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Taxes (Tables)

12 Months Ended

Dec. 31, 2014

($ in millions)

For the year ended December 31:		2014		2013*		2012*
Income from continuing operations before income taxes
	U.S. operations	$	7,509	$	7,577	$	10,306
	Non-U.S. operations		12,477		12,667		12,234
Total income from continuing operations before income taxes		$	19,986	$	20,244	$	22,540

* Reclassified to reflect discontinued operations presentation.

Provision for income taxes by geographic operations

The income from continuing operations provision for income taxes by geographic operations is as follows:

($ in millions)

For the year ended December 31:	2014		2013*		2012*
U.S. operations	$	2,093	$	1,315	$	2,825
Non-U.S. operations		2,141		2,048		2,716
Total continuing operations provision for income taxes	$	4,234	$	3,363	$	5,541

* Reclassified to reflect discontinued operations presentation.

Components of the provision for income taxes by taxing jurisdiction

The components of the income from continuing operations provision for income taxes by taxing jurisdiction are as follows:

($ in millions)

For the year ended December 31:		2014		2013*		2012*
U.S. federal
	Current	$	1,134	$	1,694	$	1,556
	Deferred		105		(708)		415
			1,239		986		1,971
U.S. state and local
	Current		541		277		168
	Deferred		(105)		(330)		291
			436		(53)		459
Non-U.S.
	Current		2,825		3,067		3,006
	Deferred		(266)		(637)		105
			2,559		2,430		3,111
Total continuing operations provision for income taxes			4,234		3,363		5,541
Discontinued operations provision for income taxes			(1,617)		(322)		(243)
Provision for social security, real estate, personal property
	and other taxes		4,068		4,198		4,331
Total taxes included in net income		$	6,685	$	7,238	$	9,629

	* Reclassified to reflect discontinued operations presentation.

Income tax reconciliation

A reconciliation of the statutory U.S. federal tax rate to the company’s effective tax rate from continuing operations is as
follows:

For the year ended December 31:	2014		2013*		2012*
Statutory rate	35	%	35	%	35	%
Foreign tax differential	(14)		(13)		(10)
State and local	1		0		1
Domestic incentives	(2)		(3)		(1)
Other	1		(2)		0
Effective rate	21	%	17	%	25	%

Components of deferred tax assets (liabilities)

Deferred Tax Assets

($ in millions)

At December 31:	2014		2013*
Retirement benefits	$	4,795	$	3,704
Share-based and other compensation		1,328		1,262
Domestic tax loss/credit carryforwards		858		982
Deferred income		957		964
Foreign tax loss/credit carryforwards		686		651
Bad debt, inventory and warranty reserves		529		592
Depreciation		329		382
Accruals		1,176		322
Other		1,306		1,452
Gross deferred tax assets		11,964		10,311
Less: valuation allowance		646		734
Net deferred tax assets	$	11,318	$	9,577

* Reclassified to conform with 2014 presentation.

Deferred Tax Liabilities

($ in millions)

At December 31:	2014		2013
Depreciation	$	487	$	1,346
Retirement benefits		205		1,219
Goodwill and intangible assets		1,263		1,173
Leases		912		1,119
Software development costs		421		558
Deferred transition costs		374		424
Other		1,111		841
Gross deferred tax liabilities	$	4,773	$	6,680

Reconciliation of the beginning and ending amount of unrecognized tax benefits

($ in millions)
		2014		2013		2012
Balance at January 1		$	4,458	$	5,672	$	5,575
Additions based on tax positions related to the current year			697		829		401
Additions for tax positions of prior years			586		417		215
Reductions for tax positions of prior years (including
	impacts due to a lapse in statute)		(579)		(2,201)		(425)
Settlements			(58)		(259)		(94)
Balance at December 31		$	5,104	$	4,458	$	5,672

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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