Income Taxes (Unaudited)

3 Months Ended

Mar. 31, 2017



	Three Months Ended March 31
$ in millions	2017			2016
Federal and foreign income tax expense	$	133		$	120
Effective income tax rate	17.2		%	17.8		%

The company’s effective tax rate of 17.2 percent for the three months ended March 31, 2017 was comparable with the same period in 2016. Both periods reflect comparable tax benefits associated with the manufacturing deduction and research credits. In addition, the company’s effective tax rate for the three months ended March 31, 2017 includes $47 million of excess tax benefits related to employee share-based compensation, a $42 million benefit recognized in connection with the Congressional Joint Committee on Taxation’s approval of the Internal Revenue Service (IRS) examination of the company’s 2012-2013 tax returns and a $22 million benefit recognized for additional research credits claimed on our prior year tax returns. The company’s effective tax rate of 17.8 percent for the three months ended March 31, 2016 included $80 million of excess tax benefits related to employee share-based compensation.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. Our 2014-2015 federal tax returns are currently under IRS examination.

In the first quarter of 2017, the company recorded a net increase in unrecognized tax benefits of approximately $55 million. This increase included $65 million related to tax benefits from temporary items claimed on a prior year tax return and $40 million related to positions taken on amended federal and state tax returns filed during the quarter. These increases were partially offset by a $60 million reduction in connection with the resolution of the IRS examination of the company’s 2012-2013 tax returns described above.