Citibank 2014 Annual Report Download - page 198

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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 2014 2013 2012
Current
Federal $ 181 $ (260) $ (71)
Foreign 3,281 3,788 3,869
State 388 (41) 300
Total current income taxes $3,850 $ 3,487 $ 4,098
Deferred
Federal $2,184 $ 2,550 $(4,943)
Foreign 361 (716) 900
State 469 546 (48)
Total deferred income taxes $3,014 $ 2,380 $(4,091)
Provision (benefit) for income tax
on continuing operations before
non-controlling interests (1) $ 6,864 $ 5,867 $ 7
Provision (benefit) for income taxes on
discontinued operations 12 (244) (52)
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 65 (48) (709)
Investment securities 1,007 (1,300) 369
Employee stock plans (87) 28 265
Cash flow hedges 207 625 311
Benefit plans (660) 698 (390)
Retained earnings (2) (353) — —
Income taxes before non-controlling interests $7,055 $ 5,626 $ (257)
(1) Includes the effect of securities transactions and other-than-temporary-impairment losses resulting
in a provision (benefit) of $200 million and $(148) million in 2014, $262 million and $(187) million in
2013 and $1,138 million and $(1,740) million in 2012, respectively.
(2) See “Consolidated Statement of Changes in Stockholders’ Equity” above.
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 non-controlling interests and the cumulative effect of accounting
changes) for the years ended December 31 was as follows:
2014 2013 2012
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 3.5 1.7 3.0
Foreign income tax rate differential (0.9) (2.2) (4.6)
Audit settlements (1) (2.4) (0.6) (11.8)
Effect of tax law changes (2) 1.2 (0.3) (0.1)
Nondeductible legal and related expenses 18.7 0.8 0.2
Basis difference in affiliates (2.5) — (9.2)
Tax advantaged investments (5.2) (4.2) (12.4)
Other, net 0.4 (0.1) —
Effective income tax rate 47.8% 30.1% 0.1%
(1) For 2014, relates to the conclusion of the audit of various issues in the Company’s 2009-2011 U.S.
federal tax audit and the conclusion of a New York State tax audit for 2006-2008. 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 2014, includes the results of corporate tax reforms enacted in New York and South Dakota which
resulted in a DTA charge of approximately $210 million.
As set forth in the table above, Citi’s effective tax rate for 2014 was 47.8%,
which included a tax benefit of $347 million for the resolution of certain tax
items during the year. This was higher than the effective tax rate for 2013
of 30.1% due primarily to the effect of the level of non-deductible legal and
related expenses on the comparably lower level of pretax income in 2014.
Also included in 2013 is a $127 million tax benefit related to the resolution of
certain tax audit items during that year.
In addition, 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 2014 and 2013 tax provisions on these foreign
subsidiary earnings to the higher U.S. tax rate and thus increased Citi’s
effective tax rate for 2014 and 2013 and reduced its after-tax earnings.
For additional information on Citi’s foreign earnings, see “Foreign
Earnings” below.