Income Taxes (Unaudited)

9 Months Ended

Sep. 30, 2013

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

	Three Months Ended September 30				Nine Months Ended September 30
$ in millions	2013		2012		2013		2012
Federal and foreign income tax expense	$223		$236		$682		$733
Effective income tax rate	31.0	%	34.0	%	31.6	%	33.7	%

The company's lower effective tax rate for the three months ended September 30, 2013, includes an additional $16 million benefit associated with the company's 2012 U.S. federal tax return and $6 million benefit for the American Taxpayer Relief Act, which reinstated research tax credits for 2012 and 2013. During the nine months ended September 30, 2013, the company recorded $29 million of research tax credits representing estimated full year 2012 research tax credits and three quarters of the expected 2013 research tax credits and an additional $16 million benefit associated with the 2012 U.S. federal tax return noted above.

The company recognizes accrued interest and penalties related to uncertain tax positions in federal and foreign income tax expense. The company files income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. The Internal Revenue Service (IRS) is conducting an examination of the company’s tax returns for the years 2007 through 2011. With respect to the tax years 2007 through 2009, the company has reached a tentative resolution with the IRS subject to final review by the U.S. Congressional Joint Committee on Taxation. It is reasonably possible that during the next twelve months, we will record a reduction in our unrecognized tax benefits up to $80 million and a reduction of our income tax expense up to $50 million. Other open tax years related to state and foreign jurisdictions remain subject to examination, but are not considered material.