Fannie Mae 2008 Annual Report Download - page 353

12. Income Taxes
Provision (Benefit) for Income Taxes
We operate as a government-sponsored enterprise. We are subject to federal income tax, but we are exempt
from state and local income taxes. The following table displays the components of our provision for federal
income taxes for the years ended December 31, 2008, 2007 and 2006.
2008 2007 2006
For the Year Ended
December 31,
(Dollars in millions)
Current income tax expense
(1)
..................................... $ 403 $ 757 $745
Deferred income tax expense (benefit)
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,346 (3,809) (579)
Other, non-current tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (39) —
Provision (benefit) for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,749 $(3,091) $ 166
(1)
Does not reflect the tax impact of extraordinary gains (losses) as this amount is recorded in our consolidated
statements of operations, net of tax effect. We recorded a tax benefit of $8 million and a tax expense of $7 million
related to extraordinary gains (losses) for the year ended December 31, 2007 and 2006, respectively. We recorded no
tax benefit for extraordinary losses in 2008.
(2)
Amount excludes the income tax effect of items directly recognized in “Stockholders’ equity (deficit)” where we did
not establish a valuation allowance.
The following table displays the difference between our effective tax rates and the statutory federal tax rates
for the years ended December 31, 2008, 2007 and 2006, respectively.
2008 2007 2006
For the Year Ended
December 31,
Statutory corporate tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.0% 35.0% 35.0%
Tax-exempt interest and dividends-received deductions . . . . . . . . . . . . . . . . . . . . . . . . . 0.5 4.6 (6.0)
Equity investments in affordable housing projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 20.1 (25.0)
Other........................................................... — 0.6 (0.1)
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (68.2) — —
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30.6)% 60.3% 3.9%
Our effective tax rate is the provision (benefit) for federal income taxes, excluding the tax effect of
extraordinary items, expressed as a percentage of income or loss before federal income taxes. The effective tax
rate for the years ended December 31, 2008, 2007 and 2006 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, the establishment of a valuation allowance of
$30.8 billion in the year ended December 31, 2008 and our holdings of tax-exempt investments.
F-75
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)