Income Taxes (Unaudited)

6 Months Ended

Jun. 30, 2016



	Three Months Ended June 30						Six Months Ended June 30
$ in millions	2016			2015			2016			2015
Federal and foreign income tax expense	$	213		$	205		$	333		$	425
Effective income tax rate	29.2		%	27.9		%	23.7		%	29.5		%

Current Quarter

The company’s effective tax rate for the three months ended June 30, 2016 was higher than the comparable 2015 period primarily due to the absence of $38 million of refund claims filed in 2015, partially offset by extension of the research tax credit.

Year to Date

The company’s effective tax rate for the six months ended June 30, 2016 was lower than the comparable 2015 period principally due to $84 million of excess tax benefits related to employee share-based payment transactions recognized in 2016 resulting from the adoption of ASU No. 2016-09 described in Note 1 and extension of the research tax credit, partially offset by the absence of $38 million of refund claims filed in 2015.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. As of June 30, 2016, our 2007-2013 federal tax returns were either under Internal Revenue Service (IRS) examination or on appeal. During July 2016, the U.S. Congressional Joint Committee on Taxation approved a resolution of the IRS examination of the company’s 2007-2011 tax returns. As a result, in the third quarter of 2016, the company will record a reduction of our unrecognized tax benefits of approximately $115 million and a reduction of our income tax expense of approximately $40 million. The company believes it is reasonably possible that within the next twelve months we may resolve additional tax matters, which may result in further reductions of our unrecognized tax benefits up to $70 million and income tax expense up to $45 million.