FORM 10-K

64 Income tax expense for continuing operations is summarized as follows: (In millions) 2017 2016 2015 Current expense (benefit): Federal $ 29 $ (74) $ 212 State (9) 18 16 Non-U.S. 79 41 41 99 (15) 269 Deferred expense (benefit): Federal 358 47 17 State (14) (7) (14) Non-U.S. 13 8 1 357 48 4 Income tax expense $ 456 $ 33 $ 273 The following table reconciles the federal statutory income tax rate to our effective income tax rate for continuing operations: 2017 2016 2015 U.S. Federal statutory income tax rate 35.0% 35.0% 35.0% Increase (decrease) resulting from: U.S. tax reform impact 34.9 — — Federal tax settlement of 1998 to 2008 — (23.5) — State income taxes (net of federal impact) (1.9) 0.8 0.2 Non-U.S. tax rate differential and foreign tax credits* (2.9) (2.7) (3.6) Domestic manufacturing deduction (1.1) (1.6) (2.7) Research credit (2.6) (3.2) (1.5) Other, net (1.6) (1.0) 0.7 Effective income tax rate 59.8% 3.8% 28.1% * Included a favorable impact of (1.4)% in 2015 related to a net change in valuation allowances. U.S. Tax Reform The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Among other things, the Act reduces the U.S. federal corporate tax rate from 35% to 21% and requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred. We have reasonably estimated the effects of the Act and recorded provisional amounts in the fourth quarter of 2017 totaling $266 million. Our provisional estimate included a $154 million charge to remeasure our U.S. federal deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. In addition, the provisional estimate included $112 million in expense for the one-time transition tax. This tax was based on approximately $1.6 billion of our post-1986 earnings and profits that were previously deferred from U.S. income taxes, and on the amount of those earnings held in cash and other specified net assets. The U.S. Government and state tax authorities are expected to continue to issue guidance regarding the Act, which may result in adjustments to our provisional estimates. We are continuing to analyze certain aspects of the Act and may refine our estimates, which could potentially affect the measurement of our net deferred tax assets or give rise to new deferred tax amounts. The final determination of the remeasurement of our net deferred tax assets and the transition tax will be completed as additional information becomes available, but no later than one year from the enactment date. No additional income taxes related to outside basis differences have been provided as all such amounts continue to be indefinitely reinvested in foreign operations. Should these earnings be distributed in the future in the form of dividends or otherwise, we would be subject to withholding taxes payable to various non-U.S. jurisdictions and U.S. states. It is not practicable to determine the amount of unrecognized deferred tax liability related to any undistributed foreign earnings. We will continue to assess our ability and intent to repatriate these earnings during the measurement period. Federal Tax Settlement of 1998 to 2008 For 2016, the provision for income taxes included a benefit of $319 million to reflect the settlement with the U.S. Internal Revenue Service Office of Appeals for our 1998 to 2008 tax years, which resulted in a $206 million benefit attributable to continuing operations and $113 million attributable to discontinued operations.