PNC Bank 2008 Annual Report Download - page 144

amount of unrecognized tax benefit related to permanent
differences because a portion of those unrecognized benefits
relate to state tax matters.
It is reasonably possible that the liability for uncertain tax
positions could increase or decrease in the next twelve months
due to completion of tax authorities’ exams or the expiration
of statutes of limitations. Management estimates that the
liability for uncertain tax positions could decrease by $5
million within the next twelve months.
The consolidated federal income tax returns of The PNC
Financial Services Group, Inc. and subsidiaries through 2003
have been audited by the Internal Revenue Service and we
have resolved all disputed matters through the IRS appeals
division. The Internal Revenue Service is currently examining
the 2004 through 2006 consolidated federal income tax returns
of The PNC Financial Services Group, Inc. and subsidiaries.
The consolidated federal income tax returns of National City
Corporation and subsidiaries through 2004 have been audited
by the Internal Revenue Service and we have reached
agreement in principle on resolution of all disputed matters
through the IRS appeals division. However, because the
agreement is still subject to execution of a closing agreement
we have not treated it as effectively settled. The Internal
Revenue Service is currently examining the 2005 through
2007 consolidated federal income tax returns of National City
Corporation and subsidiaries, and we expect the 2008 federal
income tax return to begin being audited as soon as it is filed.
New York, New Jersey, Maryland and New York City are
principally where we were subject to state and local income
tax prior to our acquisition of National City. The state of New
York is currently in the process of closing the 2002 to 2004
audit and will begin auditing the years 2005 and 2006. New
York City is currently auditing 2004 and 2005. However,
years 2002 and 2003 remain subject to examination by New
York City pending completion of the New York state audit.
Through 2006, BlackRock is included in our New York and
New York City combined tax filings and constituted most of
the tax liability. Years subsequent to 2004 remain subject to
examination by New Jersey and years subsequent to 2005
remain subject to examination by Maryland.
National City was principally subject to state and local income
tax in California, Florida, Illinois, Indiana, and Missouri.
Audits currently in process for these states include: California
(2003-2004), Illinois (2004-2006) and Missouri (2003-2005).
We will now also be principally subject to tax in those states.
In the ordinary course of business we are routinely subject to
audit by the taxing authorities of these states and at any given
time a number of audits will be in process.
Our policy is to classify interest and penalties associated with
income taxes as income taxes. At January 1, 2008, we had
accrued $91 million of interest related to tax positions, most of
which related to our cross-border leasing transactions. The
total accrued interest and penalties at December 31, 2008 was
$164 million. While the leasing related interest decreased with
a payment to the IRS, the $73 million net increase primarily
resulted from our acquisition of National City.
N OTE 22 S UMMARIZED F INANCIAL
I NFORMATION OF B LACK R OCK
As required by SEC Regulation S-X, summarized
consolidated financial information of BlackRock follows (in
millions).
December 31 2008 2007
Total assets $19,924 $22,561
Total liabilities $ 7,367 $10,387
Non-controlling interest 491 578
Stockholders’ equity 12,066 11,596
Total liabilities, non-controlling interest and
stockholders’ equity $19,924 $22,561
Year ended December 31 2008 2007
Total revenue $ 5,064 $ 4,845
Total expenses 3,471 3,551
Operating income 1,593 1,294
Non-operating income (expense) (574) 529
Income before income taxes and
non-controlling interest 1,019 1,823
Income taxes 388 464
Non-controlling interest (155) 364
Net income $ 786 $ 995
N
OTE 23 R EGULATORY M ATTERS
We are subject to the regulations of certain federal and state
agencies and undergo periodic examinations by such
regulatory authorities.
The access to and cost of funding new business initiatives
including acquisitions, the ability to pay dividends, the level
of deposit insurance costs, and the level and nature of
regulatory oversight depend, in large part, on a financial
institution’s capital strength. The minimum US regulatory
capital ratios are 4% for tier 1 risk-based, 8% for total risk-
based and 4% for leverage. However, regulators may require
higher capital levels when particular circumstances warrant.
To qualify as “well capitalized,” regulators require banks to
maintain capital ratios of at least 6% for tier 1 risk-based, 10%
for total risk-based and 5% for leverage. At December 31,
2008 and December 31, 2007, each of our domestic bank
subsidiaries met the “well capitalized” capital ratio
requirements.
140