Capital One 2008 Annual Report Download - page 151

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Note 16
Income Taxes
The Company accounts for income taxes in accordance with SFAS 109, recognizing the current and deferred tax consequences of all
transactions that have been recognized in the consolidated financial statements using the provisions of the enacted tax laws. Deferred
tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and
are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation
allowances are recorded to reduce deferred tax assets to an amount that is more likely than not to be realized.
Significant components of the provision for income taxes attributable to continuing operations were as follows:
Year Ended December 31
2008
2007 2006
Current income tax provision:
Federal taxes.........................................................................................................
.
$ 1,068,846 $ 1,613,909 $ 1,188,283
State taxes.............................................................................................................
.
53,218 82,468 67,068
International taxes ................................................................................................
.
32,014 53,721 61,661
Total current provision...................................................................................................
.
$ 1,154,078 $ 1,750,098 $ 1,317,012
Deferred income tax provision:
Federal taxes.........................................................................................................
.
$ (643,488) $ (462,193) $ 3,678
State taxes.............................................................................................................
.
(3,202) (12,318) (25,395)
International taxes ................................................................................................
.
(10,286) 2,250 (49,331)
Total deferred benefit.....................................................................................................
.
$ (656,976) $ (472,261) $ (71,048)
Total income tax provision ............................................................................................
.
$ 497,102 $ 1,277,837 $ 1,245,964
Income tax benefits of $31.7 million and $121.9 million in 2008 and 2007, respectively, were allocated directly to reduce goodwill
from acquisitions. Income tax benefit reported in shareholders equity was as follows:
Year Ended December 31
2008
2007 2006
Foreign currency translation gains (losses)..............................................................................
.
$ 6,597 $ 2,679 $ (18,033)
Net unrealized securities gains (losses)....................................................................................
.
(433,659) 25,780 16,635
Net unrealized derivative (losses) gains...................................................................................
.
28,095 (63,804) (6,750)
Adoption of FAS 158...............................................................................................................
.
(317) 6,378 
Employee stock plans ..............................................................................................................
.
11,071 (53,041) (77,090)
Employee retirement plans ......................................................................................................
.
(40,535) 17,675 1,851
Total current provision (benefit)..............................................................................................
.
$ (428,748) $ (64,333) $ (83,387)
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
2008
2007 2006
Income tax at U.S. federal statutory tax rate.......................................................................................
.
35.00% 35.00% 35.00%
Resolution of federal income tax issues and audits.............................................................................
.
 (0.31) (1.94)
Recognition of foreign tax credits.......................................................................................................
.
 (1.78) 
Other foreign tax differences, net .......................................................................................................
.
1.97 (0.03) 0.40
Goodwill impairment..........................................................................................................................
.
47.67  
Other, including state taxes, net..........................................................................................................
.
0.83 0.14 0.47
Income taxes .......................................................................................................................................
.
85.47% 33.02% 33.93%
During 2008, 2007, and 2006, the Companys income tax expense was reduced by $0, $12.0 million and $70.7 million, respectively,
due to the resolution of certain tax issues and audits for prior years with the Internal Revenue Service (IRS). 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.