Capital One 2009 Annual Report Download - page 170

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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
2009
2008 2007
Income tax at U.S. federal statutory tax rate .......................................................................................
.
35.00% 35.00% 35.00%
State taxes, net of federal benefit ........................................................................................................
.
2.40 3.45 0.68
Resolution of federal income tax issues and audits .............................................................................
.
(4.63) — (0.31)
Recognition of foreign tax credits .......................................................................................................
.
— — (1.78)
Other foreign tax differences, net .......................................................................................................
.
(0.20) 1.97 (0.03)
Goodwill impairment ..........................................................................................................................
.
— 47.67 —
Other, including nontaxable income and general business tax credits ................................................
.
(6.41) (2.62) (0.54)
Income taxes .......................................................................................................................................
.
26.16% 85.47% 33.02%
During 2009, 2008 and 2007, the Company’s income tax expense was reduced by $61.9 million, zero and $12.0 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 and litigation adjustments which were subsequently settled or
eliminated and further refinement of existing tax exposures.
Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2009 and 2008 were as follows:
December 31
2009
2008
Deferred tax assets:
Allowance for loan and lease losses ........................................................................................................
.
$ 1,496,130 $ 1,631,883
Unearned income .....................................................................................................................................
.
205,637 236,043
N
et unrealized losses on securities and derivative instruments ...............................................................
.
— 494,580
Employee stock plans ..............................................................................................................................
.
147,127 144,073
Rewards & sweepstakes programs ...........................................................................................................
.
473,201 501,817
Valuation difference of acquired loans ....................................................................................................
.
689,755 82,205
Employee benefits ....................................................................................................................................
.
122,457 68,278
Securitizations ..........................................................................................................................................
.
91,114 12,850
Property & equipment ..............................................................................................................................
.
— 3,753
Foreign tax credit carryforward ...............................................................................................................
.
131,129 131,129
Other assets ..............................................................................................................................................
.
464,133 246,022
Subtotal ....................................................................................................................................................
.
3,820,683 3,552,633
Valuation allowance ................................................................................................................................
.
(108,516) (67,671)
Total deferred tax assets ...........................................................................................................................
.
3,712,167 3,484,962
Deferred tax liabilities:
Original issue discount .............................................................................................................................
.
714,557 605,769
Property & equipment ..............................................................................................................................
.
38,895 —
Prepaid expenses ......................................................................................................................................
.
9,143 8,281
Leasing activities .....................................................................................................................................
.
23,450 23,919
Core deposit and other intangibles ...........................................................................................................
.
406,082 367,973
Servicing assets ........................................................................................................................................
.
83,456 55,035
N
et unrealized gains on securities and derivative instruments .................................................................
.
31,667 —
Other foreign deferred taxes ....................................................................................................................
.
38,937 18,964
Other liabilities ........................................................................................................................................
.
89,749 77,939
Total deferred tax liabilities .....................................................................................................................
.
1,435,936 1,157,880
N
et deferred tax assets .............................................................................................................................
.
$ 2,276,231 $ 2,327,082