BB&T 2008 Annual Report Download - page 116

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BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The reasons for the difference between the provision for income taxes and the amount computed by applying
the statutory Federal income tax rate to income before income taxes were as follows:
Years Ended December 31,
2008 2007 2006
(Dollars in millions)
Federal income taxes at statutory rate of 35% $ 724 $ 900 $ 866
Increase (decrease) in provision for income taxes as a result of:
Addition to federal tax reserves 5 19 141
State income taxes, net of federal tax benefit 37 33 31
Federal tax credits (54) (34) (25)
Interest on federal tax refunds (66) (7) —
Tax exempt income (77) (73) (62)
Other, net (19) (2) (6)
Provision for income taxes $ 550 $ 836 $ 945
Effective income tax rate 26.6% 32.5% 38.2%
BB&T has entered into certain transactions that have favorable tax treatment. These transactions include
loans and investments that produce tax-exempt income and tax credits, reducing BB&T’s effective tax rate from
the statutory rate. During the fourth quarter of 2008, BB&T agreed to treat its leveraged leases in accordance
with the IRS’s proposal that, among other things, allows 20% of deductions, imputes interest income and deems
the remaining transactions to be terminated as of December 31, 2008. As a result of this settlement, BB&T
recognized pre-tax interest income of $93 million, or $60 million after-tax, which is reflected as a reduction in tax
expense and reduced BB&T’s effective tax rate for 2008. As a result of changes in the timing of tax payments,
FSP FAS 13-2 required a recalculation of each transaction that resulted in a $67 million charge to interest income
and a corresponding $24 million tax benefit.
The tax effects of temporary differences that gave rise to significant portions of the net deferred tax assets
and liabilities are reflected in the table below. Deferred tax assets and deferred tax liabilities are included in
other assets and other liabilities, respectively on the “Consolidated Balance Sheets”.
116