Wells Fargo 2009 Annual Report Download - page 176

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Year ended December 31,
(in millions) 2009 2008
Deferred tax assets
Allowance for loan losses $ 9,178 7,859
Deferred compensation
and employee benefits 3,026 2,016
Accrued expenses,
deductible when paid 2,235 1,536
Basis difference in investments 208 —
PCI loans 8,645 13,806
Mark to market, net —194
Net unrealized losses on
securities available for sale —3,887
Net operating loss and tax
credit carry forwards 3,370 520
Other 1,706 1,421
Total deferred tax assets 28,368 31,239
Deferred tax assets valuation allowance (827) (973)
Deferred tax liabilities
Mortgage servicing rights (8,073) (5,606)
Leasing (3,439) (2,617)
Basis difference in investments —(325)
Mark to market, net (4,853) —
Intangible assets (5,567) (5,625)
Net unrealized gains on
securities available for sale (2,079) —
Other (318) (2,229)
Total deferred tax liabilities (24,329) (16,402)
Net deferred tax asset $ 3,212 13,864
The components of income tax expense were:
The tax benefit related to the exercise of employee
stock options recorded in stockholders’ equity was
$18 million, $123 million and $210 million for 2009, 2008
and 2007, respectively.
Note 20: Income Taxes
Year ended December 31,
(in millions) 2009 2008 2007
Current:
Federal $(3,952) 2,043 3,181
State and local (334) 171 284
Foreign 164 30 136
Total current (4,122) 2,244 3,601
Deferred:
Federal 8,709 (1,506) (32)
State and local 794 ——
Foreign (50) (136) 1
Total deferred 9,453 (1,642) (31)
Total $ 5,331 602 3,570
We had a net deferred tax asset of $3.2 billion and
$13.9 billion for 2009 and 2008, respectively. Our net deferred
tax asset and the tax effects of temporary differences that
gave rise to significant portions of these deferred tax assets
and liabilities are presented in the preceding table.
Deferred taxes related to net unrealized losses on securi-
ties available for sale, net unrealized gains on derivatives,
foreign currency translation, and employee benefit plan
adjustments are recorded in cumulative OCI (see Note 22 in
this Report). These associated adjustments decreased OCI by
$5.9 billion. Deferred taxes totaling $2.7 billion were recorded
against goodwill related to purchase price refinements (see
Note 2 in this Report). Deferred taxes of $1.4 billion were also
recorded on the purchase of the Prudential noncontrolling
interest on December 31, 2009, with the associated adjustment
increasing stockholders’ equity.
We have determined that a valuation reserve is required
for 2009 in the amount of $827 million primarily attributable
to deferred tax assets in various state and foreign jurisdic-
tions where we believe it is more likely than not that these
deferred tax assets will not be realized. In these jurisdictions,
carry back limitations, lack of sources of taxable income,
and tax planning strategy limitations contributed to our
conclusion that the deferred tax assets would not be realizable.
We have concluded that it is more likely than not that the
remaining deferred tax assets will be realized based on our
history of earnings, sources of taxable income in carry back
periods, and our ability to implement tax planning strategies.
At December 31, 2009, we had net operating loss and
credit carry forwards with related deferred tax assets of
$3.0 billion and $366 million, respectively. If these carry for-
wards are not utilized, they will expire in varying amounts
through 2029.
At December 31, 2009, Wachovia had undistributed
foreign earnings of $1.4 billion related to foreign subsidiaries.
We intend to reinvest these earnings indefinitely outside
the U.S. and accordingly have not provided $464 million
of income tax liability on these earnings.