Citibank 2012 Annual Report Download - page 154

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Based upon the foregoing discussion, Citi believes the U.S. federal and
New York state and city NOL carry-forward period of 20 years provides enough
time to fully utilize the DTAs pertaining to the existing NOL carry-forwards,
as set forth in the table above, and any NOL that would be created by the
reversal of the future net deductions that have not yet been taken on a tax
return.
As noted in the table above, Citi’s FTC carry-forwards were $22.0 billion as
of December 31, 2012, compared to $15.8 billion as of December 31, 2011.
Over half of the FTC increase year-over-year was due to specific tax planning
actions involving the payment of dividends from Citi’s foreign subsidiaries.
The U.S. FTC carry-forward period is 10 years and represents the most
time-sensitive component of Citi’s DTAs. The table below sets forth the
expiration dates for Citi’s FTCs as of December 31, 2012 and 2011:
In billions of dollars
Year of expiration
Dec. 31,
2012
Dec. 31,
2011
U.S. consolidated tax return FTC carry-forwards
2016 $ 0.4 $ 0.4
2017 (1) 6.6 4.9
2018 5.3 5.3
2019 1.3 1.3
2020 2.3 2.2
2021 1.9 1.7
2022 4.2 —
Total U.S. consolidated tax return FTC carry-forwards $22.0 $15.8
(1) Increase is due to the conclusion of Citi’s 2006–2008 U.S. federal tax audit.
Utilization of FTCs in any year is restricted to 35% of foreign source
taxable income in that year. However, overall domestic losses that Citi
has incurred of approximately $63 billion as of December 31, 2012 are
allowed to be reclassified as foreign source income to the extent of 50% of
domestic source income produced in subsequent years, and such resulting
foreign source income would cover the FTCs being carried forward. As such,
Citi believes the foreign source taxable income limitation will not be an
impediment to the FTC carry-forward usage as long as Citi can generate
sufficient domestic taxable income within the 10-year carry-forward period.
Citi believes that it will generate sufficient U.S. taxable income within the
10-year carry-forward period referenced above to be able to fully utilize the
FTC carry-forward, in addition to any FTC produced in such period.
First Quarter of 2013—Tax Benefit
On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed
into law. Among other provisions contained in the Act was a retroactive
extension to the beginning of 2012 of the “active financing exception.” As a
result of the enactment of this new tax law, Citigroup expects to have a tax
benefit of approximately $45 million in the first quarter of 2013.
For additional information on income taxes, see Note 10 to the
Consolidated Financial Statements.
Litigation Accruals
See the discussion in Note 28 to the Consolidated Financial Statements for
information regarding Citi’s policies on establishing accruals for legal and
regulatory contingencies.
Accounting Changes and Future Application of
Accounting Standards
See Note 1 to the Consolidated Financial Statements for a discussion of
“Accounting Changes” and the “Future Application of Accounting Standards.”