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Income Taxes Income Taxes (Tables)
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12 Months Ended |
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Dec. 31, 2012
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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 (benefit) expense for the years ended December 31, 2012, 2011 and 2010 were as follows:
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|
|
|
|
|
|
|
|
|
|
|
(dollars in millions) |
|
Year Ended
December 31,
2012
|
|
Year Ended
December 31,
2011
|
|
Year Ended
December 31,
2010
|
Current income tax expense (benefit) |
|
|
|
|
|
|
|
|
U.S. federal |
$ |
(110 |
) |
|
$ |
(5,875 |
) |
|
$ |
(778 |
) |
U.S. state |
137 |
|
|
(161 |
) |
|
34 |
|
Non-U.S. |
210 |
|
|
11 |
|
|
255 |
|
Total current expense (benefit) |
237 |
|
|
(6,025 |
) |
|
(489 |
) |
Deferred income tax (benefit) expense |
|
|
|
|
|
|
|
U.S. federal |
(2,743 |
) |
|
2,199 |
|
|
(566 |
) |
U.S. state |
(723 |
) |
|
(288 |
) |
|
472 |
|
Non-U.S. |
681 |
|
|
1,170 |
|
|
731 |
|
Total deferred (benefit) expense |
(2,785 |
) |
|
3,081 |
|
|
637 |
|
Total income tax (benefit) expense(1)
|
$ |
(2,548 |
) |
|
$ |
(2,944 |
) |
|
$ |
148 |
|
|
|
|
|
|
|
|
|
(1) |
Total income tax (benefit) expense does not reflect the deferred tax effects of unrealized gains and losses on AFS debt securities, foreign currency translation adjustments, derivatives and employee benefit plan adjustments that are included in accumulated other comprehensive loss. As a result of these tax effects, accumulated other comprehensive loss decreased $238 million in the year ended December 31, 2012, increased $178 million in the year ended December 31, 2011 and decreased $322 million in the year ended December 31, 2010. In addition, total income tax (benefit) expense does not reflect the tax effects associated with employee stock compensation plans, which decreased stockholder’s equity $232 million in the year ended December 31, 2012, increased stockholder's equity $43 million in the year ended December 31, 2011 and decreased stockholders' equity $37 million in the year ended December 31, 2010.
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| Schedule of Effective Income Tax Rate Reconciliation |
A reconciliation of the expected U.S. federal income tax (benefit) expense using the U.S. federal statutory tax rate of 35% to Merrill Lynch’s actual income tax (benefit) expense and resulting effective tax rate for the years ended December 31, 2012, 2011 and 2010 is presented in the table below.
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(dollars in millions) |
|
Year Ended
December 31,
2012
|
|
Year Ended
December 31,
2011
|
|
Year Ended
December 31,
2010
|
|
Amount |
|
Percent |
|
Amount |
|
Percent |
|
Amount |
|
Percent |
U.S. federal income tax at statutory rate |
$ |
(790 |
) |
|
35.0 |
% |
|
$ |
(1,607 |
) |
|
35.0 |
% |
|
$ |
1,409 |
|
|
35.0 |
% |
U.S. state and local income taxes, net of federal effect |
(381 |
) |
|
16.9 |
|
|
(292 |
) |
|
6.4 |
|
|
329 |
|
|
8.2 |
|
Non-U.S.tax differential (1)
|
(1,908 |
) |
|
84.5 |
|
|
(20 |
) |
|
0.4 |
|
|
(75 |
) |
|
(1.9 |
) |
Change in prior period UTBs (including interest) |
(135 |
) |
|
6.0 |
|
|
(102 |
) |
|
2.2 |
|
|
31 |
|
|
0.8 |
|
Tax-exempt income, including dividends |
(103 |
) |
|
4.6 |
|
|
(96 |
) |
|
2.1 |
|
|
(375 |
) |
|
(9.3 |
) |
Subsidiary sales and liquidations |
— |
|
|
— |
|
|
(593 |
) |
|
12.9 |
|
|
— |
|
|
— |
|
Non-deductible U.K. bank payroll tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
87 |
|
|
2.2 |
|
Non-U.S. statutory rate reductions (2)
|
781 |
|
|
(34.6 |
) |
|
845 |
|
|
(18.4 |
) |
|
386 |
|
|
9.6 |
|
Change in federal and non-U.S. valuation allowance |
41 |
|
|
(1.8 |
) |
|
(1,102 |
) |
|
24.0 |
|
|
(1,657 |
) |
|
(41.1 |
) |
Other |
(53 |
) |
|
2.2 |
|
|
23 |
|
|
(0.5 |
) |
|
13 |
|
|
0.2 |
|
Income tax (benefit) expense |
$ |
(2,548 |
) |
|
112.8 |
% |
|
$ |
(2,944 |
) |
|
64.1 |
% |
|
$ |
148 |
|
|
3.7 |
% |
|
|
|
|
|
|
|
|
|
|
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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.
(2) Includes charges of $781 million, $774 million, and $386 million in 2012, 2011 and 2010, respectively, to reduce the carrying value of certain U.K. net deferred tax assets due to U.K. corporate income tax rate reductions.
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| Schedule of Unrecognized Tax Benefits Roll Forward |
The reconciliation of the beginning UTB balance to the ending balance is presented in the table below.
Reconciliation of the Change in UTBs
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(dollars in millions) |
|
Year Ended December 31 |
|
2012 |
|
|
2011 |
|
|
2010 |
|
Beginning balance |
$ |
1,547 |
|
|
$ |
2,261 |
|
|
$ |
1,714 |
|
Increases related to positions taken during the current year |
52 |
|
|
38 |
|
|
97 |
|
Increases related to positions taken during prior years(1)
|
37 |
|
|
450 |
|
|
520 |
|
Decreases related to positions taken during prior years(1)
|
(181 |
) |
|
(967 |
) |
|
(51 |
) |
Settlements |
(9 |
) |
|
(152 |
) |
|
(3 |
) |
Expiration of statute of limitations |
(31 |
) |
|
(83 |
) |
|
(16 |
) |
Ending balance |
$ |
1,415 |
|
|
$ |
1,547 |
|
|
$ |
2,261 |
|
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|
|
|
|
|
|
|
(1) |
Amounts differ from the tax rate reconciliation table due to temporary items and jurisdictional offsets, as well as the inclusion of interest in the tax rate reconciliation table. |
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| Summary of Income Tax Examinations |
The table below summarizes the status of significant tax examinations, by jurisdiction, for Merrill Lynch as of December 31, 2012.
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Tax Examination Status |
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|
Jurisdiction |
Years under
examination(1)
|
|
Status at
December 31, 2012
|
U.S. federal |
2004-2009(2)
|
|
See below |
U.S. federal |
2010-2011(2)
|
|
Field examination |
U.K. |
2011 |
|
Field examination |
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|
(1) |
All tax years subsequent to the above years remain open to examination. |
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|
(2) |
From the date of its acquisition by Bank of America, Merrill Lynch has been included in Bank of America's consolidated federal income tax return. |
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| Schedule of Deferred Tax Assets and Liabilities |
Significant components of Merrill Lynch’s net deferred tax assets at December 31, 2012 and 2011 are presented in the table below.
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(dollars in millions) |
|
December 31,
2012 |
|
|
December 31,
2011 |
Deferred tax assets |
|
|
|
|
|
|
Net operating loss carryforwards |
$ |
14,584 |
|
|
|
$ |
14,815 |
|
Tax credit carryforwards |
3,120 |
|
|
|
317 |
|
Employee compensation and retirement benefits |
2,283 |
|
|
|
2,367 |
|
Deferred interest |
726 |
|
|
|
881 |
|
Accrued expenses |
577 |
|
|
|
899 |
|
Allowance for credit losses |
363 |
|
|
|
490 |
|
Securities, loan and debt valuations and investments |
321 |
|
|
|
— |
|
Capital loss carryforwards |
89 |
|
|
|
72 |
|
Other |
150 |
|
|
|
556 |
|
Gross deferred tax assets |
22,213 |
|
|
|
20,397 |
|
Valuation allowance |
(1,057 |
) |
|
|
(1,047 |
) |
Total deferred tax assets, net of valuation allowance |
21,156 |
|
|
|
19,350 |
|
Deferred tax liabilities |
|
|
|
|
Long-term borrowings |
3,820 |
|
|
|
3,924 |
|
Intangibles |
1,166 |
|
|
|
1,798 |
|
Securities, loan and debt valuations and investments |
— |
|
|
|
583 |
|
Other |
852 |
|
|
|
749 |
|
Gross deferred tax liabilities |
5,838 |
|
|
|
7,054 |
|
Net deferred tax assets |
$ |
15,318 |
|
|
|
$ |
12,296 |
|
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|
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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 and tax credit carryforwards at December 31, 2012.
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|
(dollars in millions) |
|
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|
Net |
|
|
Deferred |
Valuation |
Deferred |
First Year |
|
Tax Asset |
Allowance |
Tax Asset |
Expiring |
|
|
|
|
|
Net operating losses - U.S. |
$ |
4,742 |
|
$ |
— |
|
$ |
4,742 |
|
After 2028 |
Net operating losses - U.K. (1)
|
8,483 |
|
— |
|
8,483 |
|
None |
Net operating losses - other non-U.S. |
282 |
|
(222 |
) |
60 |
|
Various |
Net operating losses - U.S. states(2)
|
1,166 |
|
(358 |
) |
808 |
|
Various |
Tax credits(3)
|
3,120 |
|
(271 |
) |
2,849 |
|
After 2017 |
(1) The U.K. net operating losses may be carried forward indefinitely.
(2) Amounts above include capital losses. The losses and related valuation allowances for U.S. states before considering
the benefit of federal deductions were $1.8 billion and $(551) million, respectively.
(3) Primarily U.S. foreign tax credits.
|