Income Taxes (Unaudited)

3 Months Ended

Mar. 31, 2019



	Three Months Ended March 31
$ in millions	2019			2018
Federal and foreign income tax expense	$	171		$	159
Effective income tax rate	16.5		%	15.9		%

The effective tax rate for the first quarter of 2019 increased to 16.5 percent from 15.9 percent in the first quarter of 2018 primarily due to lower tax benefits related to employee share-based compensation and claims for prior year manufacturing deductions, partially offset by higher research credits. The company’s effective rate for the first quarter of 2019 includes $31 million of research credits and $13 million of excess tax benefits for employee share-based compensation. The company’s effective tax rate for the first quarter of 2018 included $26 million of excess tax benefits for employee share-based compensation, $20 million of research credits and $8 million of claims for prior year manufacturing deductions.

During the three months ended March 31, 2019, we increased our unrecognized tax benefits related to our methods of accounting associated with the Tax Cuts and Jobs Act by approximately $15 million and it is reasonably possible that within the next twelve months those unrecognized tax benefits may increase by up to an additional $70 million.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. The Northrop Grumman 2014-2017 federal tax returns and refund claims related to its 2007-2016 federal tax returns are currently under IRS examination. In addition, legacy Orbital ATK federal tax returns for the year ended March 31, 2015, the nine-month transition period ended December 31, 2015 and calendar year 2016 are currently under IRS examination.