Wells Fargo 2010 Annual Report Download - page 211

The components of income tax expense were:
Note 20: Income Taxes
Year ended December 31,
(in millions) 2010 2009 2008
Current:
Federal $ 1,425 (3,952) 2,043
State and local 548 (334) 171
Foreign 78 164 30
Total current 2,051 (4,122) 2,244
Deferred:
Federal 4,060 8,709 (1,506)
State and local 211 794 -
Foreign 16 (50) (136)
Total deferred 4,287 9,453 (1,642)
Total $ 6,338 5,331 602
Our net deferred tax asset (liability) and the tax effects of
temporary differences that gave rise to significant portions of
these deferred tax assets and liabilities are presented in the
following table.
Year ended December 31,
(in millions) 2010 2009
Deferred tax assets
Allowance for loan losses $ 8,157 9,178
Deferred compensation
and employee benefits 3,473 3,026
Accrued expenses, deductible when paid 1,989 2,235
PCI loans 4,933 8,645
Basis difference in investments 2,598 208
Net operating loss and tax
credit carry forwards 1,514 3,370
Other 1,891 1,706
Total deferred tax assets 24,555 28,368
Deferred tax assets valuation allowance (711) (827)
Deferred tax liabilities
Mortgage servicing rights (8,020) (8,073)
Leasing (3,703) (3,439)
Mark to market, net (5,161) (4,853)
Intangible assets (3,322) (5,567)
Net unrealized gains on
securities available for sale (3,243) (2,079)
Other (2,875) (318)
Total deferred tax liabilities (26,324) (24,329)
Net deferred tax
asset (liability) $ (2,480) 3,212
Deferred taxes related to net unrealized gains (losses) on
securities available for sale, net unrealized gains (losses) on
derivatives, foreign currency translation, and employee benefit
plan adjustments are recorded in cumulative OCI (see Note 22-
OCI). These associated adjustments decreased OCI by
$1.3 billion.
We have determined that a valuation reserve is required for
2010 in the amount of $711 million primarily attributable to
deferred tax assets in various state and foreign jurisdictions
where we believe it is more likely than not that these deferred tax
assets will not be realized. In these jurisdictions, carry back
limitations, lack of sources of taxable income, and tax planning
strategy limitations contributed to our conclusion that the
deferred tax assets would not be realizable. We have concluded
that it is more likely than not that the remaining deferred tax
assets will be realized based on our history of earnings, sources
of taxable income in carry back periods, and our ability to
implement tax planning strategies.
At December 31, 2010, we had net operating loss and credit
carry forwards with related deferred tax assets of $1.4 billion and
$128 million, respectively. If these carry forwards are not
utilized, they will expire in varying amounts through 2030.
At December 31, 2010, we had undistributed foreign earnings
of $1.6 billion related to foreign subsidiaries. We intend to
reinvest these earnings indefinitely outside the U.S. and
accordingly have not provided $508 million of income tax
liability on these earnings.
The following table reconciles the statutory federal income
tax expense and rate to the effective income tax expense and
rate. Effective January 1, 2009, we adopted new accounting
guidance that changed the way noncontrolling interests are
presented in the income statement such that the consolidated
income statement includes amounts from both Wells Fargo
interests and the noncontrolling interests. As a result, our
effective tax rate is calculated by dividing income tax expense by
income before income tax expense less the net income from
noncontrolling interests.
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