Income Taxes

The components of the (provision)/benefit for income taxes on continuing operations were:



	Year Ended December 31
Millions of dollars	2014			2013			2012
Current income taxes:
Federal	$	(959	)	$	(245	)	$	(695	)
Foreign	(734		)	(485		)	(328		)
State	(36		)	(49		)	(47		)
Total current	(1,729		)	(779		)	(1,070		)
Deferred income taxes:
Federal	83			4			(168		)
Foreign	357			125			15
State	14			2			(12		)
Total deferred	454			131			(165		)
Provision for income taxes	$	(1,275	)	$	(648	)	$	(1,235	)

The United States and foreign components of income from continuing operations before income taxes were as follows:



	Year Ended December 31
Millions of dollars	2014		2013		2012
United States	$	3,020	$	1,070	$	2,826
Foreign	1,692		1,694		996
Total	$	4,712	$	2,764	$	3,822

Reconciliations between the actual provision for income taxes on continuing operations and that computed by applying the United States statutory rate to income from continuing operations before income taxes were as follows:



	Year Ended December 31
	2014		2013		2012
United States statutory rate	35.0	%	35.0	%	35.0	%
Impact of foreign income taxed at different rates	(5.7	)	(9.3	)	(2.5	)
Valuation allowance against tax assets	(3.6	)	(0.1	)	1.2
Domestic manufacturing deduction	(1.9	)	(2.0	)	(2.2	)
State income taxes	0.8		1.7		1.6
Adjustments of prior year taxes	0.3		(0.6	)	(1.3	)
Other impact of foreign operations	(0.1	)	(0.7	)	(0.5	)
Other items, net	2.3		(0.5	)	1.0
Total effective tax rate on continuing operations	27.1	%	23.5	%	32.3	%

Our effective tax rate on continuing operations was 27.1% for 2014, 23.5% for 2013 and 32.3% for 2012. The 2014 effective tax rate on continuing operations was positively impacted by a $201 million net operating loss valuation allowance released as a result of a reorganization of our legal structure in Brazil. Additionally, our effective tax rate was positively impacted by lower tax rates in certain foreign jurisdictions in which we operate. Partially offsetting these items were total charges of approximately $150 million for a write-off of certain prepaid tax assets recorded in Iraq, additional tax expenses related the settlement of a research and development credit with the United States authorities, and tax expenses related to other unrecognized tax benefits, which are mostly included in "Other items, net" in the table above.

We have not provided United States income taxes and foreign withholding taxes on the undistributed earnings of foreign subsidiaries as of December 31, 2014 because we intend to permanently reinvest such earnings outside the United States. If these foreign earnings were to be repatriated in the future, the related United States tax liability may be reduced by any foreign income taxes previously paid on these earnings. As of December 31, 2014, the cumulative amount of earnings upon which United States income taxes have not been provided is approximately $6.7 billion. It is not practicable to estimate the amount of unrecognized deferred tax liability related to these earnings at this time.

The primary components of our deferred tax assets and liabilities were as follows:



	December 31
Millions of dollars	2014		2013
Gross deferred tax assets:
Accrued liabilities	$	494	$	600
Net operating loss carryforwards	462		481
Employee compensation and benefits	395		351
Other	315		162
Total gross deferred tax assets	1,666		1,594
Gross deferred tax liabilities:
Depreciation and amortization	1,005		1,185
Other	111		81
Total gross deferred tax liabilities	1,116		1,266
Valuation allowances – net operating loss carryforwards	184		374
Net deferred income tax asset (liability)	$	366	$	(46	)

At December 31, 2014, we had $1.6 billion of net operating loss carryforwards, of which $85 million will expire from 2015 through 2018, $343 million will expire from 2019 through 2023, and $211 million will expire from 2024 through 2034. The remaining balance will not expire.

The following table presents a rollforward of our unrecognized tax benefits and associated interest and penalties.



Millions of dollars	Unrecognized Tax Benefits				Interest and Penalties
Balance at January 1, 2012	$	205			$	69
Change in prior year tax positions	16				(1		)
Change in current year tax positions	14				1
Cash settlements with taxing authorities	(3		)		—
Lapse of statute of limitations	(4		)		(1		)
Balance at December 31, 2012	$	228			$	68
Change in prior year tax positions	(53		)		(9		)
Change in current year tax positions	30				1
Cash settlements with taxing authorities	(21		)		(17		)
Lapse of statute of limitations	(9		)		(9		)
Balance at December 31, 2013	$	175		(a)	$	34
Change in prior year tax positions	83				24
Change in current year tax positions	84				—
Cash settlements with taxing authorities	(27		)		(1		)
Lapse of statute of limitations	(1		)		(1		)
Balance at December 31, 2014	$	314		(a)(b)	$	56

(a)

Includes $46 million as of December 31, 2014 and $27 million as of December 31, 2013 in foreign unrecognized tax benefits that would give rise to a United States tax credit. Approximately $194 million, which excludes $10 million of unrecognized tax benefits covered by an indemnification asset, as of December 31, 2014 and $138 million as of December 31, 2013, if resolved in our favor, would positively impact the effective tax rate and, therefore, be recognized as additional tax benefits in our statement of operations.


(b)	Includes $42 million that could be resolved within the next 12 months.

We file income tax returns in the United States federal jurisdiction and in various states and foreign jurisdictions. In most cases, we are no longer subject to state, local, or non-United States income tax examination by tax authorities for years before 2005. Tax filings of our subsidiaries, unconsolidated affiliates, and related entities are routinely examined in the normal course of business by tax authorities. Currently, our United States federal tax filings for the tax years 2012 through 2013 are open for review, 2003 through 2009 are under appeal pending final calculation of certain tax attribute carryforwards, and 2010 through 2011 are under examination by the Internal Revenue Service.