Citibank 2013 Annual Report Download - page 213

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9. INCOME TAXES
Details of the Company’s income tax provision for the years ended
December 31 are presented in the table below:
Income Taxes
In millions of dollars 2013 2012 2011
Current
Federal $ (260) $ (71) $ (144)
Foreign 3,788 3,869 3,552
State (41) 300 241
Total current income taxes $ 3,487 $ 4,098 $ 3,649
Deferred
Federal $ 2,550 $(4,943) $ (793)
Foreign (716) 900 628
State 546 (48) 91
Total deferred income taxes $ 2,380 $(4,091) $ (74)
Provision (benefit) for income tax on
continuing operations before
noncontrolling interests (1) $ 5,867 $ 7 $ 3,575
Provision (benefit) for income taxes on
discontinued operations (244) (52) 12
Provision (benefit) for income taxes on
cumulative effect of accounting changes —(58) —
Income tax expense (benefit) reported
in stockholders’ equity related to:
Foreign currency translation 5(709) (609)
Investment securities (1,353) 369 1,495
Employee stock plans 28 265 297
Cash flow hedges 625 311 (92)
Benefit Plans 698 (390) (235)
Income taxes before noncontrolling interests $ 5,626 $ (257) $ 4,443
(1) Includes the effect of securities transactions and other-than-temporary-impairment losses resulting in
a provision (benefit) of $262 million and $(187) million in 2013, $1,138 million and $(1,740) million in
2012 and $699 million and $(789) million in 2011, respectively.
Tax Rate
The reconciliation of the federal statutory income tax rate to the Company’s
effective income tax rate applicable to income from continuing operations
(before noncontrolling interests and the cumulative effect of accounting
changes) for the years ended December 31 was as follows:
2013 2012 2011
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 1.7 3.0 1.5
Foreign income tax rate differential (2.2) (4.6) (8.4)
Audit settlements (1) (0.6) (11.8) —
Effect of tax law changes (2) (0.3) (0.1) 2.0
Basis difference in affiliates —(9.2) —
Tax advantaged investments (4.2) (12.4) (6.0)
Other, net 0.7 0.2 0.2
Effective income tax rate 30.1% 0.1% 24.3%
(1) For 2013, relates to the settlement of U.S. federal issues for 2003-2005 at IRS appeals. For 2012,
relates to the conclusion of the audit of various issues in the Company’s 2006-2008 U.S. federal tax
audits and the conclusion of a New York City tax audit for 2006-2008.
(2) For 2011, includes the results of the Japan tax rate change which resulted in a $300 million
DTA charge.
As set forth in the table above, Citi’s effective tax rate for 2013 was 30.1%,
which included a tax benefit of $127 million for the resolution of certain tax
items during the year. This compared to an effective tax rate for 2012 of 0.1%
due to the effect of permanent differences on the comparably lower level of
pretax income. 2012 included a $925 million tax benefit, also related to the
resolution of certain tax audit items during the year.
As previously disclosed, during 2013, Citi decided that earnings in certain
foreign subsidiaries would no longer be indefinitely reinvested outside the
U.S. (as asserted under ASC 740, Income Taxes). This decision increased
Citi’s 2013 tax provision on these foreign subsidiary earnings to the higher
U.S. tax rate and thus increased Citi’s effective tax rate for 2013 and reduced
its after-tax earnings. For additional information on Citi’s foreign earnings,
see “Foreign Earnings” below.