Capital One 2010 Annual Report Download - page 177

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED STATEMENTS
157
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,
(Dollars in millions) 2010 2009 2008
Income tax at U.S. federal statutory tax rate .................................. 35.00% 35.00% 35.00%
State taxes, net of federal benefit ............................................ 1.28 2.40 3.45
Resolution of federal income tax issues and audits ............................ (2.54) (4.63) 0
Other foreign tax differences, net ........................................... (0.54) (0.20) 1.97
Goodwill impairment ...................................................... 0 0 47.67
Other, including nontaxable income and general business tax credits ........... (3.64) (6.41) (2.62)
Income taxes .............................................................. 29.56% 26.16% 85.47%
During 2010, 2009 and 2008, our income tax expense was reduced by $110 million, $62 million and zero, 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 our deferred tax assets and liabilities as of December 31, 2010 and 2009 were as follows:
December 31,
(Dollars in millions) 2010 2009
Deferred tax assets:
Allowance for loan and lease losses ......................................................... $ 1,950 $ 1,496
Unearned income ........................................................................... 85 206
N
et unrealized losses on securities and derivative instruments .................................. 0 0
Employee stock plans ....................................................................... 162 147
Rewards & sweepstakes programs ........................................................... 525 473
Valuation difference of acquired loans ........................................................ 503 690
Representation & warranty reserve ........................................................... 302 86
Employee benefits .......................................................................... 119 123
Securitizations ............................................................................. 13 91
Foreign tax credit carryforward .............................................................. 87 131
Other foreign deferred taxes ................................................................. 50 0
Other assets ................................................................................ 287 378
Subtotal ................................................................................... 4,083 3,821
Valuation allowance ........................................................................ (130) (109)
Total deferred tax assets ..................................................................... 3,953 3,712
Deferred tax liabilities:
Original issue discount ...................................................................... 574 715
Property & equipment ...................................................................... 66 39
Prepaid expenses ........................................................................... 13 9
Leasing activities ........................................................................... 46 23
Core deposit and other intangibles ........................................................... 348 406
Servicing assets ............................................................................ 48 83
N
et unrealized gains on securities and derivative instruments ................................... 36 32
Other foreign deferred taxes ................................................................. 0 39
Other liabilities ............................................................................. 107 90
Total deferred tax liabilities ................................................................. 1,238 1,436
N
et deferred tax assets ...................................................................... $ 2,715 $ 2,276
We have state net operating loss carryforwards with a tax value of $143 million that expire from 2011 to 2030. We have foreign tax
credit carryforwards of $87 million that expire in 2014 through 2018.
The valuation allowance was increased by $21 million to adjust the tax benefit of certain state deferred tax assets and net operating
loss carryforwards to the amount that we have determined is more likely than not to be realized.