Income taxes (Tables)

12 Months Ended

Dec. 31, 2015



The components of profit before taxes were:
	Years ended December 31,
(Millions of dollars)	2015		2014		2013
U.S.	$	636	$	276	$	5,602
Non-U.S.	2,803		2,876		3,769
	$	3,439	$	3,152	$	9,371



The components of the provision (benefit) for income taxes were:
	Years ended December 31,
(Millions of dollars)	2015			2014			2013
Current tax provision (benefit):
U.S.¹	$	525		$	715		$	407
Non-U.S.	656			883			805
State (U.S.)	42			48			33
	1,223			1,646			1,245

Deferred tax provision (benefit):
U.S.¹	(367		)	(763		)	1,308
Non-U.S.	66			(116		)	131
State (U.S.)	(6		)	(75		)	111
	(307		)	(954		)	1,550
Total provision (benefit) for income taxes	$	916		$	692		$	2,795
¹ Includes U.S. taxes related to non-U.S. profits.

Reconciliation of the U.S. federal statutory rate to effective rate:



	Years ended December 31,
(Millions of dollars)	2015					2014					2013
Taxes at U.S. statutory rate	$	1,203		35.0	%	$	1,103		35.0	%	$	3,280		35.0	%
(Decreases) increases resulting from:
Non-U.S. subsidiaries taxed at other than 35%	(236		)	(6.9	)%	(223		)	(7.1	)%	(333		)	(3.5	)%
State and local taxes, net of federal	24			0.7	%	(17		)	(0.5	)%	93			1.0	%
Interest and penalties, net of tax	12			0.4	%	12			0.4	%	4			—	%
U.S. research and production incentives	(95		)	(2.7	)%	(125		)	(4.0	)%	(91		)	(1.0	)%
Other—net	(34		)	(1.0	)%	(14		)	(0.4	)%	(16		)	(0.2	)%
	874			25.5	%	736			23.4	%	2,937			31.3	%

Prior year tax and interest adjustments	42			1.2	%	(21		)	(0.7	)%	(55		)	(0.6	)%
Release of valuation allowances	—			—	%	(23		)	(0.7	)%	—			—	%
Tax law changes	—			—	%	—			—	%	(87		)	(0.9	)%
Provision (benefit) for income taxes	$	916		26.7	%	$	692		22.0	%	$	2,795		29.8	%

The amount of deferred income taxes at December 31, included on the following lines in Statement 3, are as follows:



	December 31,
(Millions of dollars)	2015		2014
Assets:
Noncurrent deferred and refundable income taxes	2,367		2,166
Liabilities:
Other liabilities	335		383
Deferred income taxes—net	$	2,032	$	1,783



Deferred income tax assets and liabilities:
	December 31,
(Millions of dollars)	2015			2014
Deferred income tax assets:
Pension	$	1,694		$	1,513
Postemployment benefits other than pensions	1,339			1,514
Tax carryforwards	1,098			826
Warranty reserves	359			346
Stock-based compensation	356			327
Inventory	129			123
Allowance for credit losses	203			198
Post sale discounts	185			175
Deferred compensation	124			132
Other—net	572			549
	6,059			5,703

Deferred income tax liabilities:
Capital and intangible assets	(2,561		)	(2,625		)
Bond discount	(225		)	(233		)
Translation	(343		)	(252		)
Undistributed profits of non-U.S. subsidiaries	(82		)	(69		)
	(3,211		)	(3,179		)
Valuation allowance for deferred tax assets	(816		)	(741		)
Deferred income taxes—net	$	2,032		$	1,783

At December 31, 2015, amounts and expiration dates of net operating loss carryforwards in various non-U.S. taxing jurisdictions were:



Reconciliation of unrecognized tax benefits: ¹
	Years ended December 31,
(Millions of dollars)	2015			2014
Balance at January 1,	$	846		$	759

Additions for tax positions related to current year	73			58
Additions for tax positions related to prior years	118			84
Reductions for tax positions related to prior years	(30		)	(31		)
Reductions for settlements ²	(30		)	(18		)
Reductions for expiration of statute of limitations	(9		)	(6		)

Balance at December 31,	$	968		$	846

Amount that, if recognized, would impact the effective tax rate	$	934		$	804


¹	Foreign currency impacts are included within each line as applicable.


²	Includes cash payment or other reduction of assets to settle liability.