JP Morgan Chase 2015 Annual Report Download - page 296

286 JPMorgan Chase & Co./2015 Annual Report
these requirements and needs, the Firm has determined
that the undistributed earnings of certain of its subsidiaries
would be indefinitely reinvested to fund current and future
growth of the related businesses. As management does not
intend to use the earnings of these subsidiaries as a source
of funding for its U.S. operations, such earnings will not be
distributed to the U.S. in the foreseeable future. For 2015,
pretax earnings of $3.5 billion were generated and will be
indefinitely reinvested in these subsidiaries. At
December 31, 2015, the cumulative amount of
undistributed pretax earnings in these subsidiaries were
$34.6 billion. If the Firm were to record a deferred tax
liability associated with these undistributed earnings, the
amount would be $8.2 billion at December 31, 2015.
These undistributed earnings are related to subsidiaries
located predominantly in the U.K. where the 2015 statutory
tax rate was 20.25%.
Affordable housing tax credits
The Firm recognized $1.6 billion, $1.6 billion and $1.5
billion of tax credits and other tax benefits associated with
investments in affordable housing projects within income
tax expense for the years 2015, 2014 and 2013,
respectively. The amount of amortization of such
investments reported in income tax expense under the
current period presentation during these years was $1.1
billion, $1.1 billion and $989 million, respectively. The
carrying value of these investments, which are reported in
other assets on the Firm’s Consolidated balance sheets, was
$7.7 billion and $7.3 billion at December 31, 2015 and
2014, respectively. The amount of commitments related to
these investments, which are reported in accounts payable
and other liabilities on the Firm’s Consolidated balance
sheets, was $2.0 billion and $1.8 billion at December 31,
2015 and 2014, respectively.
Deferred taxes
Deferred income tax expense/(benefit) results from
differences between assets and liabilities measured for
financial reporting purposes versus income tax return
purposes. Deferred tax assets are recognized if, in
management’s judgment, their realizability is determined to
be more likely than not. If a deferred tax asset is
determined to be unrealizable, a valuation allowance is
established. The significant components of deferred tax
assets and liabilities are reflected in the following table as
of December 31, 2015 and 2014.
December 31, (in millions) 2015 2014
Deferred tax assets
Allowance for loan losses $ 5,343 $ 5,756
Employee benefits 2,972 3,378
Accrued expenses and other 7,299 8,637
Non-U.S. operations 5,365 5,106
Tax attribute carryforwards 2,602 570
Gross deferred tax assets 23,581 23,447
Valuation allowance (735) (820)
Deferred tax assets, net of valuation
allowance $ 22,846 $ 22,627
Deferred tax liabilities
Depreciation and amortization $ 3,167 $ 3,073
Mortgage servicing rights, net of
hedges 4,968 5,533
Leasing transactions 3,042 2,495
Non-U.S. operations 4,285 4,444
Other, net 4,419 5,392
Gross deferred tax liabilities 19,881 20,937
Net deferred tax assets $ 2,965 $ 1,690
JPMorgan Chase has recorded deferred tax assets of $2.6
billion at December 31, 2015, in connection with U.S.
federal, state and local, and non-U.S. net operating loss
(“NOL”) carryforwards and foreign tax credit carryforwards.
At December 31, 2015, total U.S. federal NOL
carryforwards were approximately $5.2 billion, state and
local NOL carryforwards were $509 million, and non-U.S.
NOL carryforwards were $288 million. If not utilized, the
U.S. federal NOLs will expire between 2025 and 2034 and
the state and local and non-U.S. NOL carryforwards will
expire between 2016 and 2017. Non-U.S. tax credit
carryforwards were $704 million and will expire by 2023.
The valuation allowance at December 31, 2015, was due to
losses associated with non-U.S. subsidiaries.