Capital One 2006 Annual Report Download - page 114
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96
Income tax benefits of $22.0 million and $1.4 million in 2006 and 2005, respectively, were allocated directly to reduce
goodwill from acquisitions. Income tax expense (benefit) reported in shareholders equity was as follows:
Year Ended December 31
2006 2005 2004
Foreign currency translation gains (losses) $ (18,033) $ (18,004) $ 2,201
Net unrealized securities gains (losses) 16,635 (31,706) (29,048)
Net unrealized derivative gains (losses) (6,750) 21,373 26,516
Employee stock plans (77,090) (168,426) (126,058)
Employee retirement plans 1,851
Total current provision (benefit) $ (83,387) $ (196,763) $ (126,389)
The reconciliation of income tax attributable to continuing operations computed at the U.S. federal statutory tax rate to
income tax expense was:
Year Ended December 31
2006 2005 2004
Income tax at U.S. federal statutory tax rate 35.00% 35.00% 35.00%
Resolution of federal income tax issues and audits (1.94)
Other, including state taxes 0.84 1.05 (0.40)
Income taxes 33.90% 36.05% 34.60%
During 2006, the Companys income tax expense was reduced by $70.7 million due to the resolution of certain tax issues and
audits for prior years with the Internal Revenue Service. This reduction represented the release of previous accruals for
potential audit adjustments which were subsequently settled or eliminated and further refinement of existing tax exposures.
Significant components of the Companys deferred tax assets and liabilities as of December 31, 2006 and 2005 were as follows:
December 31
2006 2005
Deferred tax assets:
Allowance for loan losses $ 696,890 $ 450,463
Unearned income 112,577 125,848
Net unrealized losses on securities and derivative instruments 45,139 22,164
State taxes, net of federal benefit 16,317 31,146
Employee stock plans 110,925 61,844
Rewards & sweepstakes programs 164,506 43,059
Valuation difference of acquired securities 19,982 27,423
Valuation difference of acquired loans 155,106 124,134
Retained liabilityManufactured Housing 30,461
Employee benefits 54,948 64,353
Foreign taxes 4,686 (45,817)
Other 195,879 148,960
Subtotal 1,607,416 1,053,577
Valuation allowance (15,543) (42,531)
Total deferred tax assets 1,591,873 1,011,046
Deferred tax liabilities:
Securitizations 76,166 22,708
Deferred revenue 652,554 676,852
Property & equipment 75,156 85,572
Prepaid advertisement 43,253 24,367
Leasing activities 15,507 17,335
Core deposit intangibles 419,744 129,703
Goodwill amortization 108,942 6,856
Servicing assets 93,168
Other 100,378 54,757
Total deferred tax liabilities 1,584,868 1,018,150
Net deferred tax assets (liabilities) $ 7,005 $ (7,104)