Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

The components of income tax expense for the years ended December 31 included in the Consolidated Statements of Income were as follows:

(Millions)				2016		2015		2014
Current income tax expense:
	U.S. federal		$	2,179	$	2,107	$	2,136
	U.S. state and local			272		335		264
	Non-U.S.			342		416		412
		Total current income tax expense		2,793		2,858		2,812
Deferred income tax (benefit) expense:
	U.S. federal			(45)		(23)		352
	U.S. state and local			(8)		(5)		39
	Non-U.S.			(52)		(55)		(97)
		Total deferred income tax (benefit) expense		(105)		(83)		294
Total income tax expense			$	2,688	$	2,775	$	3,106

Effective income tax rate

A reconciliation of the U.S. federal statutory rate of 35 percent to the Company’s actual income tax rate for the years ended December 31 on continuing operations was as follows:

			2016		2015		2014
U.S. statutory federal income tax rate			35.0	%	35.0	%	35.0	%
(Decrease) increase in taxes resulting from:
	Tax-exempt income		(1.7)		(1.7)		(1.5)
	State and local income taxes, net of federal benefit		2.7		2.8		2.7
	Non-U.S. subsidiaries earnings^(a)		(2.0)		(1.8)		(2.2)
	Tax settlements^(b)		(0.6)		(0.2)		(0.5)
	Non deductible expenses^(c)		―		0.9		―
	Other		(0.2)		―		1.0
		Actual tax rates^(a)	33.2	%	35.0	%	34.5	%

Results for all years primarily included tax benefits associated with the undistributed earnings of certain non-U.S. subsidiaries that were deemed to be reinvested indefinitely.
Relates to the resolution of tax matters in various jurisdictions.
Relates to the nondeductible portion of the Prepaid Services goodwill impairment in 2015.

Components of deferred tax assets and liabilities

The significant components of deferred tax assets and liabilities as of December 31 are reflected in the following table:

(Millions)				2016		2015
Deferred tax assets:
	Reserves not yet deducted for tax purposes		$	3,889	$	3,771
	Employee compensation and benefits			595		648
	Other			592		520
		Gross deferred tax assets		5,076		4,939
		Valuation allowance		(54)		(58)
		Deferred tax assets after valuation allowance		5,022		4,881
Deferred tax liabilities:
	Intangibles and fixed assets			1,691		1,547
	Deferred revenue			441		509
	Deferred interest			305		323
	Investment in joint ventures			209		231
	Other			121		120
		Gross deferred tax liabilities		2,767		2,730
Net deferred tax assets			$	2,255	$	2,151

Changes in unrecognized tax benefits

The following table presents changes in unrecognized tax benefits:

(Millions)			2016		2015		2014
Balance, January 1		$	870	$	909	$	1,044
Increases:
	Current year tax positions		167		81		4
	Tax positions related to prior years		117		177		111
Decreases:
	Tax positions related to prior years		(81)		(256)		(181)
	Settlements with tax authorities		(76)		(15)		(67)
	Lapse of statute of limitations		(22)		(26)		(1)
	Effects of foreign currency translations		(1)		―		(1)
Balance, December 31		$	974	$	870	$	909