BB&T 2007 Annual Report Download - page 108

BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Internal Revenue Service (“IRS”) disallowed certain deductions taken by BB&T on leveraged lease
transactions during 1997-2002. In 2004, BB&T filed a lawsuit against the IRS to pursue a refund of amounts
assessed by the IRS related to a leveraged lease transaction entered into during 1997. On January 4, 2007, the
United States Middle District Court of North Carolina issued a summary judgment in favor of the IRS related to
BB&T’s lawsuit. Based on a review of the summary judgment by BB&T’s counsel, BB&T filed a notice of appeal
with the United States Appeals Court for the Fourth Circuit, based in Richmond, Virginia. BB&T paid $1.2
billion to the IRS during the first quarter of 2007, including $284 million in pre-tax interest that had been
previously accrued. This payment represented the total tax and interest due on these transactions for all open
years. The tax paid relates to differences in the timing of income recognition and deductions for income tax
purposes for which deferred taxes had been previously provided. Management has consulted with outside counsel
and continues to believe that BB&T’s treatment of its leveraged lease transactions was appropriate and in
compliance with the tax laws and regulations applicable to the years examined and is pursuing legal remedies
related to this issue.
Also, during the first quarter of 2007, BB&T paid $48 million ($32 million, net of federal benefit), including
tax of $39 million and interest and penalties of $9 million in conjunction with an agreement with a state taxing
authority. The agreement covered tax years through 2005 and also established the future filing methodology for
that state taxing authority. These amounts were previously accrued.
The IRS has completed its federal tax examinations of BB&T through 2005. BB&T plans to appeal the IRS’
assertion of penalties related to its leveraged lease transactions and proposed deficiencies related to certain
executive compensation deductions. Other than an adjustment to the timing of certain deductions related to
mortgage servicing rights for which deferred taxes have previously been provided, no significant adjustments
have been proposed. In addition, the IRS is currently examining a deconsolidated subsidiary of BB&T that
claimed significant foreign tax credits during tax years 2002-2007. While the IRS has not yet proposed any
adjustments to the foreign tax credits claimed by this subsidiary, it is reasonably possible that such adjustments
may be proposed within the next 12 months. An estimate of the range of the reasonably possible change in the
total amount of unrecognized tax benefits related to this position cannot currently be made. Various years remain
subject to examination by state taxing authorities.
NOTE 14. Benefit Plans
BB&T provides various benefit plans to substantially all employees, including employees of acquired entities.
Employees of acquired entities generally participate in existing BB&T plans after consummation of the business
combinations. The plans of acquired institutions are typically merged into the BB&T plans after consummation of
the mergers, and, under these circumstances, credit is usually given to these employees for years of service at the
acquired institution for vesting and eligibility purposes.
The following table summarizes expenses (income) relating to employee retirement plans:
For the Years Ended
December 31,
2007 2006 2005
(Dollars in millions)
Defined benefit plans $ 32 $ 50 $ 43
Defined contribution and ESOP plans 72 67 59
Postretirement benefit plans — (1) (3)
Other 12 20 11
Total expense related to retirement benefit plans $116 $136 $110
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