Income Tax Provision

12 Months Ended

Mar. 31, 2013

Income Tax Provision [Abstract]

Income Tax Provision

Note 13 – Income Tax Provision
The provision for income taxes consisted of the following:
		Years ended March 31,
(Dollars in millions)		2013		2012		2011
Current
Federal	$	(15)	$	(33)	$	(26)
State		41		7		30
Foreign		6		9		10
Total current		32		(17)		14
Deferred
Federal		721		830		981
State		69		123		151
Foreign		2		1		4
Total deferred		792		954		1,136
Provision for income taxes	$	824	$	937	$	1,150

A reconciliation between the U.S. federal statutory tax rate and the effective tax rate is as follows:

	Years ended March 31,
	2013		2012		2011
Provision for income taxes at U.S. federal statutory tax rate	35.0	%	35.0	%	35.0	%
State and local taxes (net of federal tax benefit)	3.2	%	3.4	%	3.4	%
Other	-	%	0.3	%	(0.1)	%
Effective tax rate	38.2	%	38.7	%	38.3	%

For fiscal2013,the amounts in Other in the table above include benefits from federal plug-in and electric vehicle credits offset by adjustments for the differences between the income tax accrued in the prior year as compared with the actual liability on the income tax returns as filed. For fiscal2012, the amounts in Other included benefits from state hybrid vehicle creditsand adjustments for the differences between the income tax accrued in the prior year as compared with the actual liability on the income tax returns as filed. Finally, for fiscal 2011, the amounts in Other includedbenefits from state hybrid vehicle credits and benefits from the reduction of deferred tax due to the reduction in future state tax effective rates.

Note 13 – Income Tax Provision (Continued)
The net deferred income tax liabilities, by tax jurisdiction, are as follows:
		March 31,
(Dollars in millions)		2013		2012
Federal	$	5,763	$	5,009
State		475		406
Foreign		(2)		(3)
Net deferred income tax liability	$	6,236	$	5,412

Our net deferred income tax liability consists of the following deferred tax liabilities and assets:
		March 31,
(Dollars in millions)		2013		2012
Liabilities:
Lease transactions	$	6,509	$	6,379
State taxes		446		429
Mark-to-market of investments in marketable securities		210		48
Other		295		296
Deferred tax liabilities	$	7,460	$	7,152
Assets:
Provision for credit and residual value losses		347		369
Deferred costs and fees		167		155
Net operating loss and tax credit carryforwards		679		1,168
Other		47		52
Deferred taxassets		1,240		1,744
Valuation allowance		(16)		(4)
Net deferred tax assets	$	1,224	$	1,740
Net deferred income tax liability	$	6,236	$	5,412

We have deferred tax assets related to our cumulative federal net operating loss carryforwards of $552million and $1,043million available at March 31, 2013 and March 31,2012, respectively. The federal net operating loss carryforwards expire beginning in fiscal 2029 through fiscal 2032. At March 31, 2013, we have a deferred tax asset of $55million for state tax net operating loss carryforwards which expire in fiscal 2014 through fiscal 2032.At March 31,2012, we had deferred tax assets of $61million for state tax net operating loss carryforwards which expire in fiscal 2013 through fiscal 2031.

Note 13 – Income Tax Provision (Continued)

In addition, at March 31, 2013 and March 31, 2012, we have deferred tax assets for federal and state hybrid credits of $58 million and $50 million, respectively. The deferred tax assets related to state tax net operating losses and charitable contributions are reduced by a valuation allowance of $16 million at March 31, 2013. The deferred tax assets related to state tax net operating losses and state hybrid credits were reduced by a valuation allowance of $4 million at March 31, 2012. Apart from the valuation allowance, we believe that the remaining deferred tax assets will be realized in full. We paid net taxes of $21 million and received a net tax refund of $112 million in fiscal 2013 and fiscal2012, respectively.

We have made an assertion of permanent reinvestment of earnings from our foreign subsidiary; as a result, U.S. taxes have not been provided for unremitted earnings of our foreign subsidiary. At March 31, 2013 these unremitted earnings totaled $171 million. Determination of the amount of the deferred tax liability is not practicable, and accordingly no estimate of the unrecorded deferred tax liability is provided. Although there are no foreseeable events causing repatriation of earnings, possible examples may include but not be limited to parent company capital needs or exiting the business in the foreign country.

At March 31, 2013and March 31, 2012, the receivable for our share of the income tax in those states where we filed consolidated or combined returns with TMA and its subsidiaries was $7 million and $6 million, respectively.

The guidance for the accounting and reporting for income taxes requires us to assess tax positions in cases where the interpretation of the tax law may be uncertain.

The change in unrecognized tax benefits in fiscal 2013, 2012 and 2011 are as follows:

		March 31,
(Dollars in millions)		2013		2012		2011
Balance at beginning of the period	$	8	$	6	$	39
Increases related to positions taken during the prior years		-		2		-
Increases related to positions taken during the current year		1		-		-
Settlements		(2)		-		(33)
Balance at end of period	$	7	$	8	$	6

At March 31, 2013, approximately $1 million of the respective unrecognized tax benefits would, if recognized, have an effect on the effective tax rate. At March 31, 2012 and 2011, approximately $2 million of the respective unrecognized tax benefits at each year end would, if recognized, have an effect on the effective tax rate. The deductibility of the remaining amount of the respective unrecognized tax benefits is highly certain, but there is uncertainty about the timing of such deductibility. The decrease in unrecognized tax benefits during fiscal 2013 did not have an effect on the effective tax rate.

We accrue interest, if applicable, related to uncertain income tax positions in interest expense. Statutory penalties, if applicable, accrued with respect to uncertain income tax positions are recognized as an addition to the income tax liability. For each of fiscal 2013, 2012, and 2011, less than $1 million was accrued for interest and no penalties were accrued.

As of March 31, 2013, we remain under IRS examination for fiscal 2013, 2012, and 2011. The IRS examination forfiscal2007 through 2009 was concluded in the fourth quarter of fiscal 2011 with a refund of $105million plus interest received during the first quarter of fiscal 2012. The IRS examination for fiscal 2010 was concluded in the first quarter of fiscal 2012. The IRS examination for fiscal 2011 was concluded in May 2013.