SunTrust 2007 Annual Report Download - page 119

SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
Deferred income tax liabilities and assets result from temporary differences between assets and liabilities measured for
financial reporting purposes and for income tax return purposes. These assets and liabilities are measured using the enacted
tax rates and laws that are currently in effect. The significant components of the net deferred tax liability at December 31
were as follows:
December 31,
(Dollars in thousands) 2007 2006
Deferred Tax Assets
Allowance for loan losses $474,252 $386,796
Accrued expenses 286,912 96,203
Securities 165,944 (89,910)
Other 169,867 136,321
Gross Deferred Tax Assets $1,096,975 $529,410
Deferred Tax Liabilities
Net unrealized gains on available for sale securities, derivatives, and benefit obligations $929,048 $521,568
Leasing 852,254 823,763
Employee benefits 148,529 185,737
Mortgage 484,459 311,774
Intangible assets 43,373 41,753
Fixed assets 33,800 44,334
Loans 87,616 97,971
Undistributed dividends 128,835 95,382
Other 97,164 80,381
Gross Deferred Tax Liabilities $2,805,078 $2,202,663
Net Deferred Tax Liability $1,708,103 $1,673,253
SunTrust and its subsidiaries file consolidated income tax returns where permissible or required. Each subsidiary generally
remits current taxes to or receives current refunds from the Parent Company based on what would be required had the
subsidiary filed an income tax return as a separate entity. Deferred tax assets resulting from state net operating loss
carryforwards consist of $83.7 million (net of a valuation allowance of $38.8 million) for 2007 and $62.6 million (net of
valuation allowance of $19.4 million) for 2006. The state net operating losses expire, if not utilized, in varying amounts from
2008 to 2027.
Adoption of FIN 48
SunTrust adopted FIN 48 effective January 1, 2007. The cumulative effect adjustment recorded upon adoption resulted in an
increase to unrecognized tax benefits of $55.0 million ($46.0 million on an after-tax basis), with offsetting adjustments to
equity and goodwill. The Company classifies interest and penalties related to its tax positions as a component of income tax
expense. As of December 31, 2007, the Company’s cumulative unrecognized tax benefits amounted to $405.4 million
($316.2 million on an after-tax basis). Of this amount, $351.5 million ($277.5 million on an after-tax basis) would affect the
Company’s effective tax rate, if recognized. The remaining $53.9 million ($38.7 million on after after-tax basis) is expected
to impact goodwill, if recognized. After-tax interest expense related to unrecognized tax benefits was $18.0 million for the
year ended December 31, 2007. Cumulative unrecognized tax benefits included interest of $80.0 million ($52.0 million on an
after-tax basis) as of December 31, 2007. The Company continually evaluates the unrecognized tax benefits associated with
its uncertain tax positions. It is reasonably possible that the total unrecognized tax benefits as of December 31, 2007 could
decrease by an estimated $40.0 million ($26.0 million on an after-tax basis) by December 31, 2008, as a result of the
expiration of statutes of limitations and potential settlements with federal and state taxing authorities. It is also reasonably
possible that this decrease could be substantially offset by new matters arising during the same period. The Company files
consolidated and separate income tax returns in the United States Federal jurisdiction and in various state jurisdictions. The
Company’s Federal returns through 1998 have been examined by the Internal Revenue Services (“IRS”) and issues for tax
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