Bank of America Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Schedule of Components of Income Tax Expense (Benefit)

The components of income tax expense for 2015, 2014 and 2013 are presented in the table below.




Income Tax Expense

(Dollars in millions)	2015		2014		2013
Current income tax expense
U.S. federal	$	2,387	$	443	$	180
U.S. state and local	210		340		786
Non-U.S.	561		513		513
Total current expense	3,158		1,296		1,479
Deferred income tax expense (benefit)
U.S. federal	1,992		583		2,056
U.S. state and local	519		85		(94		)
Non-U.S.	597		58		1,300
Total deferred expense	3,108		726		3,262
Total income tax expense	$	6,266	$	2,022	$	4,741

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, and the effective tax rates for 2015, 2014 and 2013 are presented in the table below.




Reconciliation of Income Tax Expense

	2015					2014					2013
(Dollars in millions)	Amount			Percent		Amount			Percent		Amount			Percent
Expected U.S. federal income tax expense	$	7,754		35.0	%	$	2,399		35.0	%	$	5,660		35.0	%
Increase (decrease) in taxes resulting from:
State tax expense, net of federal benefit	474			2.1		276			4.0		450			2.8
Affordable housing credits/other credits	(1,087		)	(4.9	)	(950		)	(13.8	)	(863		)	(5.3	)
Non-U.S. tax rate differential	(559		)	(2.5	)	(507		)	(7.4	)	(940		)	(5.8	)
Tax-exempt income, including dividends	(539		)	(2.4	)	(533		)	(7.8	)	(524		)	(3.2	)
Changes in prior period UTBs, including interest	(85		)	(0.4	)	(741		)	(10.8	)	(255		)	(1.6	)
Non-U.S. tax law changes	289			1.3		—			—		1,133			7.0
Nondeductible expenses	40			0.2		1,982			28.9		104			0.6
Other	(21		)	(0.1	)	96			1.4		(24		)	(0.2	)
Total income tax expense	$	6,266		28.3	%	$	2,022		29.5	%	$	4,741		29.3	%

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.




Reconciliation of the Change in Unrecognized Tax Benefits

(Dollars in millions)	2015			2014			2013
Balance, January 1	$	1,068		$	3,068		$	3,677
Increases related to positions taken during the current year	36			75			98
Increases related to positions taken during prior years⁽¹⁾	187			519			254
Decreases related to positions taken during prior years ⁽¹⁾	(177		)	(973		)	(508		)
Settlements	(1		)	(1,594		)	(448		)
Expiration of statute of limitations	(18		)	(27		)	(5		)
Balance, December 31	$	1,095		$	1,068		$	3,068


⁽¹⁾	The sum per year of positions taken during prior years differs from the $85 million, $741 million and $255 million in the Reconciliation of Income Tax Expense table due to temporary items, state items and jurisdictional offsets, as well as the inclusion of interest in the Reconciliation of Income Tax Expense table.

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, 2015.




Tax Examination Status

	Years under Examination	Status at December 31 2015
U.S.	2010 – 2011	IRS Appeals
U.S.	2012 – 2013	Field examination
New York	2008 – 2014	Field examination
U.K.	2012	Field examination

Schedule of Deferred Tax Assets and Liabilities

Significant components of the Corporation’s net deferred tax assets and liabilities at December 31, 2015 and 2014 are presented in the table below.




Deferred Tax Assets and Liabilities

	December 31
(Dollars in millions)	2015			2014
Deferred tax assets
Net operating loss carryforwards	$	9,494		$	10,955
Accrued expenses	6,340			6,309
Allowance for credit losses	4,649			5,478
Security, loan and debt valuations	4,084			5,385
Employee compensation and retirement benefits	3,585			3,899
Tax credit carryforwards	2,707			5,614
Available-for-sale securities	152			—
Other	2,333			1,800
Gross deferred tax assets	33,344			39,440
Valuation allowance	(1,149		)	(1,111		)
Total deferred tax assets, net of valuation allowance	32,195			38,329

Deferred tax liabilities
Equipment lease financing	3,016			3,105
Intangibles	1,306			1,513
Fee income	864			881
Mortgage servicing rights	466			1,094
Long-term borrowings	327			630
Available-for-sale securities	—			828
Other	1,752			2,024
Gross deferred tax liabilities	7,731			10,075
Net deferred tax assets, net of valuation allowance	$	24,464		$	28,254

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, 2015.




Net Operating Loss and Tax Credit Carryforward Deferred Tax Assets

(Dollars in millions)	Deferred Tax Asset		Valuation Allowance			Net Deferred Tax Asset		First Year Expiring
Net operating losses – U.S.	$	2,507	$	—		$	2,507	After 2027
Net operating losses – U.K.	5,657		—			5,657		None ⁽¹⁾
Net operating losses – other non-U.S.	432		(323		)	109		Various
Net operating losses – U.S. states ⁽²⁾	898		(405		)	493		Various
General business credits	2,635		—			2,635		After 2031
Foreign tax credits	72		(72		)	—		n/a


⁽¹⁾	The U.K. net operating losses may be carried forward indefinitely.


⁽²⁾	The net operating losses and related valuation allowances for U.S. states before considering the benefit of federal deductions were $1.4 billion and $623 million.

n/a = not applicable

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, 2015.




Net Operating Loss and Tax Credit Carryforward Deferred Tax Assets

(Dollars in millions)	Deferred Tax Asset		Valuation Allowance			Net Deferred Tax Asset		First Year Expiring
Net operating losses – U.S.	$	2,507	$	—		$	2,507	After 2027
Net operating losses – U.K.	5,657		—			5,657		None ⁽¹⁾
Net operating losses – other non-U.S.	432		(323		)	109		Various
Net operating losses – U.S. states ⁽²⁾	898		(405		)	493		Various
General business credits	2,635		—			2,635		After 2031
Foreign tax credits	72		(72		)	—		n/a


⁽¹⁾	The U.K. net operating losses may be carried forward indefinitely.


⁽²⁾	The net operating losses and related valuation allowances for U.S. states before considering the benefit of federal deductions were $1.4 billion and $623 million.

n/a = not applicable