Fifth Third Bank 2014 Annual Report Download - page 140

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
138 Fifth Third Bancorp
Deferred income taxes are comprised of the following items at December 31:
($ in millions) 2014 2013
Deferred tax assets:
Allowance for loan and lease losses $ 463 554
Deferred compensation 113 109
Reserves 96 101
Reserve for unfunded commitments 47 57
State net operating losses 18 22
Other 189 180
Total deferred tax assets $926 1,023
Deferred tax liabilities:
Lease financing $896 865
Investments in joint ventures and partnership interests 329 381
MSRs 237 254
Other comprehensive income 231 44
Qualifying hedges and free-standing derivatives 105 97
Bank premises and equipment 103 114
State deferred taxes 81 76
Other 148 130
Total deferred tax liabilities $2,130 1,961
Total net deferred tax liability $(1,204) (938)
At December 31, 2014 and 2013, the Bancorp had recorded
deferred tax assets of $18 million and $22 million, respectively,
related to state net operating loss carryforwards. The deferred tax
assets relating to state net operating losses (primarily resulting from
leasing operations) are presented net of specific valuation
allowances of $19 million at December 31, 2014 and 2013. If these
carryforwards are not utilized, they will expire in varying amounts
through 2034.
The Bancorp has determined that a valuation allowance is not
needed against the remaining deferred tax assets as of December 31,
2014 or 2013. The Bancorp considered all of the positive and
negative evidence available to determine whether it is more likely
than not that the deferred tax assets will ultimately be realized and,
based upon that evidence, the Bancorp believes it is more likely than
not that the deferred tax assets recorded at December 31, 2014 and
2013 will ultimately be realized. The Bancorp reached this
conclusion as the Bancorp has taxable income in the carryback
period and it is expected that the Bancorp’s remaining deferred tax
assets will be realized through the reversal of its existing taxable
temporary differences and its projected future taxable income.
The IRS is currently examining the Bancorp’s 2010 and 2011
federal income tax returns. The statute of limitations for the
Bancorp’s federal income tax returns remains open for tax years
2010-2014. On occasion, as various state and local taxing
jurisdictions examine the returns of the Bancorp and its subsidiaries,
the Bancorp may agree to extend the statute of limitations for a
short period of time. Otherwise, with the exception of a few states
with insignificant uncertain tax positions, the statutes of limitations
for state income tax returns remain open only for tax years in
accordance with each state’s statutes.
Any interest and penalties incurred in connection with income
taxes are recorded as a component of income tax expense in the
Consolidated Financial Statements. During the years ended
December 31, 2014, 2013 and 2012, the Bancorp recognized an
immaterial amount of interest expense in connection with income
taxes. At December 31, 2014 and 2013, the Bancorp had accrued
interest liabilities, net of the related tax benefits, of $1 million. No
material liabilities were recorded for penalties related to income
taxes.
Retained earnings at December 31, 2014 and 2013 included
$157 million in allocations of earnings for bad debt deductions of
former thrift subsidiaries for which no income tax has been
provided. Under current tax law, if certain of the Bancorp’s
subsidiaries use these bad debt reserves for purposes other than to
absorb bad debt losses, they will be subject to federal income tax at
the current corporate tax rate.
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21. RETIREMENT AND BENEFIT PLANS
The Bancorp’s qualified defined benefit plan’s benefits were frozen
in 1998, except for grandfathered employees. The Bancorp’s other
retirement plans consist of nonqualified, supplemental retirement
plans, which are funded on an as needed basis. A majority of these
plans were obtained in acquisitions from prior years. The Bancorp
recognizes the overfunded and underfunded status of its pension
plans as an asset and liability in the Consolidated Balance Sheets.
The overfunded and underfunded amounts recognized in other assets and other liabilities, respectively, on the Consolidated Balance Sheets were
as follows as of December 31:
($ in millions) 2014 2013
Prepaid benefit cost $- 6
A
ccrued benefit liabilit
y
(52) (27)
Net underfunded status $(52) (21)