Freddie Mac 2015 Annual Report Download - page 282

Financial Statements Notes to the Consolidated Financial Statements | Note 11
Freddie Mac 2015 Form 10-K 280
NOTE 11: INCOME TAXES
INCOME TAX (EXPENSE) BENEFIT
The total income tax (expense) benefit includes:
• Deferred tax (expense) benefit, which represents the net change in the deferred tax asset or liability
balance during the year and any change in the valuation allowance, if any; and
• Current tax (expense) benefit, which represents the amount of tax currently payable to or receivable
from a tax authority, including related interest and penalties, and amounts accrued for unrecognized
tax benefits, if any.
Income tax (expense) benefit excludes the tax effects related to adjustments recorded to other
comprehensive income, such as unrealized gains and losses on available-for-sale securities.
The table below presents the components of our federal income tax (expense) benefit for 2015, 2014,
and 2013. We are exempt from state and local income taxes.
Year Ended December 31,
(in millions) 2015 2014 2013
Current income tax (expense) benefit $ (1,243) $ (1,028) $ (117)
Deferred income tax (expense) benefit (1,655) (2,284) 23,422
Total income tax (expense) benefit $ (2,898) $ (3,312) $ 23,305
The decrease in income tax expense from 2014 to 2015 is primarily due to a decrease in pre-tax income.
The income tax benefit for 2013 primarily relates to the release of the valuation allowance against our net
deferred tax assets.
The table below presents reconciliation between our federal statutory income tax rate and our effective
tax rate for 2015, 2014 and 2013.
Year Ended December 31,
2015 2014 2013
(dollars in millions) Amount Percent Amount Percent Amount Percent
Statutory corporate tax rate $ (3,246) 35.0% $ (3,851) 35.0% $ (8,877) 35.0 %
Tax-exempt interest 52 (0.6) 73 (0.7)101 (0.4)
Tax credits 346 (3.7)438 (4.0)495 (2.0)
Valuation allowance:
Current year activity — —— — 5,156 (20.3)
Release of valuation allowance — —— — 26,369 (104.0)
Unrecognized tax benefits — —— — — —
Other — —— — 138 (0.5)
Total valuation allowance — —— — 31,663 (124.8)
Other (50) 0.5 28 (0.2)(77) 0.3
Effective tax rate $ (2,898) 31.2% $ (3,312) 30.1% $ 23,305 (91.9)%
DEFERRED TAX ASSETS, NET
We use the asset and liability method of accounting for income taxes for financial reporting purposes.
Under this method, deferred tax assets and liabilities are recognized based upon the expected future tax