction totaling $69 million, which the Company anticipates will be resolved through settlement 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 United States, Canada, the United Kingdom, 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 2009 and outside the U.S. for tax years after 2007.

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.