American Express 2009 Annual Report Download - page 110

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN EXPRESS COMPANY
NOTE 17
INCOME TAXES
The components of income tax expense included in the
Consolidated Statements of Income were as follows:
(Millions) 2009 2008 2007
Current income tax expense (benefit):
U.S. federal $ 661 $ 735 $1,631
U.S. state and local 40 (28) 246
Non-U.S. 295 352 408
Total current income tax expense 996 1,059 2,285
Deferred income tax (benefit) expense:
U.S. federal (231) (150) (496)
U.S. state and local 24 (84) (22)
Non-U.S. (85) (115) (199)
Total deferred income tax benefit (292) (349) (717)
Total income tax expense on continuing
operations $ 704 $ 710 $1,568
Income tax expense (benefit) from
discontinued operations $4$ 12 $ (49)
A reconciliation of the U.S. federal statutory rate of 35 percent
to the Company’s actual income tax rate for the years ended
December 31 on continuing operations was as follows:
2009 2008 2007
Combined tax at U.S. statutory federal
income tax rate 35.0% 35.0% 35.0%
Increase (Decrease) in taxes resulting from:
Tax-exempt income (4.6) (3.9) (2.8)
State and local income taxes, net of
federal benefit 2.7 1.6 2.6
Non-U.S. subsidiaries earnings (6.8) (8.4) (5.0)
Tax settlements(a) (1.4) (5.5) (2.2)
All other (0.1) 1.0 (0.1)
Actual tax rates 24.8% 19.8% 27.5%
(a) Relates to the resolution of tax matters in various jurisdictions.
The Company records a deferred income tax (benefit)
provision when there are differences between assets and
liabilities measured for financial reporting and for income tax
return purposes. These temporary differences result in taxable
or deductible amounts in future years and are measured using
the tax rates and laws that will be in effect when such
differences are expected to reverse. The significant
components of deferred tax assets and liabilities as of
December 31 are reflected in the following table:
(Millions) 2009 2008
Deferred tax assets:
Reserves not yet deducted for tax purposes $3,495 $3,559
Employee compensation and benefits 717 680
Net unrealized securities losses —458
Other 114 246
Gross deferred tax assets 4,326 4,943
Valuation allowance (60) (69)
Deferred tax assets after valuation allowance 4,266 4,874
Deferred tax liabilities:
Intangibles and fixed assets 744 713
Deferred revenue 49 531
Asset securitizations 70 84
Net unrealized securities gains 291 —
Other 133 76
Gross deferred tax liabilities 1,287 1,404
Net deferred tax assets $2,979 $3,470
A valuation allowance is established when management
determines that it is more likely than not that all or some
portion of the benefit of the deferred tax assets will not be
realized. The valuation allowances as of December 31, 2009
and 2008 are associated with non-U.S. operations and relate
to all of the Company’s net operating losses and other
deferred tax assets.
Accumulated earnings of certain non-U.S. subsidiaries,
which totaled approximately $6.6 billion as of December 31,
2009, are intended to be permanently reinvested outside the
United States. The Company does not provide for federal
income taxes on foreign earnings intended to be permanently
reinvested outside the United States. Accordingly, federal
taxes, which would have aggregated approximately
$1.8 billion as of December 31, 2009, have not been provided
on those earnings.
Net income taxes paid by the Company (including
amounts related to discontinued operations) during 2009,
2008 and 2007, were approximately $0.4 billion, $2.0 billion
and $1.8 billion, respectively. These amounts include
estimated tax payments and cash settlements relating to prior
tax years.
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