Honeywell 2011 Annual Report Download - page 74

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Tax expense (benefit)
Years Ended December 31,
2011 2010 2009
United States $ 3 $ 358 $ 272
Foreign 414 407 164
$ 417 $ 765 $ 436
Years Ended December 31,
2011 2010 2009
Tax Expense consists of Current:
United States $ 171 $ (501) $ (47)
State 13 3 19
Foreign 564 385 417
$ 748 $ (113) $ 389
Deferred:
United States $ (185) $ 784 $ 283
State 4 72 17
Foreign (150) 22 (253)
(331) 878 47
$ 417 $ 765 $ 436
Years Ended December 31,
2011 2010 2009
The U.S. statutory federal income tax rate is reconciled to our effective income tax rate as follows:
Statutory U.S. federal income tax rate 35.0% 35.0% 35.0%
Taxes on foreign earnings below U.S. tax rate(1) (10.4) (7.3) (8.3)
State income taxes(1) 0.7 1.5 1.5
Manufacturing incentives (1.7) — (1.6)
ESOP dividend tax benefit (1.1) (0.8) (1.1)
Tax credits (2.3) (1.2) (1.9)
Audit settlements (2.0) 0.1 (0.7)
All other items—net 0.1 0.8 (0.7)
18.3% 28.1% 22.2%
(1) Net of changes in valuation allowance and tax reserves
The effective tax rate decreased by 9.8 percentage points in 2011 compared with 2010 primarily due to a change in the mix of earnings related to higher
U.S. pension expense (primarily driven by an approximate 7.6 percentage point impact which resulted from the increase in pension mark-to-market expense),
an increased benefit from manufacturing incentives, an increased benefit from the favorable settlement of tax audits and an increased benefit from a lower
foreign effective tax rate. The foreign effective tax rate was 21.1 percent, a decrease of approximately 4.9 percentage points which primarily consisted of (i) a
5.1 percent impact from decreased valuation allowances on net operating losses primarily due to an increase in German earnings available to be offset by net
operating loss carry forwards; (ii) a 2.4 percent impact from tax benefits related to foreign exchange and investment losses; iii) a 1.2 percent impact from an
increased benefit in tax credits and lower statutory tax rates and (iv) a 4.1 percent impact related to an increase in tax reserves. The effective tax rate was
lower than the U.S. statutory rate of 35 percent primarily due to earnings taxed at lower foreign rates.
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