Citibank 2015 Annual Report Download - page 194

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Deferred Income Taxes
Deferred income taxes at December 31 related to the following:
In millions of dollars 2015 2014
Deferred tax assets
Credit loss deduction $ 6,058 $ 7,010
Deferred compensation and employee benefits 4,110 4,676
Repositioning and settlement reserves 1,429 1,599
Unremitted foreign earnings 8,403 6,368
Investment and loan basis differences 3,248 4,808
Cash flow hedges 359 529
Tax credit and net operating loss carry-forwards 23,053 23,395
Fixed assets and leases 1,356 2,093
Other deferred tax assets 3,176 2,334
Gross deferred tax assets $51,192 $52,812
Valuation allowance ——
Deferred tax assets after valuation allowance $51,192 $52,812
Deferred tax liabilities
Deferred policy acquisition costs
and value of insurance in force $ (327) $ (415)
Intangibles (1,146) (1,636)
Debt issuances (850) (866)
Other deferred tax liabilities (1,020) (559)
Gross deferred tax liabilities $ (3,343) $ (3,476)
Net deferred tax assets $47,849 $49,336
Unrecognized Tax Benefits
The following is a rollforward of the Company’s unrecognized tax benefits.
In millions of dollars 2015 2014 2013
Total unrecognized tax benefits at January 1 $1,060 $1,574 $ 3,109
Net amount of increases for current year’s tax positions 32 135 58
Gross amount of increases for prior years’ tax positions 311 175 251
Gross amount of decreases for prior years’ tax positions (61) (772) (716)
Amounts of decreases relating to settlements (45) (28) (1,115)
Reductions due to lapse of statutes of limitation (22) (30) (15)
Foreign exchange, acquisitions and dispositions (40) 6 2
Total unrecognized tax benefits at December 31 $1,235 $1,060 $ 1,574
The total amounts of unrecognized tax benefits at December 31, 2015,
2014 and 2013 that, if recognized, would affect Citi’s effective tax rate,
are $0.9 billion, $0.8 billion and $0.8 billion, respectively. The remaining
uncertain tax positions have offsetting amounts in other jurisdictions or are
temporary differences, except for $0.4 billion at December 31, 2013, which
was recognized in Retained earnings in 2014.
Interest and penalties (not included in “unrecognized tax benefits”
above) are a component of the Provision for income taxes.
2015 2014 2013
In millions of dollars Pretax Net of tax Pretax Net of tax Pretax Net of tax
Total interest and penalties in the Consolidated Balance Sheet at January 1 $ 269 $ 169 $ 277 $173 $ 492 $ 315
Total interest and penalties in the Consolidated Statement of Income (29) (18) (1) (1) (108) (72)
Total interest and penalties in the Consolidated Balance Sheet at December 31(1) 233 146 269 169 277 173
(1) Includes $3 million, $2 million, and $2 million for foreign penalties in 2015, 2014 and 2013, respectively. Also includes $3 million for state penalties in 2015 and 2014, and $4 million in 2013.
As of December 31, 2015, Citi is under audit by the Internal Revenue
Service and other major taxing jurisdictions around the world. It is thus
reasonably possible that significant changes in the gross balance of
unrecognized tax benefits may occur within the next 12 months, although
Citi does not expect such audits to result in amounts that would cause a
significant change to its effective tax rate, other than as discussed below.
Citi expects to conclude its IRS audit for the 2012-2013 cycle within the
next 12 months. The gross uncertain tax positions at December 31, 2015
for the items that may be resolved are as much as $97 million. Because of
the number and nature of the issues remaining to be resolved, the potential
tax benefit to continuing operations could be anywhere in a range between
$0 and $94 million. In addition, Citi may conclude certain state and local
tax audits within the next 12 months. The gross uncertain tax positions at
December 31, 2015 are as much as $222 million. In addition there is gross
interest of as much as $16 million. The potential tax benefit to continuing
operations could be anywhere between $0 and $155 million, including
interest. Furthermore, Citi may conclude certain foreign audits within the
next 12 months. The gross uncertain positions at December 31, 2015 are
as much as $119 million. In addition there is gross interest of as much as
$18 million. The potential tax benefit to continuing operations could be
anywhere between $0 and $22 million, including interest. The potential
tax benefit to discontinued operations could be anywhere between $0 and
$76 million, including interest.