Capital One 2014 Annual Report Download - page 250

The following table presents the accrued balance of tax, interest and penalties related to unrecognized tax
benefits:
Table 17.5: Reconciliation of the Change in Unrecognized Tax Benefits
Gross Accrued Gross Tax,
Unrecognized Interest and Interest and
(Dollars in millions) Tax Benefits Penalties Penalties
Balance as of January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 208 $ 54 $ 262
Additions for tax positions related to prior years . . . . . . . . . . . . . . . . . . . . . . 15 7 22
Reductions for tax positions related to prior years due to
IRS and other settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (109) (22) (131)
Balance as of December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 114 $ 39 $ 153
Additions for tax positions related to prior years . . . . . . . . . . . . . . . . . . . . . . 9 2 11
Reductions for tax positions related to prior years due to
IRS and other settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16) (5) (21)
Balance as of December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 107 $ 36 $ 143
Portion of balance at December 31, 2014 that, if recognized,
would impact the effective income tax rate . . . . . . . . . . . . . . . . . . . . . . $ 70 $ 23 $ 93
We are subject to examination by the IRS and other tax authorities in certain countries and states in which we have
significant business operations. The tax years subject to examination vary by jurisdiction. During 2014, the IRS paid
to the Company tax refunds in the aggregate amount of $155 million with respect to the taxable years 2000 to 2008,
for which examinations were completed in 2013. The IRS also completed the examination of the Company’s federal
income tax returns for the taxable years 2009, 2010, and 2011 during 2014 and paid tax refunds to the Company in
the aggregate amount of $123 million. Because receivables had been recorded in prior years for these refunds, they
did not have a significant effect on the income tax provisions in 2012, 2013 and 2014.
The IRS initiated the examinations of the Company’s federal income tax returns for the tax years 2012 and 2013
during 2014, which are expected to be completed in 2015. During 2014, the Company entered into the IRS
Compliance Assurance Process (“CAP”) for the Company’s 2014 federal income tax return. Under the CAP
examination process, the IRS exam team contemporaneously reviewed the Company’s intended tax return
reporting of certain 2014 transactions disclosed to the IRS on a quarterly basis during 2014. The CAP
examination process is expected to be completed in 2015 prior to the filing of the Company’s 2014 federal
income tax return.
It is reasonably possible that further adjustments to the Company’s unrecognized tax benefits may be made within
twelve months of the reporting date as a result of the above-referenced pending matters. At this time, an estimate of
the potential change to the amount of unrecognized tax benefits cannot be made.
As of December 31, 2014, U.S. income taxes and foreign withholding taxes have not been provided on
approximately $1.4 billion of unremitted earnings of subsidiaries operating outside the U.S., in accordance with
the guidance for accounting for income taxes in special areas. These earnings are considered by management to
be invested indefinitely. Upon repatriation of these earnings, we could be subject to both U.S. income taxes (subject
to possible adjustment for foreign tax credits) and withholding taxes payable to various foreign countries.
Determination of the amount of unrecognized deferred U.S. income tax liability and foreign withholding tax on
these unremitted earnings is not practicable at this time because such liability is dependent upon circumstances
existing if and when remittance occurs.
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CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Capital One Financial Corporation (COF)