US Bank 2015 Annual Report Download - page 128

NOTE 19 INCOME TAXES
The components of income tax expense were:
Year Ended December 31 (Dollars in Millions) 2015 2014 2013
Federal
Current .................................................................................. $1,956 $1,888 $1,885
Deferred ................................................................................. (223) (126) (83)
Federal income tax ....................................................................... 1,733 1,762 1,802
State
Current .................................................................................. 346 331 216
Deferred ................................................................................. 18 (6) 14
State income tax ......................................................................... 364 325 230
Total income tax provision ................................................................. $2,097 $2,087 $2,032
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) 2015 2014 2013
Tax at statutory rate ........................................................................ $2,810 $2,798 $2,717
State income tax, at statutory rates, net of federal tax benefit ....................................... 237 211 150
Tax effect of
Tax credits and benefits, net of related expenses ............................................... (700) (701) (648)
Tax-exempt income ...................................................................... (201) (205) (212)
Noncontrolling interests ................................................................... (19) (20) 37
Other items ............................................................................. (30)(a) 4 (12)
Applicable income taxes .................................................................... $2,097 $2,087 $2,032
(a) Includes the resolution of certain tax matters with taxing authorities.
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, 2012, 2013 and 2014 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) 2015 2014 2013
Balance at beginning of period .................................................................... $267 $264 $302
Additions (reductions) for tax positions taken in prior years .............................................. (17) 31 44
Additions for tax positions taken in the current year ................................................... 13 4 –
Exam resolutions ............................................................................... (17) (22) (56)
Statute expirations .............................................................................. (3) (10) (26)
Balance at end of period ......................................................................... $243 $267 $264
The total amount of unrecognized tax positions that, if
recognized, would impact the effective income tax rate as of
December 31, 2015, 2014 and 2013, were $165 million,
$192 million and $181 million, respectively. The Company
classifies interest and penalties related to unrecognized tax
positions as a component of income tax expense. At
December 31, 2015, the Company’s unrecognized tax
position balance included $30 million in accrued interest.
During the years ended December 31, 2015, 2014 and 2013
the Company recorded approximately $(1) million, $4 million
and $(12) million, respectively, in interest on unrecognized tax
positions.
While certain examinations may be concluded, statutes
may lapse or other developments may occur, the Company
does not believe there will be a significant increase or decrease
in uncertain tax positions over the next twelve months.
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