BB&T 2010 Annual Report Download - page 139
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NOTE 14. Income Taxes
The provision for income taxes comprised the following:
Years Ended December 31,
2010 2009 2008
(Dollars in millions)
Current expense:
Federal $161 $ 302 $ 899
State 18 15 89
Foreign 22—
Total current expense 181 319 988
Deferred expense (benefit):
Federal (65) (143) (406)
State (1) (17) (32)
Total deferred expense (benefit) (66) (160) (438)
Provision for income taxes $115 $ 159 $ 550
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,
2010 2009 2008
(Dollars in millions)
Federal income taxes at statutory rate of 35% $ 339 $ 362 $ 728
Increase (decrease) in provision for income taxes as a result of:
Addition to Federal tax reserves, net 126 5
State income taxes, net of Federal tax benefit 11 (2) 37
Federal tax credits (105) (78) (54)
Interest on Federal tax refunds 3(4) (66)
Tax exempt income (125) (108) (77)
LILO gains (2) (18) —
Other, net (7) (19) (23)
Provision for income taxes $ 115 $ 159 $ 550
Effective income tax rate 11.9% 15.3% 26.5%
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 years ended December 31, 2010 and 2009, the sale of certain leveraged leases
generated non-taxable gains that had a beneficial impact on the provision for income taxes that totaled $2 million
and $18 million, respectively.
During the year ended December 31, 2008, BB&T agreed to treat its leveraged leases in accordance with the
IRS’s proposal that, among other things, allowed 20% of deductions, imputed interest income and deemed the
remaining transactions to be terminated for income tax purposes as of December 31, 2008. As a result of this
settlement, BB&T recognized pre-tax interest from the IRS 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 leveraged lease transaction.
These recalculations resulted in a $67 million charge to interest income and a corresponding $24 million tax
benefit in 2008.
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