Taxes	9 Months Ended
Sep. 30, 2018
Taxes
Taxes	15. Taxes: For the three months ended September 30, 2018, the company reported a provision for income taxes of $304 million and an effective tax rate of 10.2 percent, compared to a provision of $339 million and an effective tax rate of 11.0 percent for the three months ended September 30, 2017. For the nine-month period ended September 30, 2018, the company reported a provision for income taxes of $138 million and an effective tax rate of 2.0 percent. The year-to-date effective rate was primarily driven by the resolution in the first quarter of certain tax matters related to the ongoing U.S. federal audit of the company’s 2013-2014 tax returns, the completion of the U.S. federal audit of amended tax returns filed for prior years and a benefit attributable to a tax incentive claim approved by the Internal Revenue Service (IRS) in the third quarter. For the nine months ended September 30, 2017, the company reported a provision for income taxes of $120 million, and its effective tax rate was 1.7 percent, primarily as a result of discrete tax benefits. The company’s U.S. income tax returns for 2013 and 2014 continue to be examined by the IRS with specific focus on certain cross-border transactions in 2013. Although the IRS could propose additional adjustments, the company believes it is adequately reserved on these issues. With respect to major U.S. state and foreign taxing jurisdictions, the company is generally no longer subject to tax examinations for years prior to 2013. The company is no longer subject to income tax examination of its U.S. federal tax return for years prior to 2013. The open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as it relates to the amount and/or timing of income, deductions and tax credits. Although the outcome of tax audits is always uncertain, the company believes that adequate amounts of tax and interest have been provided for any adjustments that are expected to result for these years. In the third quarter of 2018, the IRS commenced its audit of the company’s U.S. tax returns for 2015 and 2016. The company anticipates that this audit will be completed in 2020. The amount of unrecognized tax benefits at December 31, 2017 decreased $892 million in the first nine months of 2018 to $6,139 million. The decrease was primarily driven by the resolution of certain tax matters in the first quarter related to the U.S. audits. The liability at September 30, 2018 of $6,139 million can be reduced by $599 million of offsetting tax benefits associated with timing adjustments, U.S. tax credits, potential transfer pricing adjustments and state income taxes. The net amount of $5,540 million, if recognized, would favorably affect the company’s effective tax rate. The company is involved in a number of income tax-related matters in India challenging tax assessments issued by the India Tax Authorities. As of September 30, 2018, the company has recorded $636 million as prepaid income taxes in India. A significant portion of this balance represents cash tax deposits paid over time to protect the company’s right to appeal various income tax assessments made by the India Tax Authorities. The company believes it will prevail on these matters. U.S. Tax Reform On December 22, 2017, the U.S. Tax Cuts and Jobs Act was enacted. U.S. tax reform introduced many changes, including lowering the U.S. corporate tax rate to 21 percent, changes in incentives, provisions to prevent U.S. base erosion and significant changes in the taxation of international income, including provisions which allow for the repatriation of foreign earnings without U.S. tax. The enactment of U.S. tax reform resulted in the company recording a provisional tax expense charge of $5,475 million in the fourth-quarter and year-ended December 31, 2017. This charge was the result of the one-time U.S. transition tax and any foreign tax costs on undistributed foreign earnings, as well as the remeasurement of deferred tax balances to the new U.S. federal tax rate. All components of the provisional charge of $5,475 million were based on the company’s estimates as of December 31, 2017. Specifically, the transition tax, any foreign tax costs, as well as the remeasurement of deferred tax balances are provisional and were calculated based on existing tax law and the best information available as of the date of estimate. The effect of U.S. tax reform changes on deferred tax assets and liabilities was a benefit of $270 million and was included in the one-time charge. An additional provisional charge of $107 million was recorded in the first quarter as a result of IRS guidance issued in January 2018 and a benefit of $14 million was recorded in the second quarter as a result of IRS guidance issued in early April 2018. The final impact of U.S. tax reform may differ, possibly materially, due to factors such as changes in interpretations and assumptions that the company has made in its assessment, conclusion of the effects of the “Global Intangible Low-Taxed Income” (“GILTI”) provisions, further refinement of the company’s calculations, additional guidance that may be issued by the U.S. government, among other items. The company is still evaluating the Act’s GILTI provisions and has not yet elected an accounting policy. The company has not completed its assessment and the tax charge remains provisional as of September 30, 2018. The charge will be finalized in the fourth quarter of 2018 which is within the 12-month time limit provided by the SEC.

15. Taxes: For the three months ended September 30, 2018, the company reported a provision for income taxes of $304 million and an effective tax rate of 10.2 percent, compared to a provision of $339 million and an effective tax rate of 11.0 percent for the three months ended September 30, 2017. For the nine-month period ended September 30, 2018, the company reported a provision for income taxes of $138 million and an effective tax rate of 2.0 percent. The year-to-date effective rate was primarily driven by the resolution in the first quarter of certain tax matters related to the ongoing U.S. federal audit of the company’s 2013-2014 tax returns, the completion of the U.S. federal audit of amended tax returns filed for prior years and a benefit attributable to a tax incentive claim approved by the Internal Revenue Service (IRS) in the third quarter. For the nine months ended September 30, 2017, the company reported a provision for income taxes of $120 million, and its effective tax rate was 1.7 percent, primarily as a result of discrete tax benefits.

The company’s U.S. income tax returns for 2013 and 2014 continue to be examined by the IRS with specific focus on certain cross-border transactions in 2013. Although the IRS could propose additional adjustments, the company believes it is adequately reserved on these issues. With respect to major U.S. state and foreign taxing jurisdictions, the company is generally no longer subject to tax examinations for years prior to 2013. The company is no longer subject to income tax examination of its U.S. federal tax return for years prior to 2013. The open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as it relates to the amount and/or timing of income, deductions and tax credits. Although the outcome of tax audits is always uncertain, the company believes that adequate amounts of tax and interest have been provided for any adjustments that are expected to result for these years.

In the third quarter of 2018, the IRS commenced its audit of the company’s U.S. tax returns for 2015 and 2016. The company anticipates that this audit will be completed in 2020.

The amount of unrecognized tax benefits at December 31, 2017 decreased $892 million in the first nine months of 2018 to $6,139 million. The decrease was primarily driven by the resolution of certain tax matters in the first quarter related to the U.S. audits. The liability at September 30, 2018 of $6,139 million can be reduced by $599 million of offsetting tax benefits associated with timing adjustments, U.S. tax credits, potential transfer pricing adjustments and state income taxes. The net amount of $5,540 million, if recognized, would favorably affect the company’s effective tax rate.

The company is involved in a number of income tax-related matters in India challenging tax assessments issued by the India Tax Authorities. As of September 30, 2018, the company has recorded $636 million as prepaid income taxes in India. A significant portion of this balance represents cash tax deposits paid over time to protect the company’s right to appeal various income tax assessments made by the India Tax Authorities. The company believes it will prevail on these matters.

U.S. Tax Reform

On December 22, 2017, the U.S. Tax Cuts and Jobs Act was enacted. U.S. tax reform introduced many changes, including lowering the U.S. corporate tax rate to 21 percent, changes in incentives, provisions to prevent U.S. base erosion and significant changes in the taxation of international income, including provisions which allow for the repatriation of foreign earnings without U.S. tax. The enactment of U.S. tax reform resulted in the company recording a provisional tax expense charge of $5,475 million in the fourth-quarter and year-ended December 31, 2017. This charge was the result of the one-time U.S. transition tax and any foreign tax costs on undistributed foreign earnings, as well as the remeasurement of deferred tax balances to the new U.S. federal tax rate.

All components of the provisional charge of $5,475 million were based on the company’s estimates as of December 31, 2017. Specifically, the transition tax, any foreign tax costs, as well as the remeasurement of deferred tax balances are provisional and were calculated based on existing tax law and the best information available as of the date of estimate. The effect of U.S. tax reform changes on deferred tax assets and liabilities was a benefit of $270 million and was included in the one-time charge. An additional provisional charge of $107 million was recorded in the first quarter as a result of IRS guidance issued in January 2018 and a benefit of $14 million was recorded in the second quarter as a result of IRS guidance issued in early April 2018. The final impact of U.S. tax reform may differ, possibly materially, due to factors such as changes in interpretations and assumptions that the company has made in its assessment, conclusion of the effects of the “Global Intangible Low-Taxed Income” (“GILTI”) provisions, further refinement of the company’s calculations, additional guidance that may be issued by the U.S. government, among other items. The company is still evaluating the Act’s GILTI provisions and has not yet elected an accounting policy. The company has not completed its assessment and the tax charge remains provisional as of September 30, 2018.

The charge will be finalized in the fourth quarter of 2018 which is within the 12-month time limit provided by the SEC.