BB&T 2009 Annual Report Download - page 130

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BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
NOTE 13. Income Taxes
The provision for income taxes comprised the following:
Years Ended December 31,
2009 2008 2007
(Dollars in millions)
Current expense:
Federal $ 302 $ 899 $765
State 15 89 54
Foreign 2—25
Total current expense 319 988 844
Deferred expense (benefit):
Federal (143) (406) (5)
State (17) (32) (3)
Total deferred expense (benefit) (160) (438) (8)
Provision for income taxes $ 159 $ 550 $836
The foreign income tax expense is related to income generated on assets controlled by a foreign subsidiary of
Branch Bank.
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,
2009 2008 2007
(Dollars in millions)
Federal income taxes at statutory rate of 35% $ 362 $ 728 $ 904
Increase (decrease) in provision for income taxes as a result of:
Addition to federal tax reserves 26 519
State income taxes, net of federal tax benefit (2) 37 33
Federal tax credits (78) (54) (34)
Interest on federal tax refunds (4) (66) (7)
Tax exempt income (108) (77) (73)
LILO gain (18) ——
Other, net (19) (23) (6)
Provision for income taxes $ 159 $ 550 $ 836
Effective income tax rate 15.3% 26.5% 32.4%
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 2009 BB&T sold leveraged leases which produced a non-taxable gain and reduced tax
expense by $18 million. 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, accounting standards required a recalculation of each transaction that resulted in a $67 million charge
to interest income and a corresponding $24 million tax benefit in 2008.
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