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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Reconciliation of the applicable statutory U.S. income tax rate to the effective tax rate the effective tax rate

A reconciliation of the applicable statutory U.S. income tax rate to the effective tax rate for each of the years ended December 31, 2013, 2012 and 2011, is presented in the following table.



Effective tax rate
Year ended December 31,	2013		2012		2011
Statutory U.S. federal tax rate	35.0	%	35.0	%	35.0	%
Increase/(decrease) in tax rate resulting from:
U.S. state and local income taxes, net of U.S. federal income tax benefit	2.2		1.6		1.6
Tax-exempt income	(3.1	)	(2.9	)	(2.1	)
Non-U.S. subsidiary earnings^(a)	(4.9	)	(2.4	)	(2.3	)
Business tax credits	(5.4	)	(4.2	)	(4.0	)
Nondeductible legal expense^(b)	8.0		(0.2	)	0.9
Other, net	(1.0	)	(0.5	)	—
Effective tax rate	30.8	%	26.4	%	29.1	%


(a)	Includes earnings deemed to be reinvested indefinitely in non-U.S. subsidiaries.


(b)	The prior periods have been revised to conform with the current presentation.

Components of income tax expense/(benefit) included in the Consolidated Statements of Income

The components of income tax expense/(benefit) included in the Consolidated Statements of Income were as follows for each of the years ended December 31, 2013, 2012, and 2011.



Income tax expense/(benefit)
Year ended December 31, (in millions)	2013			2012			2011
Current income tax expense/(benefit)
U.S. federal	$	(1,316	)	$	3,225		$	3,719
Non-U.S.	1,308			1,782			1,183
U.S. state and local	(4		)	1,496			1,178
Total current income tax expense/(benefit)	(12		)	6,503			6,080
Deferred income tax expense/(benefit)
U.S. federal	7,080			2,238			2,109
Non-U.S.	10			(327		)	102
U.S. state and local	913			(781		)	(518		)
Total deferred income tax expense/(benefit)	8,003			1,130			1,693
Total income tax expense	$	7,991		$	7,633		$	7,773

Significant components of deferred tax assets and liabilities

The significant components of deferred tax assets and liabilities are reflected in the following table as of December 31, 2013 and 2012.



Deferred taxes
December 31, (in millions)	2013			2012
Deferred tax assets
Allowance for loan losses	$	6,593		$	8,712
Employee benefits	4,468			4,308
Accrued expenses and other	9,179			12,393
Non-U.S. operations	5,493			3,537
Tax attribute carryforwards	748			1,062
Gross deferred tax assets	26,481			30,012
Valuation allowance	(724		)	(689		)
Deferred tax assets, net of valuation allowance	$	25,757		$	29,323
Deferred tax liabilities
Depreciation and amortization	$	3,196		$	2,563
Mortgage servicing rights, net of hedges	5,882			5,336
Leasing transactions	2,352			2,242
Non-U.S. operations	4,705			3,582
Other, net	3,459			4,340
Gross deferred tax liabilities	19,594			18,063
Net deferred tax assets	$	6,163		$	11,260

Reconciliation of the beginning and ending amount of unrecognized tax benefits

The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2013, 2012 and 2011.



Unrecognized tax benefits
Year ended December 31, (in millions)	2013			2012			2011
Balance at January 1,	$	7,158		$	7,189		$	7,767
Increases based on tax positions related to the current period	542			680			516
Decreases based on tax positions related to the current period	—			—			(110		)
Increases based on tax positions related to prior periods	88			234			496
Decreases based on tax positions related to prior periods	(2,200		)	(853		)	(1,433		)
Decreases related to settlements with taxing authorities	(53		)	(50		)	(16		)
Decreases related to a lapse of applicable statute of limitations	—			(42		)	(31		)
Balance at December 31,	$	5,535		$	7,158		$	7,189

U.S. and non-U.S. components of income before income tax expense/(benefit) and extraordinary gain income

The following table presents the U.S. and non-U.S. components of income before income tax expense for the years ended December 31, 2013, 2012 and 2011.



Income before income tax expense - U.S. and non-U.S.
Year ended December 31, (in millions)	2013		2012		2011
U.S.	$	17,229	$	24,895	$	16,336
Non-U.S.^(a)	8,685		4,022		10,413
Income before income tax expense	$	25,914	$	28,917	$	26,749


(a)	For purposes of this table, non-U.S. income is defined as income generated from operations located outside the U.S.

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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