US Bank 2005 Annual Report Download - page 94

INCOME TAXES
The components of income tax expense were:
(Dollars in Millions) 2005 2004 2003
Federal
Current ******************************************************************************** $2,107 $1,531 $1,529
Deferred ******************************************************************************* (281) 260 223
Federal income tax ****************************************************************** 1,826 1,791 1,752
State
Current ******************************************************************************** 276 197 139
Deferred ******************************************************************************* (20) 21 50
State income tax ******************************************************************** 256 218 189
Total income tax provision ************************************************************ $2,082 $2,009 $1,941
A reconciliation of expected income tax expense at the federal statutory rate of 35 percent to the Company’s applicable
income tax expense follows:
(Dollars in Millions) 2005 2004 2003
Tax at statutory rate (35 percent)********************************************************** $2,300 $2,162 $1,978
State income tax, at statutory rates, net of federal tax benefit ********************************* 166 142 123
Tax effect of
Tax credits************************************************************************** (221) (146) (110)
Resolution of federal and state income tax examinations ********************************** (94) (106) —
Tax-exempt income from life insurance ************************************************* (48) (37) (37)
Tax-exempt interest, net ************************************************************** (22) (22) (22)
Other items ************************************************************************* 116 9
Applicable income taxes ***************************************************************** $2,082 $2,009 $1,941
The tax effects of fair value adjustments on securities included in 2004 was a reduction in income tax expense of
available-for-sale, derivative instruments in cash flow hedges $90 million related to the resolution of federal income tax
and certain tax benefits related to stock options are examinations covering substantially all of the Company’s
recorded directly to shareholders’ equity as part of other legal entities for the years 1995 through 1999 and
comprehensive income. $16 million related to the resolution of a state tax
In preparing its tax returns, the Company is required to examination for tax years through 2000. The resolution of
interpret complex tax laws and regulations and utilize these cycles was the result of negotiations held between the
income and cost allocation methods to determine its taxable Company and representatives of various taxing authorities
income. On an ongoing basis, the Company is subject to throughout the examinations. The resolution of these
examinations by federal and state taxing authorities that matters and the taxing authorities’ acceptance of submitted
may give rise to differing interpretations of these complex claims and tax return adjustments resulted in the reduction
laws, regulations and methods. Due to the nature of the of estimated income tax liabilities.
examination process, it generally takes years before these Deferred income tax assets and liabilities reflect the tax
examinations are completed and matters are resolved. effect of temporary difference between the carrying amounts
Included in 2005 was a $94 million reduction in income tax of assets and liabilities for financial reporting purposes and
expense related to the resolution of federal income tax the amounts used for the same items for income tax
examinations covering substantially all of the Company’s reporting purposes.
legal entities for the years 2000 through 2002. In addition,
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Note 20