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Income Taxes (Tables)
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12 Months Ended |
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Dec. 31, 2014
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| Income Tax Disclosure [Abstract] |
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| Schedule of Components of Income Tax Expense (Benefit) |
The components of income tax expense (benefit) for 2014, 2013 and 2012 are presented in the table below.
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Income Tax Expense (Benefit) |
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(Dollars in millions) |
2014 |
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2013 |
|
2012 |
Current income tax expense |
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U.S. federal |
$ |
443 |
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$ |
180 |
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$ |
458 |
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U.S. state and local |
340 |
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|
786 |
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|
592 |
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Non-U.S. |
513 |
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|
513 |
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|
569 |
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Total current expense |
1,296 |
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|
1,479 |
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|
1,619 |
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Deferred income tax expense (benefit) |
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U.S. federal |
583 |
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2,056 |
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(3,433 |
) |
U.S. state and local |
85 |
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(94 |
) |
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(55 |
) |
Non-U.S. |
58 |
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1,300 |
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|
753 |
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Total deferred expense (benefit) |
726 |
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3,262 |
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(2,735 |
) |
Total income tax expense (benefit) |
$ |
2,022 |
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$ |
4,741 |
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$ |
(1,116 |
) |
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| Schedule of Effective Income Tax Rate Reconciliation |
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 (benefit), and the effective tax rates for 2014, 2013 and 2012 are presented in the table below.
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Reconciliation of Income Tax Expense (Benefit) |
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2014 |
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2013 |
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2012 |
(Dollars in millions) |
Amount |
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Percent |
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Amount |
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Percent |
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Amount |
|
Percent |
Expected U.S. federal income tax expense |
$ |
2,399 |
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|
35.0 |
% |
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$ |
5,660 |
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35.0 |
% |
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$ |
1,075 |
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|
35.0 |
% |
Increase (decrease) in taxes resulting from: |
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(0.001 |
)% |
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(0.001 |
)% |
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(0.001 |
)% |
State tax expense, net of federal benefit |
276 |
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|
4.0 |
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450 |
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2.8 |
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349 |
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11.4 |
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Affordable housing credits/other credits |
(950 |
) |
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(13.8 |
) |
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(863 |
) |
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(5.3 |
) |
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(783 |
) |
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(25.5 |
) |
Changes in prior period UTBs, including interest |
(741 |
) |
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(10.8 |
) |
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(255 |
) |
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(1.6 |
) |
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(198 |
) |
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(6.4 |
) |
Tax-exempt income, including dividends |
(533 |
) |
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(7.8 |
) |
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(524 |
) |
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(3.2 |
) |
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(576 |
) |
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(18.8 |
) |
Non-U.S. tax rate differential (1)
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(507 |
) |
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(7.4 |
) |
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(940 |
) |
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(5.8 |
) |
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(1,968 |
) |
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(64.1 |
) |
Nondeductible expenses |
1,982 |
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28.9 |
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104 |
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0.6 |
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231 |
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7.5 |
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Leveraged lease tax differential |
53 |
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0.8 |
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26 |
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0.2 |
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83 |
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2.7 |
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Non-U.S. statutory rate reductions |
— |
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— |
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1,133 |
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7.0 |
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788 |
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25.7 |
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Other |
43 |
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0.6 |
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(50 |
) |
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(0.4 |
) |
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(117 |
) |
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(3.8 |
) |
Total income tax expense (benefit) |
$ |
2,022 |
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29.5 |
% |
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$ |
4,741 |
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29.3 |
% |
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$ |
(1,116 |
) |
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(36.3 |
)% |
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(1) |
Includes in 2012, a $1.7 billion income tax benefit attributable to the excess of foreign tax credits recognized in the U.S. upon repatriation of the earnings of certain non-U.S. subsidiaries over the related U.S. tax liability.
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| Reconciliation of Change in Unrecognized Tax Benefits |
The reconciliation of the beginning unrecognized tax benefits (UTB) balance to the ending balance is presented in the table below.
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Reconciliation of the Change in Unrecognized Tax Benefits |
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(Dollars in millions) |
2014 |
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2013 |
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2012 |
Balance, January 1 |
$ |
3,068 |
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$ |
3,677 |
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$ |
4,203 |
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Increases related to positions taken during the current year |
75 |
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98 |
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352 |
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Increases related to positions taken during prior years (1)
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519 |
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254 |
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142 |
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Decreases related to positions taken during prior years (1)
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(973 |
) |
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(508 |
) |
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(711 |
) |
Settlements |
(1,594 |
) |
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(448 |
) |
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(205 |
) |
Expiration of statute of limitations |
(27 |
) |
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(5 |
) |
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(104 |
) |
Balance, December 31 |
$ |
1,068 |
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$ |
3,068 |
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$ |
3,677 |
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(1) |
The sum per year of positions taken during prior years differs from the $741 million, $255 million and $198 million in the Reconciliation of Income Tax Expense (Benefit) table due to temporary items, state items and jurisdictional offsets, as well as the inclusion of interest in the Reconciliation of Income Tax Expense (Benefit) table.
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| Summary of Income Tax Examinations |
The Tax Examination Status table summarizes the status of significant examinations (U.S. federal unless otherwise noted) for the Corporation and various subsidiaries as of December 31, 2014.
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Tax Examination Status |
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Years under
Examination
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Status at December 31 2014 |
U.S. (1)
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2010 – 2011 |
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IRS Appeals |
U.S. |
2012 – 2013 |
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Field examination |
New York |
2008 – 2012 |
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Field examination |
U.K. |
2012 |
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Field examination |
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(1) |
Field examination completed during 2014. The Corporation filed a protest related to certain adjustments with the IRS administrative appeals division. |
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| Schedule of Deferred Tax Assets and Liabilities |
Significant components of the Corporation’s net deferred tax assets and liabilities at December 31, 2014 and 2013 are presented in the table below.
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Deferred Tax Assets and Liabilities |
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December 31 |
(Dollars in millions) |
2014 |
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2013 |
Deferred tax assets |
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Net operating loss carryforwards |
$ |
9,787 |
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$ |
10,967 |
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Accrued expenses |
5,916 |
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6,749 |
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Tax credit carryforwards |
5,614 |
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9,689 |
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Security, loan and debt valuations |
5,190 |
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4,264 |
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Allowance for credit losses |
5,047 |
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6,100 |
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Employee compensation and retirement benefits |
3,665 |
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2,729 |
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State income taxes |
2,034 |
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2,643 |
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Available-for-sale securities |
— |
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1,918 |
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Other |
1,688 |
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722 |
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Gross deferred tax assets |
38,941 |
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45,781 |
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Valuation allowance |
(1,111 |
) |
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(1,940 |
) |
Total deferred tax assets, net of valuation allowance |
37,830 |
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43,841 |
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Deferred tax liabilities |
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Equipment lease financing |
2,880 |
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3,106 |
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Intangibles |
1,349 |
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1,529 |
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Mortgage servicing rights |
1,041 |
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1,547 |
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Available-for-sale securities |
828 |
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— |
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Fee income |
816 |
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|
798 |
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Long-term borrowings |
587 |
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3,033 |
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Other |
2,075 |
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1,472 |
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Gross deferred tax liabilities |
9,576 |
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|
11,485 |
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Net deferred tax assets |
$ |
28,254 |
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$ |
32,356 |
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| Deferred Tax Assets And Related Valuation Allowances Recognized For Net Operating And Other Loss Carryforwards And Tax Credit Carryforwards |
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, 2014.
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Net Operating Loss and Tax Credit Carryforward Deferred Tax Assets |
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(Dollars in millions) |
Deferred
Tax Asset
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Valuation
Allowance
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Net
Deferred
Tax Asset
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First Year
Expiring
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Net operating losses – U.S. |
$ |
3,065 |
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$ |
— |
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$ |
3,065 |
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After 2027 |
Net operating losses – U.K. |
6,276 |
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— |
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6,276 |
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None (1)
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Net operating losses – other non-U.S. |
446 |
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(316 |
) |
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130 |
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Various |
Net operating losses – U.S. states (2)
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1,168 |
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(460 |
) |
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708 |
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Various |
General business credits |
3,383 |
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— |
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3,383 |
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After 2029 |
Foreign tax credits |
2,231 |
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(68 |
) |
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2,163 |
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After 2022 |
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(1) |
The U.K. net operating losses may be carried forward indefinitely. |
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(2) |
The net operating losses and related valuation allowances for U.S. states before considering the benefit of federal deductions were $1.8 billion and $708 million.
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| Summary of Tax Credit Carryforwards |
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, 2014.
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Net Operating Loss and Tax Credit Carryforward Deferred Tax Assets |
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(Dollars in millions) |
Deferred
Tax Asset
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Valuation
Allowance
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Net
Deferred
Tax Asset
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First Year
Expiring
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Net operating losses – U.S. |
$ |
3,065 |
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$ |
— |
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$ |
3,065 |
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After 2027 |
Net operating losses – U.K. |
6,276 |
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— |
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6,276 |
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None (1)
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Net operating losses – other non-U.S. |
446 |
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(316 |
) |
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130 |
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Various |
Net operating losses – U.S. states (2)
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1,168 |
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(460 |
) |
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708 |
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Various |
General business credits |
3,383 |
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— |
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3,383 |
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After 2029 |
Foreign tax credits |
2,231 |
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(68 |
) |
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2,163 |
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After 2022 |
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(1) |
The U.K. net operating losses may be carried forward indefinitely. |
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(2) |
The net operating losses and related valuation allowances for U.S. states before considering the benefit of federal deductions were $1.8 billion and $708 million.
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