Wells Fargo 2015 Annual Report Download - page 254

Note 21: Income Taxes
Table 21.1 presents the components of income tax expense.
Table 21.1: Income Tax Expense
Year ended December 31,
(in millions) 2015 2014 2013
Current:
Federal $ 10,822 7,321 4,601
State and local 1,669 520 736
Foreign 139 112 91
Total current 12,630 7,953 5,428
Deferred:
Federal (2,047) 2,117 4,457
State and local (235) 224 522
Foreign 17 13 (2)
Total deferred (2,265) 2,354 4,977
Total $ 10,365 10,307 10,405
The tax effects of our temporary differences that gave rise to
significant portions of our deferred tax assets and liabilities are
presented in Table 21.2.
Table 21.2: Net Deferred Tax Liability
December 31,
(in millions) 2015 2014
Deferred tax assets
Allowance for loan losses $ 4,363 4,592
Deferred compensation and employee
benefits 4,589 4,608
Accrued expenses 1,460 1,213
PCI loans 1,816 1,935
Net operating loss and tax credit carry
forwards 528 631
Other 1,448 1,700
Total deferred tax assets 14,204 14,679
Deferred tax assets valuation
allowance (358) (426)
Deferred tax liabilities
Mortgage servicing rights (5,399) (5,860)
Leasing (3,866) (4,057)
Mark to market, net (5,471) (7,635)
Intangible assets (1,233) (1,494)
Net unrealized gains on investment
securities (1,008) (2,737)
Insurance reserves (2,071) (2,087)
Other (2,063) (1,635)
Total deferred tax liabilities (21,111) (25,505)
Net deferred tax liability (1) $ (7,265) (11,252)
(1) Included in accrued expenses and other liabilities.
Deferred taxes related to net unrealized gains (losses) on
investment securities, net unrealized gains (losses) on
derivatives, foreign currency translation, and employee benefit
plan adjustments are recorded in cumulative OCI (see Note 23
(Other Comprehensive Income)). These associated adjustments
increased OCI by $1.8 billion in 2015.
We have determined that a valuation reserve is required for
2015 in the amount of $358 million predominantly attributable
to deferred tax assets in various state and foreign jurisdictions
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, 2015, we had net operating loss carry
forwards with related deferred tax assets of $528 million. If
these carry forwards are not utilized, they will expire in varying
amounts through 2035.
At December 31, 2015, we had undistributed foreign
earnings of $2.0 billion related to foreign subsidiaries. We
intend to reinvest these earnings indefinitely outside the U.S.
and accordingly have not provided $557 million of income tax
liability on these earnings.
Table 21.3 reconciles the statutory federal income tax
expense and rate to the effective income tax expense and rate.
Our effective tax rate is calculated by dividing income tax
expense by income before income tax expense less the net
income from noncontrolling interests.
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