Fannie Mae 2007 Annual Report Download - page 246

December 31, 2007. We recorded tax expense of $7 million and $29 million related to extraordinary gains for
the years ended December 31, 2006 and 2005, respectively.
The following table displays the difference between our effective tax rates and the statutory federal tax rates
for the years ended December 31, 2007, 2006 and 2005 respectively.
2007 2006 2005
For the Year Ended
December 31,
Statutory corporate tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.0% 35.0% 35.0%
Tax-exempt interest and dividends-received deductions. . . . . . . . . . . . . . . . . . . . . . . . . 4.6 (6.0) (4.0)
Equity investments in affordable housing projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.1 (25.0) (13.1)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6 (0.1) (1.0)
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.3% 3.9% 16.9%
The effective tax rate is the provision for federal income taxes, excluding the tax effect of extraordinary items
and cumulative effect of change in accounting principle, expressed as a percentage of income before federal
income taxes. The effective tax rate for the years ended December 31, 2007, 2006 and 2005 is different from
the federal statutory rate of 35% primarily due to the benefits of our investments in housing projects eligible
for the low-income housing tax credit and other equity investments that provide tax credits, as well as our
holdings of tax-exempt investments.
The following table displays our deferred tax assets and deferred tax liabilities as of December 31, 2007 and
2006.
2007 2006
(1)
As of December 31,
(Dollars in millions)
Deferred tax assets:
Debt and derivative instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,644 $4,796
Allowance for loan losses and basis in acquired property, net . . . . . . . . . . . . . . . . . . . . 2,070 556
Partnership credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,883 1,081
Net guaranty assets and obligations and related credits. . . . . . . . . . . . . . . . . . . . . . . . . 1,752 1,391
Mortgage and mortgage-related assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 854 370
Cash fees and other upfront payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 196
Employee compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208 245
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,080 8,635
Deferred tax liabilities:
Partnership and equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 75
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 55
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 130
Net deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,967 $8,505
(1)
Prior year amounts have been reclassified to conform to the current year presentation.
We have not established a valuation allowance against our net deferred tax assets as of December 31, 2007, as
we believe that it is more likely than not that all of these assets will be realized. We evaluate the realizability
of our deferred tax assets based on the weight of all positive and negative evidence pursuant to SFAS 109.
After considering all available evidence, including estimates of future taxable income, we believe that our net
deferred tax assets are realizable over the periods in which they are available. Should future events
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FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)