Bank of America 2015 Annual Report Download - page 224

222 Bank of America 2015
Income tax expense for 2015, 2014 and 2013 varied from the amount computed by applying the statutory income tax rate to income
before income taxes. A reconciliation of the expected U.S. federal income tax expense, calculated by applying the federal statutory tax
rate of 35 percent, to the Corporation’s actual income tax expense, and the effective tax rates for 2015, 2014 and 2013 are presented
in the table below.
Reconciliation of Income Tax Expense
2015 2014 2013
(Dollars in millions) Amount Percent Amount Percent Amount Percent
Expected U.S. federal income tax expense $ 7,754 35.0%$ 2,399 35.0% $ 5,660 35.0%
Increase (decrease) in taxes resulting from:
State tax expense, net of federal benefit 474 2.1 276 4.0 450 2.8
Affordable housing credits/other credits (1,087)(4.9)(950) (13.8) (863) (5.3)
Non-U.S. tax rate differential (559) (2.5)(507) (7.4) (940) (5.8)
Tax-exempt income, including dividends (539) (2.4)(533) (7.8) (524) (3.2)
Changes in prior period UTBs, including interest (85) (0.4)(741) (10.8) (255) (1.6)
Non-U.S. tax law changes 289 1.3 — — 1,133 7.0
Nondeductible expenses 40 0.2 1,982 28.9 104 0.6
Other (21) (0.1)96 1.4 (24) (0.2)
Total income tax expense $ 6,266 28.3%$ 2,022 29.5% $ 4,741 29.3%
The reconciliation of the beginning unrecognized tax benefits (UTB) balance to the ending balance is presented in the table below.
Reconciliation of the Change in Unrecognized Tax Benefits
(Dollars in millions) 2015 2014 2013
Balance, January 1 $ 1,068 $ 3,068 $ 3,677
Increases related to positions taken during the current year 36 75 98
Increases related to positions taken during prior years (1) 187 519 254
Decreases related to positions taken during prior years (1) (177)(973) (508)
Settlements (1)(1,594) (448)
Expiration of statute of limitations (18) (27) (5)
Balance, December 31 $ 1,095 $ 1,068 $ 3,068
(1) The sum per year of positions taken during prior years differs from the $85 million, $741 million and $255 million in the Reconciliation of Income Tax Expense table due to temporary items, state
items and jurisdictional offsets, as well as the inclusion of interest in the Reconciliation of Income Tax Expense table.
At December 31, 2015, 2014 and 2013, the balance of the
Corporation’s UTBs which would, if recognized, affect the
Corporation’s effective tax rate was $0.7 billion, $0.7 billion and
$2.5 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, 2015.
Tax Examination Status
Years under
Examination
Status at
December 31
2015
U.S. 2010 – 2011 IRS Appeals
U.S. 2012 – 2013 Field examination
New York 2008 – 2014 Field examination
U.K. 2012 Field examination
During 2015, the Corporation and IRS Appeals arrived at final
agreement on the audit of Bank of America Corporation for the
2010 through 2011 tax years. While subject to review by the Joint
Committee on Taxation of the U.S. Congress, the Corporation
expects this examination will be concluded early in 2016.