Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

The following tables present the impact of the 2017 Tax Act relating to SAB 118 amounts as an increase (decrease) reflected in the noted line items in the Consolidated Statements of Earnings and Comprehensive Income and Consolidated Statements of Financial Position:



	Year Ended December 31
$ in millions	2018		2017		2018		2017
	Income Tax Expense				Income Tax Rate
Reduction of U.S. Corporate Income Tax Rate	$	—	$	265	—	%	6.3	%
Transition Tax on Foreign Earnings	5		13		0.1		0.3
Acceleration of Depreciation	—		5		—		0.1
Other	—		2		—		0.1
Total	$	5	$	285	0.1	%	6.8	%



	Year Ended December 31
$ in millions	2018			2017			2018		2017
	Deferred Tax Assets						Other Current Liabilities
Reduction of U.S. Corporate Income Tax Rate	$	—		$	(265	)	$	—	$	—
Transition Tax on Foreign Earnings	(5		)	(13		)	—		—
Acceleration of Depreciation	17			(80		)	17		(75		)
Other	—			—			—		2
Total	$	12		$	(358	)	$	17	$	(73	)

Federal and foreign income tax expense consisted of the following:



	Year Ended December 31
$ in millions	2018		2017			2016
Federal income tax expense:
Current	$	292	$	449		$	661
Deferred	213		907			(36		)
Total federal income tax expense	505		1,356			625
Foreign income tax expense:
Current	7		8			14
Deferred	1		(4		)	(1		)
Total foreign income tax expense	8		4			13
Total federal and foreign income tax expense	$	513	$	1,360		$	638

Income tax reconciliation

Income tax expense differs from the amount computed by multiplying earnings before income taxes by the statutory federal income tax rate due to the following:



	Year Ended December 31
$ in millions	2018					2017					2016
Income tax expense at statutory rate	$	786		21.0	%	$	1,480		35.0	%	$	938		35.0	%
Stock compensation - excess tax benefits	(27		)	(0.7	)	(48		)	(1.1	)	(85		)	(3.2	)
Research credit	(186		)	(5.0	)	(130		)	(3.1	)	(61		)	(2.2	)
Manufacturing deduction	—			—		(97		)	(2.3	)	(58		)	(2.2	)
Settlements with taxing authorities	—			—		(42		)	(1.0	)	(40		)	(1.5	)
Repatriation of non-U.S. earnings	—			—		—			—		(33		)	(1.2	)
Impacts related to the 2017 Tax Act	(84		)	(2.2	)	285			6.8		—			—
MTM benefit tax rate differential⁽¹⁾	—			—		(72		)	(1.7	)	—			—
Other, net	24			0.6		(16		)	(0.4	)	(23		)	(0.9	)
Total federal and foreign income taxes	$	513		13.7	%	$	1,360		32.2	%	$	638		23.8	%

Unrecognized tax benefit rollforward

The change in unrecognized tax benefits during 2018, 2017 and 2016, excluding interest, is as follows:



	December 31
$ in millions	2018			2017			2016
Unrecognized tax benefits at beginning of the year	$	283		$	135		$	223
Additions based on tax positions related to the current year	293			102			35
Additions for tax positions of prior years	207			110			2
Reductions for tax positions of prior years	(23		)	(44		)	(40		)
Settlements with taxing authorities	(7		)	(20		)	(84		)
Other, net	(5		)	—			(1		)
Net change in unrecognized tax benefits	465			148			(88		)
Unrecognized tax benefits at end of the year	$	748		$	283		$	135

Components of deferred tax assets and liabilities

The tax effects of significant temporary differences and carryforwards that gave rise to year-end deferred federal, state and foreign tax balances, as presented in the consolidated statements of financial position, are as follows:



	December 31
$ in millions	2018			2017
Deferred Tax Assets
Retiree benefits	$	1,541		$	1,477
Accrued employee compensation	308			263
Provisions for accrued liabilities	139			193
Inventory	650			447
Stock-based compensation	42			46
Tax credits	174			9
Other	59			30
Gross deferred tax assets	2,913			2,465
Less valuation allowance	(142		)	(26		)
Net deferred tax assets	2,771			2,439
Deferred Tax Liabilities
Goodwill	511			508
Purchased intangibles	346			9
Property, plant and equipment, net	518			256
Contract accounting differences	1,381			1,182
Other	29			37
Deferred tax liabilities	2,785			1,992
Total net deferred tax (liabilities) assets	$	(14	)	$	447