Fannie Mae 2014 Annual Report Download - page 259

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-44
10. Income Taxes
Provision (Benefit) for Income Taxes
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 (benefit) for federal income taxes for the years ended
December 31, 2014, 2013 and 2012.
For the Year Ended December 31,
2014 2013 2012
(Dollars in millions)
Current income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,879 $ 3,067 $ —
Deferred income tax provision (benefit)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,062 (48,482) —
Provision (benefit) for federal income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,941 $ (45,415) $ —
__________
(1) Amount excludes the income tax effect of items recognized directly in “Fannie Mae stockholders’ equity.”
The following table displays the difference between our effective tax rates and the statutory federal tax rates for the years
ended December 31, 2014, 2013 and 2012, respectively.
For the Year Ended December 31,
2014 2013 2012
Statutory corporate tax rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.0 % 35.0 % 35.0 %
Equity investments in affordable housing projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.8)(1.5)(3.9)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4 — (0.5)
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.8)(151.3)(30.6)
Effective tax rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.8 % (117.8)% — %
Our effective tax rate is the provision (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, 2014 primarily due to the benefits of our investments in housing projects eligible for low-income housing tax
credits. The decrease in our deferred tax valuation allowance reflects the expiration of certain capital loss carryforwards that
are included as a component of “Other” in the table above. Our effective tax rate was different from the federal statutory rate
of 35% for the year ended December 31, 2013 primarily due to the release of our valuation allowance for our net deferred tax
assets that resulted in the recognition of $58.3 billion benefit in our provision (benefit) for income taxes. Our effective tax
rate was different from the federal statutory rate of 35% for the year ended December 31, 2012 primarily due 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.
Deferred Tax Assets and Liabilities
We recognize deferred tax assets and liabilities for future tax consequences arising from differences between the carrying
amounts of existing assets and liabilities under GAAP and their respective tax bases.
We evaluate our deferred tax assets for recoverability using a consistent approach which considers the relative impact of
negative and positive evidence, including our historical profitability and projections of future taxable income.
As of March 31, 2013, after weighing all of the evidence, we determined that the positive evidence in favor of releasing the
valuation allowance, particularly the evidence that was objectively verifiable, outweighed the negative evidence against
releasing the allowance. Therefore, we concluded that it was more likely than not that our deferred tax assets, except the
deferred tax assets relating to capital loss carryforwards, would be realized. As a result, we released the valuation allowance
on our deferred tax assets as of March 31, 2013, except for amounts that were expected to be released against income before
federal income taxes for the remainder of that year.