Fannie Mae 2013 Annual Report Download - page 277

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-53
Benefit for Income Taxes
The following table displays the components of our benefit for federal income taxes for the years ended December 31, 2013,
2012 and 2011.
For the Year Ended December 31,
2013 2012 2011
(Dollars in millions)
Current income tax (provision) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,067) $ — $ 90
Deferred income tax benefit (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,482 — —
Benefit for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45,415 $ — $ 90
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(1) Amount excludes the income tax effect of items recognized directly in “Fannie Mae stockholders’ equity (deficit).”
We did not have any settlements with the IRS in 2013 or 2012. During 2011, we received a refund of $1.1 billion from the
IRS related to the carryback of our 2009 operating loss to the 2008 and 2007 tax years. In addition, we effectively settled our
2007 and 2008 tax years with the IRS and, as a result, we recognized an income tax benefit of $90 million in our consolidated
statement of operations and comprehensive loss for 2011.
The following table displays the difference between our effective tax rates and the statutory federal tax rates for the years
ended December 31, 2013, 2012 and 2011, respectively.
For the Year Ended December 31,
2013 2012 2011
Statutory corporate tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.0 % 35.0 % 35.0 %
Tax-exempt interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.2)(0.7) 0.9
Equity investments in affordable housing projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.5)(3.9) 4.8
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2 0.2 1.0
Valuation allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (151.3)(30.6)(41.2)
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (117.8)% — % 0.5 %
Our effective tax rate is the benefit for federal income taxes expressed as a percentage of income or loss before federal
income taxes. Our effective tax rate was different from the federal statutory rate of 35% for the year ended December 31,
2013 due primarily to the release of our valuation allowance for our net deferred tax assets that resulted in the recognition of
$58.3 billion in our benefit for income taxes. Our effective tax rate was different from the federal statutory rate of 35% for the
year ended December 31, 2012 due primarily to the decrease to our valuation allowance for our net deferred tax assets that
resulted in the recognition of $5.3 billion in our benefit for income taxes, fully offset by a corresponding decrease in our
deferred tax assets. Our effective tax rate was different from the federal statutory rate of 35% for the year ended December
31, 2011 due primarily to the increase to our valuation allowance for our net deferred tax assets that resulted in the
recognition of $7.0 billion in our provision for income taxes, fully offset by a corresponding increase in our deferred tax
assets. Our effective tax rate for the year ended December 31, 2011 was further impacted by the release of a portion of the
valuation allowance for deferred tax assets resulting from a settlement agreement reached with the IRS for our unrecognized
tax benefits for the tax years 2007 through 2008.
Unrecognized Tax Benefits
We had $514 million, $648 million, and $758 million of unrecognized tax benefits as of December 31, 2013, 2012 and 2011,
respectively. Of these amounts, we had $60 million as of December 31, 2010 that was resolved favorably in 2011 and
reduced our effective tax rate in 2011. There were no unrecognized tax benefits as of December 31, 2013 and 2012 that
would reduce our effective tax rate in future periods. As of December 31, 2013 and 2012, we had no accrued interest payable
related to unrecognized tax benefits. For the years ended December 31, 2013, 2012 and 2011, we had no interest expense
related to unrecognized tax benefits and did not have any tax expense related to tax penalties.
The IRS is currently examining our federal income tax returns related to the 2009 and 2010 tax years. We reasonably expect
to conclude the audit with the IRS by the end of 2014. As a result of this conclusion, it is reasonably possible that a $514