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Provision for Income Taxes Notes | 12 Months Ended
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Dec. 31, 2014
Income Tax Disclosure [Abstract] |
Provision for income taxes | PROVISION FOR INCOME TAXES
| 2014 | 2013 | 2012
Current tax expense on continuing operations: |  |  |  |  |  |
U.S. federal | $ | 778 |  | $ | 160 |  | $ | 121 |
U.S. state and local | 62 |  | 23 |  | 16 |
International | 516 |  | 677 |  | 663 |
Total current tax expense on continuing operations | 1,356 |  | 860 |  | 800 |
Deferred tax expense (benefit) on continuing operations: |  |  |  |  |  |
U.S. federal | 81 |  | (193 | ) | (105 | )
U.S. state and local | (44 | ) | (65 | ) | (46 | )
International | (23 | ) | 24 |  | (33 | )
Total deferred tax expense (benefit) on continuing operations | 14 |  | (234 | ) | (184 | )
Provision for income taxes on continuing operations | $ | 1,370 |  | $ | 626 |  | $ | 616 |
The significant components of deferred tax assets and liabilities at December 31, 2014 and 2013, are as follows:
| 2014 | 2013
| Asset | Liability | Asset | Liability
Depreciation | $ | — |  | $ | 1,612 |  | $ | — |  | $ | 1,707 |
Accrued employee benefits | 5,258 |  | 555 |  | 3,754 |  | 512 |
Other accrued expenses | 623 |  | — |  | 811 |  | 87 |
Inventories | 305 |  | 156 |  | 275 |  | 151 |
Unrealized exchange gains/losses | — |  | 165 |  | 65 |  | — |
Tax loss/tax credit carryforwards/backs | 2,466 |  | — |  | 2,622 |  | — |
Investment in subsidiaries and affiliates | 144 |  | 185 |  | 189 |  | 245 |
Amortization of intangibles | 120 |  | 1,312 |  | 109 |  | 1,372 |
Other | 328 |  | 91 |  | 316 |  | 159 |
Valuation allowance | (1,757 | ) | — |  | (1,764 | ) | — |
| $ | 7,487 |  | $ | 4,076 |  | $ | 6,377 |  | $ | 4,233 |
Net deferred tax asset | $ | 3,411 |  |  |  | $ | 2,144 |  |  |
An analysis of the company's effective income tax rate (EITR) on continuing operations is as follows:
| 2014 | 2013 | 2012
Statutory U.S. federal income tax rate | 35.0 | % | 35.0 | % | 35.0 | %
Exchange gains/losses 1 | 7.4 |  | 0.8 |  | 0.1 |
Domestic operations | (2.1 | ) | (3.2 | ) | (2.3 | )
Lower effective tax rates on international operations-net 2 | (11.3 | ) | (12.3 | ) | (10.9 | )
Tax settlements | (0.6 | ) | (0.2 | ) | (2.0 | )
Sale of a business | (0.3 | ) | — |  | — |
U.S. research & development credit 2 | (0.7 | ) | (2.2 | ) | — |
| 27.4 | % | 17.9 | % | 19.9 | %
1. | Principally reflects the impact of foreign exchange losses on net monetary assets for which no corresponding tax benefit is realized. Further information about the company's foreign currency hedging program is included in Note 19 under the heading Foreign Currency Risk.
2. | On January 2, 2013, U.S. tax law was enacted which extended through 2013 (and retroactive to 2012) several expired or expiring temporary business tax provisions. In accordance with GAAP, this extension was taken into account in the quarter in which the legislation was enacted (i.e. first quarter 2013).
Consolidated income from continuing operations before income taxes for U.S. and international operations was as follows:
| 2014 | 2013 | 2012
U.S. (including exports) | $ | 2,780 |  | $ | 962 |  | $ | 640 |
International | 2,211 |  | 2,527 |  | 2,448 |
Income from continuing operations before income taxes | $ | 4,991 |  | $ | 3,489 |  | $ | 3,088 |
The increased proportion of income from continuing operations before income taxes in the U.S over prior years is primarily due to the results of the company’s hedging program, gains on sales of businesses primarily in the U.S., and the impact of Imprelis® charges in the U.S. in 2013 versus additional insurance recoveries recorded in the U.S. in 2014. In 2014 and 2013, the U.S. recorded a net exchange gain associated with the hedging program of $607 and $35, respectively. While the taxation of the amounts reflected on the chart above does not correspond precisely to the jurisdiction of taxation (due to taxation in multiple countries, exchange gains/losses, etc.), it represents a reasonable approximation of the income before income taxes split between U.S. and international jurisdictions. See Note 19 for additional information regarding the company's hedging program. Under the tax laws of various jurisdictions in which the company operates, deductions or credits that cannot be fully utilized for tax purposes during the current year may be carried forward or back, subject to statutory limitations, to reduce taxable income or taxes payable in future or prior years. At December 31, 2014, the tax effect of such carryforwards/backs, net of valuation allowance approximated $1,080. Of this amount, $921 has no expiration date, $1 expires after 2014 but before the end of 2019 and $158 expires after 2019. At December 31, 2014, unremitted earnings of subsidiaries outside the U.S. totaling $17,226 were deemed to be indefinitely reinvested. No deferred tax liability has been recognized with regard to the remittance of such earnings. It is not practicable to estimate the income tax liability that might be incurred if such earnings were remitted to the U.S. Each year the company files hundreds of tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the tax authorities. Positions challenged by the tax authorities may be settled or appealed by the company. As a result, there is an uncertainty in income taxes recognized in the company's financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes. It is reasonably possible that net reductions to the company’s global unrecognized tax benefits could be in the range of $100 to $125 within the next 12 months with the majority due to the settlement of uncertain tax positions with various tax authorities. The company and/or its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and non-U.S. jurisdictions. With few exceptions, the company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2004. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
| 2014 | 2013 | 2012
Total unrecognized tax benefits as of January 1 | $ | 901 |  | $ | 805 |  | $ | 800 |
Gross amounts of decreases in unrecognized tax benefits as a result of tax positions taken during the prior period | (50 | ) | (28 | ) | (94 | )
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken during the prior period | 84 |  | 76 |  | 73 |
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken during the current period | 92 |  | 92 |  | 78 |
Amount of decreases in the unrecognized tax benefits relating to settlements with taxing authorities | (15 | ) | (19 | ) | (29 | )
Reduction to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations | (3 | ) | (6 | ) | (10 | )
Exchange gain | (23 | ) | (19 | ) | (13 | )
Total unrecognized tax benefits as of December 31 | $ | 986 |  | $ | 901 |  | $ | 805 |
Total unrecognized tax benefits that, if recognized, would impact the effective tax rate | $ | 818 |  | $ | 778 |  | $ | 693 |
Total amount of interest and penalties recognized in the Consolidated Income Statements | $ | 5 |  | $ | 16 |  | $ | 4 |
Total amount of interest and penalties recognized in the Consolidated Balance Sheets | $ | 117 |  | $ | 122 |  | $ | 116 |

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