Income Taxes

The components of income before income taxes are as follows for the three years ended December 31:



	2012		2011		2010
United States	$	1,155	$	1,098	$	1,252
International	2,719		2,691		2,178
Total Income before income taxes	$	3,874	$	3,789	$	3,430

The provision for income taxes consists of the following for the three years ended December 31:



	2012		2011		2010
United States	$	395	$	360	$	427
International	848		875		690
Total Provision for income taxes	$	1,243	$	1,235	$	1,117

Temporary differences between accounting for financial statement purposes and accounting for tax purposes result in the current provision for taxes being higher (lower) than the total provision for income taxes as follows:



	2012			2011			2010
Goodwill and intangible assets	$	(7	)	$	(1	)	$	(11	)
Property, plant and equipment	(13		)	(19		)	(29		)
Pension and other retiree benefits	(14		)	(47		)	4
Stock-based compensation	5			11			12
Tax loss and tax credit carryforwards	(39		)	(14		)	(28		)
Other, net	32			32			123
Total deferred tax provision	$	(36	)	$	(38	)	$	71

In 2010, Other, net includes a non-recurring tax benefit related to the reorganization of an overseas subsidiary.

The difference between the statutory U.S. federal income tax rate and the Company’s global effective tax rate as reflected in the Consolidated Statements of Income is as follows:



Percentage of Income before income taxes	2012		2011		2010
Tax at United States statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	0.7		0.4		1.1
Earnings taxed at other than United States statutory rate	(2.6	)	(1.7	)	(4.6	)
Venezuela hyperinflationary transition charge	—		—		2.8
Other, net	(1.0	)	(1.1	)	(1.7	)
Effective tax rate	32.1	%	32.6	%	32.6	%

The components of deferred tax assets (liabilities) are as follows at December 31:



	2012			2011
Deferred tax liabilities:
Goodwill and intangible assets	$	(476	)	$	(471	)
Property, plant and equipment	(365		)	(345		)
Other	(162		)	(104		)
	(1,003		)	(920		)
Deferred tax assets:
Pension and other retiree benefits	544			480
Tax loss and tax credit carryforwards	61			105
Accrued liabilities	208			176
Stock-based compensation	113			115
Other	151			111
	1,077			987
Net deferred income taxes	$	74		$	67



	2012			2011
Deferred taxes included within:
Assets:
Other current assets	$	275		$	204
Deferred income taxes	92			115
Liabilities:
Deferred income taxes	(293		)	(252		)
Net deferred income taxes	$	74		$	67

Applicable U.S. income and foreign withholding taxes have not been provided on approximately $4,300 of undistributed earnings of foreign subsidiaries at December 31, 2012. These earnings have been and currently are considered to be indefinitely reinvested outside of the U.S. and currently are not subject to such taxes. Determining the tax liability that would arise if these earnings were remitted is not practicable.

In addition, net tax benefits of $80 in 2012, $79 in 2011 and $124 in 2010 recorded directly through equity predominantly include current and future tax benefits related to employee equity compensation and benefit plans.

The Company uses a comprehensive model to recognize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on an income tax return.

Unrecognized tax benefits activity for the years ended December 31, 2012, 2011 and 2010 is summarized below:



	2012			2011			2010
Unrecognized tax benefits:
Balance, January 1	$	176		$	171		$	187
Increases as a result of tax positions taken during the current year	34			76			38
Decreases of tax positions taken during prior years	(6		)	(46		)	(63		)
Increases of tax positions taken during prior years	10			10			16
Decreases as a result of settlements with taxing authorities and the expiration of statutes of limitations	(3		)	(30		)	(3		)
Effect of foreign currency rate movements	1			(5		)	(4		)
Balance, December 31	$	212		$	176		$	171

If all of the unrecognized tax benefits for 2012 above were recognized, approximately $165 would impact the effective tax rate. Although it is possible that the amount of unrecognized benefits with respect to our uncertain tax positions will increase or decrease in the next 12 months, the Company does not expect material changes.

The Company recognized approximately $5, $0 and ($4) of interest (income) expense related to the above unrecognized tax benefits within income tax expense in 2012, 2011 and 2010, respectively. The Company had accrued interest of approximately $19 and $15 as of December 31, 2012 and 2011, respectively.

The Company and its subsidiaries file U.S. federal income tax returns as well as income tax returns in many state and foreign jurisdictions. All U.S. federal income tax returns through December 31, 2007 have been audited by the IRS and there are limited matters in administrative appeals for years 2002 through 2007, the settlement of which is not expected to have a material adverse effect on the Company’s results of operations, cash flows or financial condition. With a few exceptions, the Company is no longer subject to U.S., state and local income tax examinations for the years prior to 2007. In addition, the Company has subsidiaries in various foreign jurisdictions that have statutes of limitations for tax audits generally ranging from three to six years.