Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Income Taxes

Income from continuing operations before income taxes

(In millions)		2016		2015		2014
U.S.	$	652	$	745	$	553
Non-U.S.		224		226		300
Income from continuing operations before income taxes	$	876	$	971	$	853

Income tax expense for continuing operations

(In millions)		2016		2015		2014
Current:
Federal	$	(74)	$	212	$	195
State		18		16		18
Non-U.S.		41		41		54
		(15)		269		267
Deferred:
Federal		47		17		(12)
State		(7)		(14)		(4)
Non-U.S.		8		1		(3)
		48		4		(19)
Income tax expense	$	33	$	273	$	248

Federal statutory income tax rate to effective income tax rate for continuing operations

	2016	2015	2014
U.S. Federal statutory income tax rate	35.0%	35.0%	35.0%
Increase (decrease) resulting from:
Federal tax settlement	(23.5)	—	—
State income taxes (net of federal impact) (a)	0.8	0.2	1.0
Non-U.S. tax rate differential and foreign tax credits (b)	(2.7)	(3.6)	(5.8)
Domestic manufacturing deduction	(1.6)	(2.7)	(1.1)
Research credit	(3.2)	(1.5)	(1.5)
Other, net	(1.0)	0.7	1.5
Effective income tax rate	3.8%	28.1%	29.1%

(a) Includes a favorable impact of (0.7)% in 2015 and (0.2)% in 2014 related to valuation allowance releases.

(b) Includes a favorable impact of (1.4)% in 2015 and (0.6)% in 2014 related to a net change in valuation allowances.

Reconciliation of unrecognized tax benefits, excluding accrued interest

(In millions)		December 31, 2016		January 2, 2016		January 3, 2015
Balance at beginning of year	$	401	$	385	$	284
Additions for tax positions related to current year		12		12		10
Additions for tax positions of prior years		—		6		—
Additions for acquisitions		—		1		100
Reductions for settlements and expiration of statute of limitations		(219)		(2)		(3)
Reductions for tax positions of prior years		(8)		(1)		(6)
Balance at end of year	$	186	$	401	$	385

Deferred tax assets and liabilities

(In millions)		December 31, 2016		January 2, 2016
Deferred tax assets
Obligation for pension and postretirement benefits	$	529	$	436
Accrued expenses*		282		288
Deferred compensation		175		184
Loss carryforwards		158		142
Inventory		49		71
Allowance for credit losses		23		29
Deferred income		11		9
Other, net		56		97
Total deferred tax assets		1,283		1,256
Valuation allowance for deferred tax assets		(116)		(115)
	$	1,167	$	1,141
Deferred tax liabilities
Property, plant and equipment, principally depreciation	$	(168)	$	(171)
Amortization of goodwill and other intangibles		(164)		(156)
Leasing transactions		(147)		(146)
Prepaid pension and postretirement benefits		(19)		(21)
Total deferred tax liabilities		(498)		(494)
Net deferred tax asset	$	669	$	647

*Accrued expenses includes warranty reserves, self-insured liabilities and interest.

Breakdown of net deferred tax assets

(In millions)		December 31, 2016		January 2, 2016
Manufacturing group:
Other assets	$	793	$	778
Other liabilities		(4)		(24)
Finance group - Other liabilities		(120)		(107)
Net deferred tax asset	$	669	$	647

Operating loss and credit carryforward

(In millions)
Non-U.S. net operating loss with no expiration	$	182
Non-U.S. net operating loss expiring through 2036		65
U.S. federal net operating losses expiring through 2034, related to 2014 acquisitions		193
State net operating loss and tax credits, net of tax benefits, expiring through 2036		127