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, 2017

Schedule of Components of Income Tax Expense (Benefit)

The components of income tax expense for 2017, 2016 and 2015 are presented in the table below.




Income Tax Expense

(Dollars in millions)	2017		2016			2015
Current income tax expense
U.S. federal	$	1,310	$	302		$	2,539
U.S. state and local	557		120			210
Non-U.S.	939		984			561
Total current expense	2,806		1,406			3,310
Deferred income tax expense
U.S. federal	7,238		5,416			1,855
U.S. state and local	835		(279		)	515
Non-U.S.	102		656			597
Total deferred expense	8,175		5,793			2,967
Total income tax expense	$	10,981	$	7,199		$	6,277

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 2017, 2016 and 2015 are presented in the table below.




Reconciliation of Income Tax Expense

	Amount			Percent		Amount			Percent		Amount			Percent
(Dollars in millions)	2017					2016					2015
Expected U.S. federal income tax expense	$	10,225		35.0	%	$	8,757		35.0	%	$	7,765		35.0	%
Increase (decrease) in taxes resulting from:
State tax expense, net of federal benefit	881			3.0		420			1.7		438			2.0
Tax law changes ⁽¹⁾	2,281			7.8		348			1.4		289			1.3
Changes in prior-period UTBs, including interest	133			0.5		(328		)	(1.3	)	(52		)	(0.2	)
Nondeductible expenses	97			0.3		180			0.7		40			0.1
Affordable housing/energy/other credits	(1,406		)	(4.8	)	(1,203		)	(4.8	)	(1,087		)	(4.9	)
Tax-exempt income, including dividends	(672		)	(2.3	)	(562		)	(2.2	)	(539		)	(2.4	)
Non-U.S. tax rate differential	(272		)	(0.9	)	(307		)	(1.2	)	(559		)	(2.5	)
Share-based compensation	(236		)	(0.8	)	—			—		—			—
Other	(50		)	(0.2	)	(106		)	(0.5	)	(18		)	(0.1	)
Total income tax expense	$	10,981		37.6	%	$	7,199		28.8	%	$	6,277		28.3	%

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 following table.




Reconciliation of the Change in Unrecognized Tax Benefits

(Dollars in millions)	2017			2016			2015
Balance, January 1	$	875		$	1,095		$	1,068
Increases related to positions taken during the current year	292			104			36
Increases related to positions taken during prior years	750			1,318			187
Decreases related to positions taken during prior years	(122		)	(1,091		)	(177		)
Settlements	(17		)	(503		)	(1		)
Expiration of statute of limitations	(5		)	(48		)	(18		)
Balance, December 31	$	1,773		$	875		$	1,095

Summary of Income Tax Examinations

The following table summarizes the status of examinations by major jurisdiction for the Corporation and various subsidiaries at December 31, 2017.




Tax Examination Status

	Years under Examination ⁽¹⁾	Status at December 31 2017
United States	2012 – 2013	IRS Appeals
United States	2014 – 2016	Field examination
New York	2015	Field examination
United Kingdom	2016	To begin in 2018


⁽¹⁾	All tax years subsequent to the years shown remain subject to examination.

Schedule of Deferred Tax Assets and Liabilities

Significant components of the Corporation’s net deferred tax assets and liabilities at December 31, 2017 and 2016 are presented in the following table. Amounts at December 31, 2017 reflect appropriate revaluations as a result of the Tax Act’s new 21 percent federal tax rate.




Deferred Tax Assets and Liabilities

	December 31
(Dollars in millions)	2017			2016
Deferred tax assets
Net operating loss carryforwards	$	8,506		$	9,199
Security, loan and debt valuations	2,939			4,726
Allowance for credit losses	2,598			4,362
Accrued expenses	2,021			3,016
Tax credit carryforwards	1,793			3,125
Employee compensation and retirement benefits	1,705			3,042
Available-for-sale securities	510			784
Other	1,034			1,599
Gross deferred tax assets	21,106			29,853
Valuation allowance	(1,644		)	(1,117		)
Total deferred tax assets, net of valuation allowance	19,462			28,736

Deferred tax liabilities
Equipment lease financing	2,492			3,489
Tax credit partnerships	734			539
Intangibles	670			1,171
Fee income	601			847
Mortgage servicing rights	349			829
Long-term borrowings	227			355
Other	1,764			1,915
Gross deferred tax liabilities	6,837			9,145
Net deferred tax assets, net of valuation allowance	$	12,625		$	19,591

Schedule of Operating Loss 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, 2017.




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.	$	868	$	—		$	868	After 2027
Net operating losses - U.K. ⁽¹⁾	5,347		—			5,347		None
Net operating losses - other non-U.S.	657		(578		)	79		Various
Net operating losses - U.S. states ⁽²⁾	1,634		(584		)	1,050		Various
General business credits	1,721		—			1,721		After 2036
Foreign tax credits	72		(72		)	—		n/a


⁽¹⁾	Represents U.K. broker/dealer net operating losses which 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 $2.1 billion and $739 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, 2017.




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.	$	868	$	—		$	868	After 2027
Net operating losses - U.K. ⁽¹⁾	5,347		—			5,347		None
Net operating losses - other non-U.S.	657		(578		)	79		Various
Net operating losses - U.S. states ⁽²⁾	1,634		(584		)	1,050		Various
General business credits	1,721		—			1,721		After 2036
Foreign tax credits	72		(72		)	—		n/a


⁽¹⁾	Represents U.K. broker/dealer net operating losses which 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 $2.1 billion and $739 million.

n/a = not applicable