JP Morgan Chase 2014 Annual Report Download - page 73

JPMorgan Chase & Co./2014 Annual Report 71
Noncompensation expense increased in 2013 from the
prior year. The increase was due to higher other expense,
reflecting $11.1 billion of firmwide legal expense,
predominantly in Corporate, representing additional
reserves for several litigation and regulatory proceedings,
compared with $5.0 billion of expense in the prior year.
Investments in the businesses, higher legal-related
professional services expense, and costs related to the
Firm’s control agenda also contributed to the increase. The
increase was offset partially by lower mortgage servicing
expense in CCB and lower occupancy expense for the Firm,
which predominantly reflected the absence of charges
recognized in 2012 related to vacating excess space.
Income tax expense
Year ended December 31,
(in millions, except rate) 2014 2013 2012
Income before income tax expense $29,792 $25,914 $28,917
Income tax expense 8,030 7,991 7,633
Effective tax rate 27.0% 30.8% 26.4%
2014 compared with 2013
The decrease in the effective tax rate from the prior year
was largely attributable to the effect of the lower level of
nondeductible legal-related penalties, partially offset by
higher 2014 pretax income, in combination with changes in
the mix of income and expense subject to U.S. federal, state
and local income taxes, and lower tax benefits associated
with tax adjustments and the settlement of tax audits. For
additional information on income taxes, see Critical
Accounting Estimates Used by the Firm on pages 161–165
and Note 26.
2013 compared with 2012
The increase in the effective tax rate compared with the
prior year was predominantly due to the effect of higher
nondeductible legal-related penalties in 2013. This was
largely offset by the impact of lower pretax income, in
combination with changes in the mix of income and expense
subject to U.S. federal, state and local taxes, business tax
credits, tax benefits associated with prior year tax
adjustments and audit resolutions.