KeyBank 2015 Annual Report Download - page 201

Liability for Unrecognized Tax Benefits
The change in our liability for unrecognized tax benefits is as follows:
Year ended December 31,
in millions 2015 2014
Balance at beginning of year $ 6 $6
Increase for other tax positions of prior years 7—
Decrease related to other settlements with taxing authorities (1) —
Balance at end of year $12$6
Each quarter, we review the amount of unrecognized tax benefits recorded in accordance with the applicable
accounting guidance. Any adjustment to unrecognized tax benefits is recorded in income tax expense. The
amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate was $12 million at
December 31, 2015, and $6 million at December 31, 2014. We do not currently anticipate that the amount of
unrecognized tax benefits will significantly change over the next 12 months.
As permitted under the applicable accounting guidance, it is our policy to record interest and penalties related to
unrecognized tax benefits in income tax expense. We recorded net interest expense of $.6 million in 2015, net
interest credits of $10.6 million in 2014, and $1.4 million in 2013. We recovered state tax penalties of $.3 million
in 2015 and $.2 million in 2013. We did not recover any state tax penalties in 2014. At December 31, 2015, we
had an accrued interest payable of $.9 million, compared to $1.2 million at December 31, 2014. Our liability for
accrued state tax penalties was $1 million at December 31, 2015, and $.3 million at December 31, 2014.
The amount of unrecognized tax benefits to be presented in the financial statements as a reduction to a deferred
tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if certain criteria are
met at December 31, 2015, and December 31, 2014, are $2.7 million and $1 million, respectively.
We file federal income tax returns, as well as returns in various state and foreign jurisdictions. We are subject to
income tax examination by the IRS for the tax years 2013 and forward. Currently, we are not under audit for the
tax years 2013 and forward. We are not subject to income tax examinations by other tax authorities for years
prior to 2006.
13. Acquisitions and Discontinued Operations
Acquisitions
First Niagara Financial Group, Inc. On October 30, 2015, we announced that KeyCorp entered into a
definitive agreement and plan of merger (“Agreement”) pursuant to which it will acquire all of the outstanding
capital stock of First Niagara. Under the terms of the Agreement, at the effective time of the merger, each share
of First Niagara common stock will be converted into the right to receive (i) 0.680 of a share of KeyCorp
common stock and (ii) $2.30 in cash. The exchange ratio of KeyCorp stock for First Niagara stock is fixed and
will not adjust based on changes in KeyCorp’s share trading price. First Niagara equity awards outstanding
immediately prior to the effective time of the merger will be converted into equity awards for KeyCorp common
stock as provided in the Agreement. Each share of First Niagara’s Fixed-to-Floating Rate Perpetual Non-
Cumulative Preferred Stock, Series B, will be converted into a share of a newly created series of preferred stock
of KeyCorp having substantially the same terms as First Niagara’s preferred stock. Based on the closing price of
KeyCorp common shares on Thursday, October 29, 2015, of $13.38 and assuming First Niagara has
356.272 million shares outstanding on a fully-diluted basis, the value of the total consideration to be paid by
KeyCorp pursuant to the Agreement is approximately $4.1 billion.
The merger is currently expected to be completed during the third quarter of 2016 and is subject to customary
closing conditions including the approval of regulators and the shareholders of both KeyCorp and First Niagara.
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