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Provision for Income Taxes Notes | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Provision for income taxes | PROVISION FOR INCOME TAXES
| 2016 | 2015 | 2014
Current tax expense on continuing operations: |  |  |  |  |  |
U.S. federal | $ | 40 |  | $ | 218 |  | $ | 656 |
U.S. state and local | 11 |  | 7 |  | 38 |
International | 592 |  | 466 |  | 449 |
Total current tax expense on continuing operations | 643 |  | 691 |  | 1,143 |
Deferred tax expense on continuing operations: |  |  |  |  |  |
U.S. federal | 27 |  | 139 |  | 91 |
U.S. state and local | (29 | ) | 4 |  | (42 | )
International | 103 |  | (138 | ) | (24 | )
Total deferred tax expense on continuing operations | 101 |  | 5 |  | 25 |
Provision for income taxes on continuing operations | $ | 744 |  | $ | 696 |  | $ | 1,168 |
The significant components of deferred tax assets and liabilities at December 31, 2016 and 2015, are as follows:
| 2016 | 2015
| Asset | Liability | Asset | Liability
Depreciation | $ | — |  | $ | 742 |  | $ | — |  | $ | 953 |
Accrued employee benefits | 4,529 |  | 410 |  | 4,812 |  | 374 |
Other accrued expenses | 617 |  | 222 |  | 624 |  | 61 |
Inventories | 163 |  | 144 |  | 89 |  | 99 |
Unrealized exchange gains/losses | — |  | 346 |  | — |  | 224 |
Tax loss/tax credit carryforwards/backs | 1,808 |  | — |  | 2,124 |  | — |
Investment in subsidiaries and affiliates | 126 |  | 230 |  | 133 |  | 154 |
Amortization of intangibles | 210 |  | 1,345 |  | 187 |  | 1,331 |
Other | 257 |  | 86 |  | 215 |  | 77 |
Valuation allowance | (1,308 | ) | — |  | (1,529 | ) | — |
| $ | 6,402 |  | $ | 3,525 |  | $ | 6,655 |  | $ | 3,273 |
Net deferred tax asset | $ | 2,877 |  |  |  | $ | 3,382 |  |  |
An analysis of the company's effective income tax rate (EITR) on continuing operations is as follows:
| 2016 | 2015 | 2014
Statutory U.S. federal income tax rate | 35.0 | % | 35.0 | % | 35.0 | %
Exchange gains/losses 1 | 1.6 |  | 8.0 |  | 8.1 |
Domestic operations | (3.7 | ) | (2.8 | ) | (2.8 | )
Lower effective tax rates on international operations-net | (9.3 | ) | (11.1 | ) | (11.4 | )
Tax settlements | (0.1 | ) | (0.7 | ) | (0.6 | )
Sale of a business | (0.1 | ) | (0.2 | ) | (0.4 | )
U.S. research & development credit | (0.6 | ) | (1.3 | ) | (0.8 | )
| 22.8 | % | 26.9 | % | 27.1 | %
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 5 and Note 19 under the heading Foreign Currency Risk.
Consolidated income from continuing operations before income taxes for U.S. and international operations was as follows:
| 2016 | 2015 | 2014
U.S. (including exports) | $ | 1,457 |  | $ | 1,397 |  | $ | 2,537 |
International | 1,808 |  | 1,194 |  | 1,776 |
Income from continuing operations before income taxes | $ | 3,265 |  | $ | 2,591 |  | $ | 4,313 |
The increase in international pre-tax earnings from continuing operations from 2015 to 2016 is primarily driven by the gain on the sale of DuPont (Shenzhen) Manufacturing Limited in 2016 in addition to the absence of 2015 employee separation / asset related charges, net. The decrease in pre-tax earnings from continuing operations from 2014 to 2015 is primarily driven by lower worldwide sales volume, the absence of 2014 gains on sales of businesses primarily in the U.S., higher employee separation / asset related charges, net, as well as the results of the company’s hedging program. In 2016 and 2015, the U.S. recorded a net exchange (loss) gain associated with the hedging program of $(304) and $434, 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, 2016, the tax effect of such carryforwards/backs, net of valuation allowance approximated $516. Of this amount, $285 has no expiration date, $3 expires after 2016 but before the end of 2021 and $228 expires after 2021. At December 31, 2016, unremitted earnings of subsidiaries outside the U.S. totaling $17,380 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 $70 to $90 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:
| 2016 | 2015 | 2014
Total unrecognized tax benefits as of January 1 | $ | 846 |  | $ | 986 |  | $ | 901 |
Gross amounts of decreases in unrecognized tax benefits as a result of tax positions taken during the prior period | (41 | ) | (98 | ) | (50 | )
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken during the prior period | 32 |  | 13 |  | 84 |
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken during the current period | 55 |  | 69 |  | 92 |
Amount of decreases in the unrecognized tax benefits relating to settlements with taxing authorities | (314 | ) | (58 | ) | (15 | )
Reduction to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations | (30 | ) | (30 | ) | (3 | )
Exchange loss (gain) | 2 |  | (36 | ) | (23 | )
Total unrecognized tax benefits as of December 31 | $ | 550 |  | $ | 846 |  | $ | 986 |
Total unrecognized tax benefits that, if recognized, would impact the effective tax rate | $ | 429 |  | $ | 651 |  | $ | 818 |
Total amount of interest and penalties recognized in the Consolidated Income Statements | $ | 20 |  | $ | (8 | ) | $ | 5 |
Total amount of interest and penalties recognized in the Consolidated Balance Sheets | $ | 98 |  | $ | 105 |  | $ | 117 |

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