Bank of America 2004 Annual Report Download - page 144

BANK OF AMERICA 2004 143
Note 17
Income Taxes
The components of Income Tax Expense for 2004, 2003 and 2002
were as follows:
(Dollars in millions) 2004 2003 2002
Current income tax expense
Federal $ 6,392 $4,642 $3,386
State 683 412 451
Foreign 405 260 349
Total current expense 7,480 5,314 4,186
Deferred income tax
(benefit) expense
Federal (407) (222) (270)
State (11) (45) (200)
Foreign 16 426
Total deferred benefit (402) (263) (444)
Total income tax expense(1) $ 7,078 $5,051 $3,742
(1) Does not reflect the deferred tax effects of Unrealized Gains and Losses on AFS Debt and
Marketable Equity Securities, Foreign Currency Translation Adjustments and Derivatives that are
included in Shareholders’ Equity. As a result of these tax effects, Shareholders’ Equity increased
(decreased) by $383, $1,806 and $(1,090) in 2004, 2003 and 2002, respectively. Also, does
not reflect tax benefits associated with the Corporation’s employee stock plans which increased
Shareholders’ Equity by $401, $443 and $251 in 2004, 2003 and 2002, respectively. Goodwill
has been reduced by $101, reflecting the tax benefits attributable to 2004 exercises of employee
stock options issued by FleetBoston which had vested prior to the merger date.
Income Tax Expense for 2004, 2003 and 2002 varied from the
amount computed by applying the statutory income tax rate to
Income before Income Taxes. A reconciliation between the expected
2004 2003 2002
(Dollars in millions) Amount Percent Amount Percent Amount Percent
Expected federal income tax expense $ 7,427 35.0% $5,551 35.0% $4,547 35.0%
Increase (decrease) in taxes resulting from:
Tax-exempt income, including dividends (526) (2.5) (325) (2.1) (297) (2.3)
State tax expense, net of federal benefit 437 2.1 239 1.5 210 1.6
Goodwill amortization –– 12 0.1 – –
IRS tax settlement –– (84) (0.5) (488) (3.8)
Low income housing credits/other credits (352) (1.6) (212) (1.3) (222) (1.7)
Foreign tax differential (78) (0.4) (50) (0.3) (58) (0.4)
Other 170 0.8 (80) (0.6) 50 0.4
Total income tax expense $ 7,078 33.4% $5,051 31.8% $3,742 28.8%
During 2002, the Corporation reached a tax settlement agreement
with the IRS. This agreement resolved issues for numerous tax
returns of the Corporation and various predecessor companies and
finalized all federal income tax liabilities, excluding those relating to
FleetBoston, through 1999. As a result of the settlement, reductions
in Income Tax Expense of $84 million in 2003 and $488 million in
2002 were recorded representing refunds received and reductions in
previously accrued taxes.
The IRS is currently examining the Corporation’s federal income
tax returns for the years 2000 through 2002, as well as the tax
returns of FleetBoston and certain other subsidiaries for years rang-
ing from 1997 to 2000. The Corporation’s current estimate of the
resolution of these various examinations is reflected in accrued
income taxes; however, final settlement of the examinations or
changes in the Corporation’s estimate may result in future income tax
expense or benefit.
federal income tax expense using the federal statutory tax rate of 35
percent to the Corporation’s actual Income Tax Expense and resulting
effective tax rate for 2004, 2003 and 2002 follows: