Bank of America 2012 Annual Report Download - page 254

252 Bank of America 2012
At December 31, 2012, 2011 and 2010, the balance of the
Corporation’s UTBs which would, if recognized, affect the
Corporation’s effective tax rate was $3.1 billion, $3.3 billion and
$3.4 billion, respectively. Included in the UTB balance are some
items the recognition of which would not affect the effective tax
rate, such as the tax effect of certain temporary differences, the
portion of gross state UTBs that would be offset by the tax benefit
of the associated federal deduction and the portion of gross non-
U.S. UTBs that would be offset by tax reductions in other
jurisdictions.
The Corporation files income tax returns in more than 100 state
and non-U.S. jurisdictions each year. The IRS and other tax
authorities in countries and states in which the Corporation has
significant business operations examine tax returns periodically
(continuously in some jurisdictions). The Tax Examination Status
table summarizes the status of significant examinations (U.S.
federal unless otherwise noted) for the Corporation and various
subsidiaries as of December 31, 2012.
Tax Examination Status
Years under
Examination
Status at
December 31
2012
Bank of America Corporation – U.S. 2001 – 2009 See below
Bank of America Corporation – U.S. 2010 – 2011 Field examination
Bank of America Corporation – New York (1) 2004 – 2008 Field examination
Merrill Lynch – U.S. 2004 – 2008 See below
Various – U.K. 2011 Field examination
(1) All tax years subsequent to the years shown remain open to examination.
During 2012, the Corporation and the IRS continued to make
progress toward resolving all federal income tax examinations for
Bank of America Corporation tax years through 2009 and Merrill
Lynch tax years through 2008. While subject to final agreement,
including review by the Joint Committee on Taxation of the U.S.
Congress for certain years, the Corporation believes that these
examinations may be concluded during 2013.
Considering all examinations, it is reasonably possible that the
UTB balance may decrease by as much as $2.6 billion during the
next twelve months, since resolved items will be removed from the
balance whether their resolution results in payment or recognition.
If such decrease were to occur, it likely would primarily result from
outcomes consistent with management expectations.
During 2012, the Corporation recognized a $99 million expense
and, in 2011, a benefit of $168 million for interest and penalties,
net-of-tax, in income tax benefit. At December 31, 2012 and 2011,
the Corporation’s accrual for interest and penalties that related to
income taxes, net of taxes and remittances, was $775 million and
$787 million.
Significant components of the Corporation’s net deferred tax
assets and liabilities at December 31, 2012 and 2011 are
presented in the Deferred Tax Assets and Liabilities table.
Deferred Tax Assets and Liabilities
December 31
(Dollars in millions) 2012 2011
Deferred tax assets
Net operating loss carryforwards $ 13,863 $ 14,307
Tax credit carryforwards 9,529 4,510
Allowance for credit losses 8,463 11,824
Accrued expenses 8,099 8,340
Employee compensation and retirement benefits 4,612 4,792
Security, loan and debt valuations 2,712 1,091
State income taxes 2,766 2,489
Other 725 1,654
Gross deferred tax assets 50,769 49,007
Valuation allowance (2,211) (1,796)
Total deferred tax assets, net of valuation
allowance 48,558 47,211
Deferred tax liabilities
Equipment lease financing 3,371 3,042
Long-term borrowings 3,215 3,360
Available-for-sale securities 2,877 1,811
Mortgage servicing rights 1,986 1,993
Intangibles 1,708 1,894
Fee income 901 1,038
Other 1,462 2,074
Gross deferred tax liabilities 15,520 15,212
Net deferred tax assets $ 33,038 $ 31,999
The table below summarizes the deferred tax assets and
related valuation allowances recognized for the NOL and tax credit
carryforwards at December 31, 2012.
Net Operating Loss and Tax Credit Carryforwards
(Dollars in millions)
Deferred
Tax Asset
Valuation
Allowance
Net
Deferred
Tax Asset
First Year
Expiring
Net operating losses – U.S. $ 4,911 $ — $ 4,911 After 2027
Net operating losses – U.K. 8,483 — 8,483 None (1)
Net operating losses –
other non-U.S. 469 (296) 173 Various
Net operating losses – U.S.
states (2) 2,136 (932) 1,204 Various
General business credits 3,349 — 3,349 After 2027
Foreign tax credits 6,180 (271) 5,909 After 2017
(1) The U.K. net operating losses may be carried forward indefinitely.
(2) The net operating losses and related valuation allowances for U.S. states before considering
the benefit of federal deductions were $3.3 billion and $1.4 billion.