American Express 2015 Annual Report Download - page 160

The significant components of deferred tax assets and liabilities as of December 31 are reflected in the following
table:
(Millions) 2015 2014
Deferred tax assets:
Reserves not yet deducted for tax purposes .............................................. $ 3,771 $3,926
Employee compensation and benefits ................................................... 648 789
Other ............................................................................... 520 266
Gross deferred tax assets ............................................................ 4,939 4,981
Valuation allowance ................................................................. (58) (75)
Deferred tax assets after valuation allowance ........................................... 4,881 4,906
Deferred tax liabilities:
Intangibles and fixed assets ............................................................ 1,547 1,597
Deferred revenue ..................................................................... 509 498
Deferred interest ..................................................................... 323 350
Asset securitization ................................................................... —162
Investment in joint ventures ............................................................ 231 223
Other ............................................................................... 120 62
Gross deferred tax liabilities .......................................................... 2,730 2,892
Net deferred tax assets .................................................................. $ 2,151 $ 2,014
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, 2015
and 2014 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 $9.9 billion as of
December 31, 2015, 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 $3.0 billion as of December 31, 2015, have not
been provided on those earnings.
Net income taxes paid by the Company during 2015, 2014 and 2013, were approximately $3.4 billion, $2.5 billion
and $2.0 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 United States, 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.
149