|12 Months Ended|
Dec. 31, 2016
|Income Tax Disclosure [Abstract]|
The components of income tax expense for 2016, 2015 and 2014 are presented in the table below.
Total income tax expense does not reflect the tax effects of items that are included in accumulated OCI. For additional information, see Note 14 – Accumulated Other Comprehensive Income (Loss). These tax effects resulted in a benefit of $498 million in 2016 and an expense of $631 million and $3.1 billion in 2015 and 2014, respectively, recorded in accumulated OCI. In addition, total income tax expense does not reflect tax effects associated with the Corporation’s employee stock plans which decreased common stock and additional paid-in capital $41 million, $44 million and $35 million in 2016, 2015 and 2014, respectively.
Income tax expense for 2016, 2015 and 2014 varied from the amount computed by applying the statutory income tax rate to income before income taxes. A reconciliation of the expected U.S. federal income tax expense, calculated by applying the federal statutory tax rate of 35 percent, to the Corporation’s actual income tax expense, and the effective tax rates for 2016, 2015 and 2014 are presented in the table below.
The reconciliation of the beginning unrecognized tax benefits (UTB) balance to the ending balance is presented in the table below.
At December 31, 2016, 2015 and 2014, the balance of the Corporation’s UTBs which would, if recognized, affect the Corporation’s effective tax rate was $0.6 billion, $0.7 billion and $0.7 billion, respectively. Included in the UTB balance are some items the recognition of which would not affect the effective tax rate, such as the tax effect of certain temporary differences, the portion of gross state UTBs that would be offset by the tax benefit of the associated federal deduction and the portion of gross non-U.S. UTBs that would be offset by tax reductions in other jurisdictions.
The Corporation files income tax returns in more than 100 state and non-U.S. jurisdictions each year. The IRS and other tax authorities in countries and states in which the Corporation has significant business operations examine tax returns periodically (continuously in some jurisdictions). The Tax Examination Status table summarizes the status of examinations by major jurisdiction for the Corporation and various subsidiaries as of December 31, 2016.
During 2016, the Corporation settled federal examinations for the 2010 and 2011 tax years and settled various state and local examinations for multiple years, including New York through 2014. Also, field work for the federal 2012 through 2013 and for the U.K. 2012 through 2014 examinations were substantially completed during 2016.
It is reasonably possible that the UTB balance may decrease by as much as $0.2 billion during the next 12 months, since resolved items will be removed from the balance whether their resolution results in payment or recognition.
The Corporation recognized expense of $56 million during 2016 and benefits of $82 million and $196 million in 2015 and 2014, respectively, for interest and penalties, net-of-tax, in income tax expense. At December 31, 2016 and 2015, the Corporation’s accrual for interest and penalties that related to income taxes, net of taxes and remittances, was $167 million and $288 million.
Significant components of the Corporation’s net deferred tax assets and liabilities at December 31, 2016 and 2015 are presented in the table below.
The table below summarizes the deferred tax assets and related valuation allowances recognized for the net operating loss (NOL) and tax credit carryforwards at December 31, 2016.
n/a = not applicable
Management concluded that no valuation allowance was necessary to reduce the deferred tax assets related to the U.K. NOL carryforwards, U.S. NOL and general business credit carryforwards since estimated future taxable income will be sufficient to utilize these assets prior to their expiration. The majority of the Corporation’s U.K. net deferred tax assets, which consist primarily of NOLs, are expected to be realized by certain subsidiaries over an extended number of years. Management’s conclusion is supported by financial results, profit forecasts for the relevant entities and the indefinite period to carry forward NOLs. However, a material change in those estimates could lead management to reassess its U.K. valuation allowance conclusions.
At December 31, 2016, U.S. federal income taxes had not been provided on $17.8 billion of undistributed earnings of non-U.S. subsidiaries that management has determined have been reinvested for an indefinite period of time. If the Corporation were to record a deferred tax liability associated with these undistributed earnings, the amount would be approximately $4.9 billion at December 31, 2016.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef