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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes For the years ended December 31, income before income taxes consisted of the following:
In millions | 2014 |  | 2013 |  | 2012
Income before income taxes |  |  |  |  |
United States | $ | 301 |  |  | $ | 362 |  |  | $ | 388 |
Foreign | 193 |  |  | 146 |  |  | 190 |
Total income before income taxes | $ | 494 |  |  | $ | 508 |  |  | $ | 578 |
For the years ended December 31, income tax expense consisted of the following:
In millions | 2014 |  | 2013 |  | 2012
Income tax expense |  |  |  |  |
Current |  |  |  |  |
Federal | $ | 94 |  |  | $ | 78 |  |  | $ | 50 |
State and local | 8 |  |  | 10 |  |  | 9 |
Foreign | 27 |  |  | 26 |  |  | 23 |
Deferred |  |  |  |  |
Federal | 1 |  |  | 18 |  |  | 72 |
State and local | — |  |  | 2 |  |  | 7 |
Foreign | (3 | ) |  | (3 | ) |  | (2 | )
Total income tax expense | $ | 127 |  |  | $ | 131 |  |  | $ | 159 |
Effective tax rate | 25.7 | % |  | 25.8 | % |  | 27.5 | %
The following table presents the principal components of the difference between the effective tax rate and the U.S. federal statutory income tax rate for the years ended December 31:
| 2014 |  | 2013 |  | 2012
Income tax expense at the U.S. federal tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Foreign income tax differential | (9.0 | )% |  | (7.3 | )% |  | (8.1 | )%
State and local income taxes | 0.5 | % |  | 0.4 | % |  | 0.7 | %
U.S. permanent book/tax differences | (1.7 | )% |  | (1.6 | )% |  | (0.5 | )%
Other, net | 0.9 | % |  | (0.7 | )% |  | 0.4 | %
Effective tax rate | 25.7 | % |  | 25.8 | % |  | 27.5 | %
There were no material discrete tax items impacting the effective tax rate for 2014; the 2013 effective tax rate included a $4 million discrete tax rate benefit related to the 2012 U.S. Federal Research and Development ("R&D") Tax Credit, which was retroactively reinstated in the first quarter of 2013. The rate differential resulting from the higher foreign earnings mix in 2014 versus 2013 effectively offset the one-time discrete benefit reflected in the 2013 effective tax rate, resulting in comparable effective tax rates over both periods. Deferred income tax assets and liabilities included in the balance sheets at December 31 were as follows:
In millions | 2014 |  | 2013
Deferred income tax assets |  |  |
Employee pensions and other liabilities | $ | 61 |  |  | $ | 57 |
Other balance sheet reserves and allowances | 22 |  |  | 22 |
Tax loss and credit carryforwards | 59 |  |  | 41 |
Deferred revenue | — |  |  | 2 |
Capitalized research and development | — |  |  | 5 |
Other | — |  |  | 1 |
Total deferred income tax assets | 142 |  |  | 128 |
Valuation allowance | (20 | ) |  | (13 | )
Net deferred income tax assets | 122 |  |  | 115 |
Deferred income tax liabilities |  |  |
Intangibles and capitalized software | 102 |  |  | 117 |
Property and equipment | 29 |  |  | 29 |
Deferred revenue | 17 |  |  | — |
Other | 12 |  |  | — |
Total deferred income tax liabilities | 160 |  |  | 146 |
Total net deferred income tax liabilities | $ | (38 | ) |  | $ | (31 | )
As of December 31, 2014, Teradata has NOL and tax credit carryforwards totaling $70 million (tax effected and before any valuation allowance offset and application of recognition criteria for uncertain tax positions). Of the total tax carryforwards, $18 million are NOLs in the U.S. and certain foreign jurisdictions, a small portion of which will begin to expire in 2015; $10 million is a U.S. capital loss carryforward which expires in 2019; $31 million are R&D tax credits, of which almost 90 percent are California R&D tax credits that have an indefinite carryforward period (which has a $20 million valuation allowance offset recorded); and the remaining $11 million are tax attributes that were acquired from various acquisitions and were not recorded for financial reporting purposes as they did not meet the recognition criteria for uncertain tax positions. The Company’s intention is to permanently reinvest its foreign earnings outside of the U.S. As a result, the effective tax rates in the periods presented are largely based upon the pre-tax earnings mix and allocation of certain expenses in various taxing jurisdictions where the Company conducts its business; these jurisdictions apply a broad range of statutory income tax rates. At December 31, 2014, the Company had not provided for federal income taxes on earnings of approximately $1 billion from its foreign subsidiaries. Should these earnings be distributed in the form of dividends or otherwise, the Company would be subject to U.S. income taxes and potential withholding taxes in various international jurisdictions. The U.S. taxes would be partially offset by U.S. foreign tax credits. Determination of the amount of unrecognized deferred U.S. tax liability is not practical because of the complexities associated with this hypothetical calculation. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company reflects any interest and penalties recorded in connection with its uncertain tax positions as a component of income tax expense. As of December 31, 2014, the Company’s uncertain tax positions totaled approximately $36 million, of which $18 million is reflected in the other liabilities section of the Company’s balance sheet as a non-current liability, and $3 million is recorded in current income taxes payable as the Company expects to settle this uncertain tax position within the next twelve months. The remaining balance of $15 million of uncertain tax positions relates to certain tax attributes both generated by the Company and acquired in various acquisitions, which are netted against the underlying deferred tax assets recorded on the balance sheet. The entire balance of $36 million in uncertain tax positions would cause a decrease in the effective income tax rate upon recognition. Teradata has recorded $2 million of interest accruals related to its uncertain tax liabilities as of December 31, 2014. Below is a rollforward of the Company’s liability related to uncertain tax positions at December 31:
In millions | 2014 |  | 2013
Balance at January 1 | $ | 34 |  |  | $ | 31 |
Gross increases for prior period tax positions | 4 |  |  | 1 |
Gross decreases for prior period tax positions | (3 | ) |  | (3 | )
Gross increases for current period tax positions | 4 |  |  | 5 |
Decreases due to the lapse of applicable statute of limitations | (3 | ) |  | — |
Balance at December 31 | $ | 36 |  |  | $ | 34 |
The Company and its subsidiaries file income tax returns in the U.S. federal and various state jurisdictions, as well as numerous foreign jurisdictions. As of December 31, 2014, the Company has ongoing tax audits in a limited number of state and foreign jurisdictions; however, no material adjustments have been proposed or made in any of these examinations to date which would result in any incremental income tax expense in future periods to the company. In addition, the Internal Revenue Service audit of the Company’s United States Federal tax filing for tax year 2011 was finalized in July of 2014 and resulted in a no change audit.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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