Bank of America 2014 Annual Report Download - page 240

238 Bank of America 2014
It is reasonably possible that the UTB balance may decrease
by as much as $0.4 billion during the next 12 months, since
resolved items will be removed from the balance whether their
resolution results in payment or recognition.
During 2014, 2013 and 2012, the Corporation recognized a
benefit of $196 million and expense of $127 million and $99
million, respectively, for interest and penalties, net-of-tax, in income
tax expense. At December 31, 2014 and 2013, the Corporation’s
accrual for interest and penalties that related to income taxes, net
of taxes and remittances, was $455 million and $888 million.
Significant components of the Corporation’s net deferred tax
assets and liabilities at December 31, 2014 and 2013 are
presented in the table below.
Deferred Tax Assets and Liabilities
December 31
(Dollars in millions) 2014 2013
Deferred tax assets
Net operating loss carryforwards $ 9,787 $ 10,967
Accrued expenses 5,916 6,749
Tax credit carryforwards 5,614 9,689
Security, loan and debt valuations 5,190 4,264
Allowance for credit losses 5,047 6,100
Employee compensation and retirement benefits 3,665 2,729
State income taxes 2,034 2,643
Available-for-sale securities —1,918
Other 1,688 722
Gross deferred tax assets 38,941 45,781
Valuation allowance (1,111) (1,940)
Total deferred tax assets, net of valuation
allowance 37,830 43,841
Deferred tax liabilities
Equipment lease financing 2,880 3,106
Intangibles 1,349 1,529
Mortgage servicing rights 1,041 1,547
Available-for-sale securities 828 —
Fee income 816 798
Long-term borrowings 587 3,033
Other 2,075 1,472
Gross deferred tax liabilities 9,576 11,485
Net deferred tax assets $ 28,254 $ 32,356
The table below summarizes the deferred tax assets and
related valuation allowances recognized for the net operating loss
(NOL) and tax credit carryforwards at December 31, 2014.
Net Operating Loss and Tax Credit Carryforward Deferred
Tax Assets
(Dollars in millions)
Deferred
Tax Asset
Valuation
Allowance
Net
Deferred
Tax Asset
First Year
Expiring
Net operating losses – U.S. $ 3,065 $ — $ 3,065 After 2027
Net operating losses – U.K. 6,276 — 6,276 None (1)
Net operating losses –
other non-U.S. 446 (316) 130 Various
Net operating losses – U.S.
states (2) 1,168 (460) 708 Various
General business credits 3,383 — 3,383 After 2029
Foreign tax credits 2,231 (68) 2,163 After 2022
(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 $1.8 billion and $708 million.
Management concluded that no valuation allowance was
necessary to reduce the U.K. NOL carryforwards and U.S. NOL and
general business credit carryforwards since estimated future
taxable income will be sufficient to utilize these assets prior to
their expiration. The majority of the Corporation’s U.K. net deferred
tax assets, which consist primarily of NOLs, are expected to be
realized by certain subsidiaries over an extended number of years.
Management’s conclusion is supported by financial results and
forecasts, the reorganization of certain business activities and the
indefinite period to carry forward NOLs. However, significant
changes to those estimates, such as changes that would be
caused by a substantial and prolonged worsening of the condition
of Europe’s capital markets, or a change in applicable laws, could
lead management to reassess its U.K. valuation allowance
conclusions.
At December 31, 2014, U.S. federal income taxes had not been
provided on $17.2 billion of undistributed earnings of non-U.S.
subsidiaries that management has determined have been
reinvested for an indefinite period of time. If the Corporation were
to record a deferred tax liability associated with these
undistributed earnings, the amount would be approximately $4.5
billion at December 31, 2014.