Honeywell 2014 Annual Report Download - page 53

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2014 2013 2012
Years Ended December 31,
The U.S. federal statutory income tax rate is reconciled to
our effective income tax rate as follows:
U.S. federal statutory income tax rate . . . . . . . . . . . . . . . . . . . 35.0% 35.0% 35.0%
Taxes on non-U.S. earnings below U.S. tax rate(1) . . . . . . (7.0) (7.2) (7.1)
U.S. state income taxes(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 1.8 0.8
Manufacturing incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.0) (0.9) (1.7)
ESOP dividend tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.4) (0.5) (0.6)
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.0) (1.8) (0.4)
Reserves for tax contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . (0.2) 0.6 (0.4)
All other items—net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.0) (0.2) (1.2)
25.6% 26.8% 24.4%
(1) Net of changes in valuation allowance
The effective tax rate decreased by 1.2 percentage points in 2014 compared to 2013. The
decrease was primarily attributable to lower tax expense from the resolution of audits, partially offset by
the impact of more income in jurisdictions with higher tax rates and additional reserves. The
Company’s non-U.S. effective tax rate for 2014 was 21.3%, an increase of approximately
2.3 percentage points compared to 2013. The increase in the non-U.S. effective tax rate was primarily
attributable to additional reserves and the impact of more income in jurisdictions with higher tax rates,
partially offset by the tax impact of dispositions. The effective tax rate was lower than the U.S. federal
statutory rate of 35% primarily due to overall non-U.S. earnings taxed at lower rates.
The effective tax rate increased by 2.4 percentage points in 2013 compared to 2012. The increase
was primarily attributable to lower mark-to-market pension expense in the U.S. Other factors causing
an increase in the effective tax rate include higher tax expense related to an increase in tax reserves
and higher state tax expense. These increases in the effective tax rate were partially offset by tax
benefits from retroactive law changes in the U.S. The Company’s non-U.S. effective tax rate for 2013
was 19.0%, an increase of approximately 2.0 percentage points compared to 2012. The increase in the
non-U.S. effective tax rate was primarily attributable to higher expense related to retroactive tax law
changes in Germany and additional reserves in various jurisdictions, coupled with higher earnings in
higher tax rate jurisdictions. The effective tax rate was lower than the U.S. federal statutory rate of 35%
primarily due to overall non-U.S. earnings taxed at lower rates.
44
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)