American Express 2014 Annual Report Download - page 114

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The significant components of deferred tax assets and liabilities as of December 31 are reflected in the following table:
(Millions) 2014 2013
Deferred tax assets:
Reserves not yet deducted for tax purposes $3,926$3,813
Employee compensation and benefits 789 721
Other 266 546
Gross deferred tax assets 4,981 5,080
Valuation allowance (75) (121)
Deferred tax assets after valuation allowance 4,906 4,959
Deferred tax liabilities:
Intangibles and fixed assets 1,597 1,465
Deferred revenue 498 453
Deferred interest 350 363
Asset securitization 162 130
Investment in joint ventures 223 10
Other 62 95
Gross deferred tax liabilities 2,892 2,516
Net deferred tax assets $2,014$2,443
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, 2014 and 2013 are associated with net operating losses
and other deferred tax assets in certain non-U.S. operations of the Company.
Accumulated earnings of certain non-U.S. subsidiaries, which totaled approximately $9.7 billion as of December 31, 2014, are intended to
be permanently reinvested outside the U.S. The Company does not provide for federal income taxes on foreign earnings intended to be
permanently reinvested outside the U.S. Accordingly, federal taxes, which would have aggregated approximately $3.0 billion as of
December 31, 2014, have not been provided on those earnings.
Net income taxes paid by the Company during 2014, 2013 and 2012, were approximately $2.5 billion, $2.0 billion and $1.9 billion,
respectively. These amounts include estimated tax payments and cash settlements relating to prior tax years.
The Company is subject to the income tax laws of the U.S., its states and municipalities and those of the foreign jurisdictions in which the
Company operates. These tax laws are complex, and the manner in which they apply to the taxpayer’s facts is sometimes open to
interpretation. Given these inherent complexities, the Company must make judgments in assessing the likelihood that a tax position will be
sustained upon examination by the taxing authorities based on the technical merits of the tax position. A tax position is recognized only
when, based on management’s judgment regarding the application of income tax laws, it is more likely than not that the tax position will be
sustained upon examination. The amount of benefit recognized for financial reporting purposes is based on management’s best judgment of
the largest amount of benefit that is more likely than not to be realized on ultimate settlement with the taxing authority given the facts,
circumstances and information available at the reporting date. The Company adjusts the level of unrecognized tax benefits when there is new
information available to assess the likelihood of the outcome.
The Company is under continuous examination by the Internal Revenue Service (IRS) and tax authorities in other countries and states in
which the Company has significant business operations. The tax years under examination and open for examination vary by jurisdiction. The
IRS has completed its field examination of the Company’s federal tax returns for years through 2007; however, refund claims for certain years
continue to be reviewed by the IRS. In addition, the Company is currently under examination by the IRS for the years 2008 through 2011.
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