Wells Fargo 2014 Annual Report Download - page 251

December 31,
2014 2013 2012
(in millions)
Statutory federal income tax expense and rate
Change in tax rate resulting from:
State and local taxes on income, net of federal income tax
benefit
Tax-exempt interest
Excludable dividends
Tax credits
Life insurance
Leveraged lease tax expense
Other
Effective income tax expense and rate
Amount
$ 11,677
971
(550)
(70)
(1,074)
(179)
158
(626)
$ 10,307
Rate
35.0%
2.9
(1.6)
(0.2)
(3.2)
(0.5)
0.5
(2.0)
30.9%
$
$
Amount
11,299
964
(490)
(49)
(967)
(173)
302
(481)
10,405
Rate
35.0%
3.0
(1.5)
(0.2)
(3.0)
(0.5)
0.9
(1.5)
32.2%
$
$
Amount
9,800
856
(414)
(132)
(815)
(524)
347
(15)
9,103
Rate
35.0%
3.1
(1.5)
(0.5)
(2.9)
(1.9)
1.2
—
32.5%
The effective tax rate for 2014, includes a net reduction in
the reserve for uncertain tax positions primarily due to the
resolution of prior period matters with state taxing authorities.
The effective tax rate for 2013, included a net reduction in the
reserve for uncertain tax positions primarily due to settlements
with authorities regarding certain cross border transactions and
tax benefits recognized from the realization for tax purposes of a
previously written down investment. The 2012 effective tax rate
included a tax benefit resulting from the surrender of previously
written-down Wachovia life insurance investments.
The change in unrecognized tax benefits follows:
Year ended
December 31,
(in millions) 2014 2013
Balance at beginning of year
Additions:
$ 5,528 6,069
For tax positions related to the current
year
For tax positions related to prior years
Reductions:
412
324
427
283
For tax positions related to prior years
Lapse of statute of limitations
Settlements with tax authorities
(213)
(50)
(999)
(540)
(74)
(637)
Balance at end of year $ 5,002 5,528
Of the $5.0 billion of unrecognized tax benefits at
December 31, 2014, approximately $3.1 billion would, if
recognized, affect the effective tax rate. The remaining
$1.9 billion of unrecognized tax benefits relates to income tax
positions on temporary differences.
We recognize interest and penalties as a component of
income tax expense. At December 31, 2014 and 2013, we have
accrued approximately $660 million and $832 million for the
payment of interest and penalties, respectively. In 2014, we
recognized in income tax expense, a net tax benefit related to
interest and penalties of $142 million. In 2013, we recognized in
income tax expense, interest and penalties of $69 million.
We are subject to U.S. federal income tax as well as income
tax in numerous state and foreign jurisdictions. We are routinely
examined by tax authorities in these various jurisdictions. The
IRS is currently examining the 2007 through 2012 consolidated
federal income tax returns of Wells Fargo & Company and its
subsidiaries. In addition, we are currently subject to examination
by various state, local and foreign taxing authorities. With few
exceptions, Wells Fargo and its subsidiaries are not subject to
federal, state, local and foreign income tax examinations for
taxable years prior to 2007. Wachovia Corporation and its
subsidiaries are no longer subject to federal examination and,
with limited exception, are no longer subject to state, local and
foreign income tax examinations.
We are litigating or appealing various issues related to our
prior IRS examinations for the periods 2003 through 2006, and
we are appealing various issues related to IRS examinations of
Wachovia’s 2006 through 2008 tax years. We have paid the IRS
the contested income tax and interest associated with these
issues and refund claims have been filed for the respective years.
During 2014 we filed a petition for certiorari to the U.S. Supreme
Court, which was denied, in connection with a lease
restructuring transaction. It is possible that one or more of these
examinations, appeals or litigation may be resolved within the
next twelve months resulting in a decrease of up to $700 million
to our gross unrecognized tax benefits.
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