Ally Bank 2011 Annual Report Download - page 198

Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10−K
subjective in nature.
Based on this assessment, valuation allowances have been recorded against our domestic net deferred tax assets and certain international net deferred
tax assets. Included within tax expense were charges of $215 million in 2011, benefits of $132 million in 2010, and charges of $2.1 billion in 2009 to adjust
valuation allowances. These adjustments include establishment of valuation allowances, release of valuation allowances, and movement in valuation
allowances stemming from pretax results after establishment. The charges for 2011 included a $101 million reversal of valuation allowance on net deferred
tax assets in one of our Canadian subsidiaries. The reversal related to modifications to the legal structure of our Canadian operations. The amount of the net
U.S. deferred tax asset considered realizable could change in the future depending on actual taxable income or capital gains and other relevant factors. In
particular, improving trends in the U.S. could lead to reversal of a large portion of our U.S. valuation allowance in 2012. Until such time, utilization of tax
attributes to offset U.S. profits will continue to reduce the overall level of our U.S. deferred tax assets and related valuation allowance.
The significant components of deferred tax assets and liabilities are reflected in the following table.
December 31, ($ in millions) 2011 2010
Deferred tax assets
Tax loss carryforwards $ 1,976 $ 1,728
Provision for loan losses 775 753
Mark−to−market on consumer finance receivables and loans 695 655
Hedging transactions 248 9
State and local taxes 184 170
Sales of finance receivables and loans 182 205
Contingency 169 223
Tax credit carryforwards 161 132
Unearned insurance premiums 158 151
Basis difference in subsidiaries 105 82
MSRs 95 (54)
Other 368 354
Gross deferred tax assets 5,116 4,408
Valuation allowance (2,240) (1,993)
Net deferred tax assets 2,876 2,415
Deferred tax liabilities
Lease transactions 2,052 1,545
Deferred acquisition costs 328 332
Unrealized gains on securities 180 304
Tax on unremitted earnings 63 46
Debt transactions 32 84
Other 94 101
Gross deferred tax liabilities 2,749 2,412
Net deferred tax assets $ 127 $ 3
Foreign pretax income is subject to U.S. taxation when effectively repatriated. Through the Conversion date, our U.S. incorporated insurance and
banking operations provided federal income taxes on the undistributed earnings of foreign subsidiaries to the extent these earnings were not deemed
indefinitely reinvested outside the United States. It was the responsibility of our members to provide for federal income taxes on the undistributed foreign
subsidiary earnings of our disregarded entities to the extent the earnings was not indefinitely reinvested. Subsequent to the Conversion date, all of our
domestic subsidiaries fully provide for federal income taxes on the undistributed earnings of foreign subsidiaries except to the extent these earnings are
indefinitely reinvested outside the United States. At December 31, 2011, $4.1 billion of accumulated undistributed earnings of foreign subsidiaries were
indefinitely reinvested. Quantification of the deferred tax liability associated with indefinitely reinvested earnings is not practicable. If in the future we
decide to repatriate such foreign earnings, we would incur incremental U.S. federal and state income tax, reduced by the current benefit of our U.S. federal
and state net operating loss and tax credit carryforwards. However, our intent is to keep these funds indefinitely reinvested outside of the United States and
our current plans do not demonstrate a need to repatriate them to fund our U.S. operations.
Tax benefits related to positions considered uncertain are recognized only if, based on the technical merits of the issue, it is more likely than not that
we will sustain the position and then at the largest amount that is greater than 50% likely to be realized upon ultimate settlement.
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