JP Morgan Chase 2015 Annual Report Download - page 297

JPMorgan Chase & Co./2015 Annual Report 287
Unrecognized tax benefits
At December 31, 2015, 2014 and 2013, JPMorgan Chase’s
unrecognized tax benefits, excluding related interest
expense and penalties, were $3.5 billion, $4.9 billion and
$5.5 billion, respectively, of which $2.1 billion, $3.5 billion
and $3.7 billion, respectively, if recognized, would reduce
the annual effective tax rate. Included in the amount of
unrecognized tax benefits are certain items that would not
affect the effective tax rate if they were recognized in the
Consolidated statements of income. These unrecognized
items include the tax effect of certain temporary
differences, the portion of gross state and local
unrecognized tax benefits that would be offset by the
benefit from associated U.S. federal income tax deductions,
and the portion of gross non-U.S. unrecognized tax benefits
that would have offsets in other jurisdictions. JPMorgan
Chase is presently under audit by a number of taxing
authorities, most notably by the Internal Revenue Service as
summarized in the Tax examination status table below. As
JPMorgan Chase is presently under audit by a number of
taxing authorities, it is reasonably possible that over the
next 12 months the resolution of these examinations may
increase or decrease the gross balance of unrecognized tax
benefits by as much as approximately $800 million. Upon
settlement of an audit, the change in the unrecognized tax
benefit balance would result from payment or income
statement recognition.
The following table presents a reconciliation of the
beginning and ending amount of unrecognized tax benefits
for the years ended December 31, 2015, 2014 and 2013.
Year ended December 31,
(in millions) 2015 2014 2013
Balance at January 1, $ 4,911 $ 5,535 $ 7,158
Increases based on tax positions
related to the current period 408 810 542
Increases based on tax positions
related to prior periods 1,028 477 88
Decreases based on tax positions
related to prior periods (2,646) (1,902) (2,200)
Decreases related to cash
settlements with taxing authorities (204) (9) (53)
Balance at December 31, $ 3,497 $ 4,911 $ 5,535
After-tax interest expense/(benefit) and penalties related to
income tax liabilities recognized in income tax expense were
$(156) million, $17 million and $(184) million in 2015,
2014 and 2013, respectively.
At December 31, 2015 and 2014, in addition to the liability
for unrecognized tax benefits, the Firm had accrued $578
million and $1.2 billion, respectively, for income tax-related
interest and penalties.
Tax examination status
JPMorgan Chase is continually under examination by the
Internal Revenue Service, by taxing authorities throughout
the world, and by many states throughout the U.S. The
following table summarizes the status of significant income
tax examinations of JPMorgan Chase and its consolidated
subsidiaries as of December 31, 2015.
December 31, 2015
Periods under
examination Status
JPMorgan Chase – U.S. 2003 – 2005
Field examination
completed; at
Appellate level
JPMorgan Chase – U.S. 2006 – 2010
Field examination
completed, JPMorgan
Chase filed amended
returns and intends
to appeal
JPMorgan Chase – U.S. 2011 – 2013 Field Examination
JPMorgan Chase – New
York State 2008 – 2011 Field Examination
JPMorgan Chase –
California 2011 – 2012 Field Examination
JPMorgan Chase – U.K. 2006 – 2012
Field examination of
certain select entities