Wells Fargo 2012 Annual Report Download - page 235

Note 21: Income Taxes
The components of income tax expense were:
Year ended December 31,
(in millions) 2012 2011 2010
Current:
Federal $ 9,141 3,352 1,425
State and local 1,198 468 548
Foreign 61 52 78
Total current 10,400 3,872 2,051
Deferred:
Federal (1,151) 3,088 4,060
State and local (166) 471 211
Foreign 20 14 16
Total deferred (1,297) 3,573 4,287
Total $ 9,103 7,445 6,338
The tax effects of our temporary differences that gave rise to
significant portions of our deferred tax assets and liabilities are
presented in the following table.
December 31,
(in millions) 2012 2011
Deferred tax assets
Allowance for loan losses $ 6,192 6,955
Deferred compensation
and employee benefits 4,701 4,115
Accrued expenses 1,692 1,598
PCI loans 2,692 3,851
Basis difference in investments 1,182 2,104
Net operating loss and tax
credit carry forwards 1,058 1,701
Other 1,868 402
Total deferred tax assets 19,385 20,726
Deferred tax assets valuation allowance (579) (918)
Deferred tax liabilities
Mortgage servicing rights (7,360) (7,388)
Leasing (4,414) (4,344)
Mark to market, net (2,401) (4,027)
Intangible assets (2,157) (2,608)
Net unrealized gains on
securities available for sale (4,135) (2,619)
Insurance reserves (1,707) (1,197)
Other (1,683) (2,539)
Total deferred tax liabilities (23,857) (24,722)
Net deferred tax liability (1) $ (5,051) (4,914)
(
1
)
Included in accrued ex
p
enses and other liabilities.
Deferred taxes related to net unrealized gains (losses) on
securities available for sale, net unrealized gains (losses) on
derivatives, foreign currency translation, and employee benefit
plan adjustments are recorded in cumulative OCI (see Note 23).
These associated adjustments decreased OCI by $1.4 billion in
2012.
We have determined that a valuation reserve is required for
2012 in the amount of $579 million predominantly attributable
to deferred tax assets in various state and foreign jurisdictions
where we believe it is more likely than not that these deferred tax
assets will not be realized. In these jurisdictions, carry back
limitations, lack of sources of taxable income, and tax planning
strategy limitations contributed to our conclusion that the
deferred tax assets would not be realizable. We have concluded
that it is more likely than not that the remaining deferred tax
assets will be realized based on our history of earnings, sources
of taxable income in carry back periods, and our ability to
implement tax planning strategies.
At December 31, 2012, we had net operating loss and credit
carry forwards with related deferred tax assets of $900 million
and $158 million, respectively. If these carry forwards are not
utilized, they will expire in varying amounts through 2032.
At December 31, 2012, we had undistributed foreign earnings
of $1.3 billion related to foreign subsidiaries. We intend to
reinvest these earnings indefinitely outside the U.S. and
accordingly have not provided $367 million of income tax
liability on these earnings.
The following table reconciles the statutory federal income
tax expense and rate to the effective income tax expense and
rate. Our effective tax rate is calculated by dividing income tax
expense by income before income tax expense less the net
income from noncontrolling interests.
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