INCOME TAXES

Earnings before income taxes consisted of:



	2013		2012		2011
United States	$	193	$	591	$	613
International	1,019		1,114		1,073
	$	1,212	$	1,705	$	1,686

Income taxes consisted of:



	2013			2012			2011
Current income tax expense
United States federal	$	79		$	227		$	100
United States state and local	29			41			33
International	75			178			372
Total current income tax expense	183			446			505
Deferred income tax expense (benefit)
United States federal	(52		)	(12		)	(16		)
United States state and local	(4		)	(9		)	(9		)
International	79			(18		)	(139		)
Total deferred income tax benefit	23			(39		)	(164		)
Total income tax expense	206			407			341

Interest expense and penalties included in other income (expense)	$	12		$	(4	)	$	36

In 2013 we recorded income tax benefits related to favorable audit resolutions in multiple jurisdictions. In 2011 we recorded an income tax benefit related to a favorable settlement with the United States Internal Revenue Service (IRS) regarding its proposed adjustment to our previously filed 2003 through 2007 income tax returns related to income tax positions we had taken for our cost sharing arrangements with two wholly-owned entities operating in Ireland, and we recorded charges for other uncertain tax positions related to the outcome of the IRS settlements. The net income tax benefit of these adjustments was $82.

Reconciliation of the United States federal statutory income tax rate to our effective income tax rate:



	2013		2012		2011
United States federal statutory income tax rate	35.0	%	35.0	%	35.0	%
Add (deduct):
United States state and local income taxes, less federal deduction	1.4		1.7		0.9
International operations	(13.7	)	(12.1	)	(13.7	)
Repatriation of foreign earnings	—		(0.4	)	1.1
Other	(5.7	)	(0.3	)	(3.1	)
	17.0	%	23.9	%	20.2	%

Deferred income tax assets and liabilities:



	December 31
	2013			2012
Deferred income tax assets:
Inventories	$	607		$	623
Other accrued expenses	288			212
Depreciation and amortization	46			41
State income taxes	53			54
Share-based compensation	101			115
Net operating loss carryforwards	124			90
Other	107			97
Total deferred income tax assets	1,326			1,232
Less valuation allowances	(39		)	(33		)
Total deferred income tax assets after valuation allowances	1,287			1,199
Deferred income tax liabilities:
Depreciation and amortization	(668		)	(450		)
Other	(102		)	(57		)
Total deferred income tax liabilities	(770		)	(507		)
Net deferred income tax assets	$	517		$	692
Reported as:
Current assets— Prepaid expenses and other current assets	$	880		$	811
Noncurrent assets—Other	34			63
Current liabilities—Accrued expenses and other liabilities	—			—
Noncurrent liabilities—Other liabilities	(397		)	(182		)
	$	517		$	692
Accrued interest and penalties reported as accrued expenses and other liabilities	$	34		$	49

Net operating loss carryforwards totaling $377 at December 31, 2013 are available to reduce future taxable earnings of certain domestic and foreign subsidiaries. United States loss carryforwards of $270 expire between 2013 and 2032. International loss carryforwards of $107 expire beginning in 2013; however, some have no expiration. Of these carryforwards, $55 are subject to a full valuation allowance. We also have a tax credit carryforward of $25 with a full valuation allowance. These credits have no expiration; however, we do not anticipate generating income tax in excess of the credits in the foreseeable future.

No provision has been made for United States federal and state income taxes or international income taxes that may result from future remittances of the undistributed earnings of foreign subsidiaries that are determined to be indefinitely reinvested ($7,023 at December 31, 2013). Determination of the amount of any unrecognized deferred income tax liability on these is not practicable.

The changes in the amounts recorded for uncertain income tax positions are as follows:



	December 31
	2013			2012
Balance at beginning of year	$	227		$	249
Increases related to current year income tax positions	22			17
Increases related to prior year income tax positions	56			3
Decreases related to prior year income tax positions:
Settlements and resolutions of income tax audits	(37		)	(19		)
Statute of limitations expirations	(64		)	(23		)
Balance at end of year	$	204		$	227
Reported as:
Current liabilities—Income taxes	$	10		$	11
Noncurrent liabilities—Other liabilities	194			216
	$	204		$	227

Our income tax expense could have been reduced by $194 and $216 at December 31, 2013 and December 31, 2012, respectively, had these uncertain income tax positions been favorably resolved. It is reasonably possible that the amount of unrecognized tax benefits will significantly change due to one or more of the following events in the next twelve months: expiring statutes, audit activity, tax payments, competent authority proceedings related to transfer pricing or final decisions in matters that are the subject of controversy in various taxing jurisdictions in which we operate, including inventory transfer pricing and cost sharing, product royalty and foreign branch arrangements. We are not able to reasonably estimate the amount or the future periods in which changes in unrecognized tax benefits may be resolved; however, we do not anticipate any significant changes within the next twelve months. Interest and penalties incurred associated with uncertain tax positions are included in other income (expense).

In the normal course of business, income tax authorities in various income tax jurisdictions both within the United States and internationally conduct routine audits of our income tax returns filed in prior years. These audits are generally designed to determine if individual income tax authorities are in agreement with our interpretations of complex income tax regulations regarding the allocation of income to the various income tax jurisdictions. Income tax years are open from 2010 through the current year for the United States federal jurisdiction; income tax years open for our other major jurisdictions range from 2003 through the current year.