Citibank 2013 Annual Report Download - page 158

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For a tabular summary of Citi’s net DTAs balance as of December 31, 2013,
including the FTCs and applicable expiration dates of the FTCs, see Note 9 to
the Consolidated Financial Statements.
While Citi’s net total DTAs decreased year-over-year, the time remaining for
utilization has shortened, given the passage of time, particularly with respect
to the FTC component of the DTAs. Although realization is not assured,
Citi believes that the realization of the recognized net DTAs of $52.8 billion
at December 31, 2013 is more likely than not based upon expectations as
to future taxable income in the jurisdictions in which the DTAs arise and
available tax planning strategies (as defined in ASC 740, Income Taxes) that
would be implemented, if necessary, to prevent a carry-forward from expiring.
In general, Citi would need to generate approximately $98 billion of U.S.
taxable income during the FTC carry-forward periods to prevent this most
time-sensitive component of Citi’s DTAs from expiring. Citi’s net DTAs will
decline primarily as additional domestic GAAP taxable income is generated.
Citi has concluded that two components of positive evidence support the
full realization of its DTAs. First, Citi forecasts sufficient U.S. taxable income
in the carry-forward periods, exclusive of ASC 740 tax planning strategies.
Citi’s forecasted taxable income, which will continue to be subject to overall
market and global economic conditions, incorporates geographic business
forecasts and taxable income adjustments to those forecasts (e.g., U.S.
tax exempt income, loan loss reserves deductible for U.S. tax reporting in
subsequent years), and actions intended to optimize its U.S. taxable earnings.
Second, Citi has sufficient tax planning strategies available to it under
ASC 740 that would be implemented, if necessary, to prevent a carry-forward
from expiring. These strategies include: repatriating low taxed foreign source
earnings for which an assertion that the earnings have been indefinitely
reinvested has not been made; accelerating U.S. taxable income into, or
deferring U.S. tax deductions out of, the latter years of the carry-forward
period (e.g., selling appreciated intangible assets, electing straight-line
depreciation); accelerating deductible temporary differences outside the
U.S.; and selling certain assets that produce tax-exempt income, while
purchasing assets that produce fully taxable income. In addition, the sale
or restructuring of certain businesses can produce significant U.S. taxable
income within the relevant carry-forward periods.
Based upon the foregoing discussion, Citi believes the U.S. federal and
New York state and city net operating loss carry-forward period of 20 years
provides enough time to fully utilize the DTAs pertaining to the existing
net operating loss carry-forwards and any net operating loss that would be
created by the reversal of the future net deductions that have not yet been
taken on a tax return.
With respect to the FTCs component of the DTAs, the carry-forward period
is 10 years. Citi believes that it will generate sufficient U.S. taxable income
within the 10-year carry-forward period to be able to fully utilize the FTCs, in
addition to any FTCs produced in such period, which must be used prior to
any carry-forward utilization.
Litigation Accruals
See the discussion in Note 28 to the Consolidated Financial Statements for
information regarding Citi’s policies on establishing accruals for litigation
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.”