Following are three Carb O$\text{'}$ Nation $($the Company$)$nancial statement excerpts, with Year $5$ being the most current year.

Note $14$: Income Taxes Income before income taxes consisted of the following $($in millions$).$

Year Ended December $31$Year $5$Year $4$Year $3$United States$$1,765$$$1,536$$$2,402$International$7,6487,6038,845$Total$$9,413$$$9,139$$$11,247$

A reconciliation of the statutory U$.$S$.$ federal tax rate and our effective tax rate is as follows:

Year Ended December $31$Year $5$Year $4$Year $3$Statutory U$.$S$.$ federal tax rate$35\mathrm{.}0\%35\mathrm{.}0\%35\mathrm{.}0\%$State and local income taxes$$net of federal benefit$1\mathrm{.}2\%1\mathrm{.}0\%1\mathrm{.}0\%$Earnings in jurisdictions taxed at rates different from the statutory U$.$S$.$ federal rate$-12\mathrm{.}7\%-11\mathrm{.}5\%-10\mathrm{.}3\%$Equity income or loss$-1\mathrm{.}7\%-2\mathrm{.}2\%-1\mathrm{.}4\%$Other operating charges$1\mathrm{.}2\%2\mathrm{.}9\%1\mathrm{.}2\%$Other$$net$0\mathrm{.}3\%-1\mathrm{.}6\%-0\mathrm{.}7\%$Effective tax rate$23\mathrm{.}3\%23\mathrm{.}6\%24\mathrm{.}8\%$

December $31$Year $5$Year $4$Deferred tax assets:Property, plant and equipment$$188$$$94$Trademarks and other intangible assets$6767$Equity method investments $($including foreign currency translation adjustment$)680453$Derivative financial instruments$158131$Other liabilities$1,0351,060$Benefit plans$1,5101,640$Net operating$/$capital loss carryforwards$405714$Other$172192$Gross deferred tax assets$$4,215$$$4,351$Valuation allowances$(467)(636)$Total deferred tax assets$$3,748$$$3,715$

Required

a$.$ If the Company had no permanent or temporary di$$erences$,$ and all earnings were subject to the federal statutory income tax rate, for what amount would the Company record income tax expense in Year $5?$

$$Note: Round your answer to the nearest million dollars.

$$Note: Do not use a negative sign with your answer.

Year $5$ income tax expense: $Answer $1$

million.

b$.$ Identify three sources and their percentage e$$ects on income taxes that caused the Company$$s e$$ective tax rate in Year $5$ to di$$er from the federal statutory rate of $35\%.$

$$Note: Use a negative sign to indicate a decrease in the effective tax rate.

$$Note:Enter the percent one digit after the decimal; for example, enter $8\mathrm{.}4\%.$

State and local income taxes:Answer $2$

Earnings in jurisdictions taxed at rates different from the statutory U$.$S$.$ federal rate:Answer $3$

Equity income or loss:Answer $4$

c$.$ By how much did the Company increase or decrease its valuation allowance in Year $5?$ How did the valuation allowance as a percentage of deferred tax assets $($gross$)$ change from Year $4$ to Year $5?$

$$Note: Do not use a negative sign with your answers.

The Company Answer $5$IncreasedDecreased its valuation allowance in Year $5$ from $Answer $6$

million to $Answer $7$million.

Numerator$$Denominator$=$ResultValuation allowance as a percentage of deferred tax assets $($gross$),$ Year $4$Answer $8$

$$Answer $9$

$=$Valuation allowance as a percentage of deferred tax assets $($gross$),$ Year $5$Answer $10$

$$Answer $11$

$=$

From this analysis, it appears that the company has Answer $12$more favorableless favorableno change in assumptions for the recoverability of its tax assets in Year $5$ compared to the prior year.