Citibank 2008 Annual Report Download - page 158

11. INCOME TAXES
In millions of dollars 2008 2007 2006
Current
Federal $ (4,582) $(2,260) $ 3,703
Foreign 4,968 3,615 3,766
State 29 75 178
Total current income taxes $ 415 $ 1,430 $ 7,647
Deferred
Federal $(16,585) $(2,113) $ (552)
Foreign (2,284) (1,039) 490
State (2,158) (776) 164
Total deferred income taxes $(21,027) $(3,928) $ 102
Provision (benefit) for income tax on
continuing operations before minority
interest (1) $(20,612) $(2,498) $ 7,749
Provision (benefit) for income taxes on
discontinued operations 207 297 306
Provision (benefit) for income taxes on cumulative
effect of accounting changes —(109) —
Income tax expense (benefit) reported in
stockholders’ equity related to:
Foreign currency translation (2,116) 565 52
Securities available-for-sale (5,468) (759) 271
Employee stock plans 449 (410) (607)
Cash flow hedges (1,354) (1,705) (406)
Pension liability adjustments (918) 426 (1,033)
Income taxes before minority interest $(29,812) $(4,193) $ 6,332
(1) Includes the effect of securities transactions resulting in a (benefit) provision of $(721) million in 2008,
$409 million in 2007 and $627 million in 2006.
The reconciliation of the federal statutory income tax rate to the
Company’s effective income tax rate applicable to income from continuing
operations (before minority interest and the cumulative effect of accounting
changes) for the years ended December 31 was as follows:
2008 2007 2006
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 2.6 (58.6) 1.6
Foreign income tax rate differential 1.2 (180.8) (4.3)
Audit settlements (1) —— (2.9)
Goodwill (2.2) 0.5 —
Tax advantaged investments 1.7 (84.0) (1.8)
Other, net 0.6 (34.0) (0.4)
Effective income tax rate (2) 38.9% (321.9)% 27.2%
(1) For 2006, relates to the resolution of the Federal and New York tax audits.
(2) The Company recorded an income tax benefit for 2007. The effective tax rate (benefit) of (322)%
primarily resulted from pretax losses in the Company’s ICG and N.A. and Consumer Banking
businesses (the U.S. is a higher tax rate jurisdiction). In addition, the tax benefits of permanent
differences, including the tax benefit for not providing U.S. income taxes on the earnings of certain
foreign subsidiaries that are indefinitely invested, favorably impacted the Company’s effective tax rate.
Deferred income taxes at December 31 related to the following:
In millions of dollars 2008 2007
Deferred tax assets
Credit loss deduction $11,242 $ 5,977
Deferred compensation and employee benefits 4,367 2,686
Restructuring and settlement reserves 1,134 2,388
Unremitted foreign earnings 4,371 2,833
Investments 5,312 —
Cash flow hedges 3,071 1,717
Tax credit and net operating loss carryforwards 18,424 4,644
Other deferred tax assets 4,158 2,404
Gross deferred tax assets $52,079 $22,649
Valuation allowance ——
Deferred tax assets after valuation allowance $52,079 $22,649
Deferred tax liabilities
Investments —(1,023)
Deferred policy acquisition costs
and value of insurance in force $ (805) (761)
Leases (1,255) (1,865)
Fixed assets (954) (765)
Intangibles (2,365) (2,361)
Credit valuation adjustment on Company-issued debt (1,473) (222)
Other deferred tax liabilities (758) (2,075)
Gross deferred tax liabilities $ (7,610) $ (9,072)
Net deferred tax asset $44,469 $13,577
The following is a roll-forward of the Company’s FIN 48 unrecognized tax
benefits from January 1, 2008 to December 31, 2008.
In millions of dollars
Total unrecognized tax benefits at January 1, 2008 $3,698
Net amount of increases for current year’s tax positions 254
Gross amount of increases for prior years’ tax positions 252
Gross amount of decreases for prior years’ tax positions (581)
Amounts of decreases relating to settlements (21)
Reductions due to lapse of statutes of limitation (30)
Foreign exchange, acquisitions and dispositions (104)
Total unrecognized tax benefits at December 31, 2008 $3,468
Total amount of unrecognized tax benefits at December 31, 2008 that, if
recognized, would affect the effective tax rate is $2.4 billion. The remainder
of the uncertain tax positions have offsetting amounts in other jurisdictions
or are temporary differences.
Interest and penalties (not included in the “unrecognized tax benefits”
above) are a component of the Provision for income taxes.
In millions of dollars Pretax Net of tax
Total interest and penalties in the
balance sheet at January 1, 2008 $618 $389
Total interest and penalties in the 2008
statement of operations $114 $ 81
Total interest and penalties in the
balance sheet at December 31, 2008(1) $663 $420
(1) Includes $9 million for foreign penalties.
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