US Bank 2011 Annual Report Download - page 111

NOTE 19 Income Taxes
The components of income tax expense were:
Year Ended December 31 (Dollars in Millions) 2011 2010 2009
Federal
Current ....................................................................................................... $ 907 $1,105 $ 765
Deferred ..................................................................................................... 689 (339) (499)
Federal income tax ........................................................................................ 1,596 766 266
State
Current ....................................................................................................... 186 200 175
Deferred ..................................................................................................... 59 (31) (46)
State income tax .......................................................................................... 245 169 129
Total income tax provision ................................................................................ $1,841 $ 935 $ 395
A reconciliation of expected income tax expense at the federal statutory rate of 35 percent to the Company’s applicable income
tax expense follows:
Year Ended December 31 (Dollars in Millions) 2011 2010 2009
Tax at statutory rate ......................................................................................... $2,320 $1,470 $ 921
State income tax, at statutory rates, net of federal tax benefit ............................................... 159 110 84
Tax effect of
Tax credits, net of related expenses ...................................................................... (458) (462) (421)
Tax-exempt income ....................................................................................... (226) (214) (202)
Noncontrolling interests ................................................................................... 29 18 (11)
Other items ................................................................................................ 17 13 24
Applicable income taxes ..................................................................................... $1,841 $ 935 $ 395
The tax effects of fair value adjustments on securities
available-for-sale, derivative instruments in cash flow hedges,
pension and post-retirement plans and certain tax benefits
related to stock options are recorded directly to shareholders’
equity as part of other comprehensive income (loss).
In preparing its tax returns, the Company is required to
interpret complex tax laws and regulations and utilize income
and cost allocation methods to determine its taxable income.
On an ongoing basis, the Company is subject to examinations
by federal, state, local and foreign taxing authorities that may
give rise to differing interpretations of these complex laws,
regulations and methods. Due to the nature of the
examination process, it generally takes years before these
examinations are completed and matters are resolved.
Included in earnings for 2011, 2010 and 2009 were changes
in income tax expense and associated liabilities related to the
resolution of various state income tax examinations which
cover varying years from 2001 through 2008 in different
states. The resolution of these cycles was the result of
negotiations held between the Company and representatives
of various taxing authorities throughout the examinations.
Federal tax examinations for all years ending through
December 31, 2006, are completed and resolved. The
Company’s tax returns for the years ended December 31,
2007 and 2008 are under examination by the Internal
Revenue Service, and during 2011, the Internal Revenue
Service began its examination of the Company’s tax returns
for the years ended December 31, 2009 and 2010. The years
open to examination by state and local government
authorities vary by jurisdiction.
A reconciliation of the changes in the federal, state and foreign unrecognized tax position balances are summarized as follows:
Year Ended December 31 (Dollars in Millions) 2011 2010 2009
Balance at beginning of period ................................................................................... $532 $440 $283
Additions for tax positions taken in prior years ................................................................... 24 116 31
Additions for tax positions taken in the current year ............................................................. 2 30 145
Exam resolutions ................................................................................................. (70) — (12)
Statute expirations ............................................................................................... (9) (54) (7)
Balance at end of period ......................................................................................... $479 $532 $440
U.S. BANCORP 109