Capital One 2012 Annual Report Download - page 251

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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) 2012 2011 2010
Income tax at U.S. federal statutory tax rate ................................... 35.0% 35.0% 35.0%
State taxes, net of federal benefit ............................................ 1.9 1.4 1.3
Resolution of federal income tax issues and audits .............................. (0.2) (1.1) (2.5)
Low-income housing, New Markets, and other tax credits ........................ (5.0) (4.3) (3.3)
Other foreign tax differences, net ............................................ (0.7) (0.1) (0.5)
Nontaxable bargain purchase gain ........................................... (4.1) 00
Other, net .............................................................. (1.1) (1.8) (0.4)
Income tax effective tax rate ............................................... 25.8% 29.1% 29.6%
During 2012, 2011 and 2010, our income tax expense was reduced by $7 million, $50 million and $110 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 our deferred tax assets and liabilities as of December 31, 2012 and 2011 were as
follows:
December 31,
(Dollars in millions) 2012 2011
Deferred tax assets:
Allowance for loan and lease losses ............................................... $1,876 $1,480
Rewards & sweepstakes programs ................................................ 755 612
Representation & warranty reserve ................................................ 343 355
Security & loan valuations ...................................................... 502 351
Deferred compensation & employee benefits ........................................ 350 322
Net unrealized losses on derivatives ............................................... 77 129
Unearned income .............................................................. 116 39
Net operating loss and tax credit carryforwards ...................................... 362 126
Other foreign deferred taxes ..................................................... 22 15
Other assets .................................................................. 293 279
Subtotal ..................................................................... 4,696 3,708
Valuation allowance ........................................................... (123) (89)
Total deferred tax assets .................................................... 4,573 3,619
Deferred tax liabilities:
Original issue discount ......................................................... 958 596
Core deposit and other intangibles ................................................ 237 291
Fixed assets & leases ........................................................... 184 167
Other liabilities ............................................................... 256 249
Total deferred tax liabilities ................................................. 1,635 1,303
Net deferred tax assets .......................................................... $2,938 $2,316
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