US Bank 2014 Annual Report Download - page 127

NOTE 19 INCOME TAXES
The components of income tax expense were:
Year Ended December 31 (Dollars in Millions) 2014 2013 2012
Federal
Current ........................................................................................................... $1,888 $1,885 $1,853
Deferred .......................................................................................................... (126) (83) 45
Federal income tax ............................................................................................ 1,762 1,802 1,898
State
Current ........................................................................................................... 331 216 334
Deferred .......................................................................................................... (6) 14 4
State income tax ............................................................................................... 325 230 338
Total income tax provision ..................................................................................... $2,087 $2,032 $2,236
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) 2014 2013 2012
Tax at statutory rate .............................................................................................. $2,798 $2,717 $2,704
State income tax, at statutory rates, net of federal tax benefit .................................................... 211 150 220
Tax effect of
Tax credits and benefits, net of related expenses .............................................................. (701) (648) (479)
Tax-exempt income ............................................................................................ (205) (212) (219)
Noncontrolling interests ....................................................................................... (20) 37 55
Other items .................................................................................................... 4 (12) (45)
Applicable income taxes .......................................................................................... $2,087 $2,032 $2,236
The tax effects of fair value adjustments on securities
available-for-sale, derivative instruments in cash flow
hedges, foreign currency translation adjustments, 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. Federal tax examinations for all years ending
through December 31, 2010, are completed and resolved.
The Company’s tax returns for the years ended
December 31, 2011 and 2012 are under examination by the
Internal Revenue Service. 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) 2014 2013 2012
Balance at beginning of period ................................................................................ $264 $302 $ 479
Additions for tax positions taken in prior years ................................................................ 31 44 73
Additions for tax positions taken in the current year ........................................................... 4–5
Exam resolutions ............................................................................................. (22) (56) (245)
Statute expirations ............................................................................................ (10) (26) (10)
Balance at end of period ...................................................................................... $267 $264 $ 302
The total amount of unrecognized tax positions that, if
recognized, would impact the effective income tax rate as of
December 31, 2014, 2013 and 2012, were $192 million, $181
million and $240 million, respectively. The Company
classifies interest and penalties related to unrecognized tax
positions as a component of income tax expense. At
December 31, 2014, the Company’s unrecognized tax
position balance included $31 million in accrued interest.
During the years ended December 31, 2014, 2013 and 2012
the Company recorded approximately $4 million, $(12)
million and $(8) million, respectively, in interest on
unrecognized tax positions.
U.S. BANCORP The power of potential
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