Wells Fargo 2015 Annual Report Download - page 255

Table 21.3: Effective Income Tax Expense and Rate
2015 2014
December 31,
2013
(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
Tax credits
Life insurance
Leveraged lease tax expense
Other
Effective income tax expense and rate
Amount
$ 11,641
1,025
(641)
(1,108)
(186)
140
(506)
$ 10,365
Rate
35.0%
3.1
(1.9)
(3.3)
(0.6)
0.4
(1.5)
31.2%
$
$
Amount
11,677
971
(550)
(1,074)
(179)
158
(696)
10,307
Rate
35.0%
2.9
(1.6)
(3.2)
(0.5)
0.5
(2.2)
30.9%
$
$
Amount
11,299
964
(490)
(967)
(173)
302
(530)
10,405
Rate
35.0%
3.0
(1.5)
(3.0)
(0.5)
0.9
(1.7)
32.2%
The effective tax rate for 2015 includes net reductions in
reserves for uncertain tax positions primarily due to audit
resolutions of prior period matters with U.S. federal and state
taxing authorities. The effective tax rate for 2014 included 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.
Table 21.4 presents the change in unrecognized tax benefits.
Table 21.4: Change in Unrecognized Tax Benefits
Year ended
December 31,
(in millions) 2015 2014
Balance at beginning of year $ 5,002 5,528
Additions:
For tax positions related to the current
year 196 412
For tax positions related to prior years 225 324
Reductions:
For tax positions related to prior years (413) (213)
Lapse of statute of limitations (22) (50)
Settlements with tax authorities (182) (999)
Balance at end of year $ 4,806 5,002
Of the $4.8 billion of unrecognized tax benefits at
December 31, 2015, approximately $3.0 billion would, if
recognized, affect the effective tax rate. The remaining
$1.8 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. As of December 31, 2015 and 2014, we have
accrued approximately $524 million and $660 million for the
payment of interest and penalties, respectively. In 2015, we
recognized in income tax expense a net tax benefit related to
interest and penalties of $79 million. In 2014, we recognized in
income tax expense a net tax benefit related to interest and
penalties of $142 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 2011 through 2014 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 prior
IRS examinations for the periods 2003 through 2010, and we are
appealing various issues related to IRS examinations of
Wachovia’s 2006 through 2008 tax years. For the 2003 through
2006 Wells Fargo periods and the 2006 through 2008 Wachovia
periods, 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. 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
$600 million to our gross unrecognized tax benefits.
Wells Fargo & Company
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