Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

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, 2012, 2011, and 2010.



Income tax expense/(benefit)
Year ended December 31, (in millions)	2012			2011			2010
Current income tax expense
U.S. federal	$	3,225		$	3,719		$	4,001
Non-U.S.	1,782			1,183			2,712
U.S. state and local	1,496			1,178			1,744
Total current income tax expense	6,503			6,080			8,457
Deferred income tax expense/(benefit)
U.S. federal	2,238			2,109			(753		)
Non-U.S.	(327		)	102			169
U.S. state and local	(781		)	(518		)	(384		)
Total deferred income tax expense/(benefit)	1,130			1,693			(968		)
Total income tax expense	$	7,633		$	7,773		$	7,489

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, 2012, 2011 and 2010, is presented in the following table.



Effective tax rate
Year ended December 31,	2012		2011		2010
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	1.6		1.6		3.6
Tax-exempt income	(2.9	)	(2.1	)	(2.4	)
Non-U.S. subsidiary earnings^(a)	(2.4	)	(2.3	)	(2.2	)
Business tax credits	(4.2	)	(4.0	)	(3.7	)
Other, net	(0.7	)	0.9		(0.2	)
Effective tax rate	26.4	%	29.1	%	30.1	%


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

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, 2012 and 2011.



Deferred taxes
December 31, (in millions)	2012			2011
Deferred tax assets
Allowance for loan losses	$	8,712		$	10,689
Employee benefits	4,308			4,570
Accrued expenses and other^(a)	12,393			11,183
Non-U.S. operations	3,537			2,943
Tax attribute carryforwards	1,062			1,547
Gross deferred tax assets^(a)	30,012			30,932
Valuation allowance	(689		)	(1,303		)
Deferred tax assets, net of valuation allowance^(a)	$	29,323		$	29,629
Deferred tax liabilities
Depreciation and amortization^(a)	$	2,563		$	2,799
Mortgage servicing rights, net of hedges ^(a)	5,336			4,396
Leasing transactions^(a)	2,242			2,348
Non-U.S. operations	3,582			2,790
Other, net^(a)	4,340			2,520
Gross deferred tax liabilities^(a)	18,063			14,853
Net deferred tax assets	$	11,260		$	14,776


(a)	The prior period has been revised to conform with the current presentation.

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, 2012, 2011 and 2010.



Unrecognized tax benefits
Year ended December 31, (in millions)	2012			2011			2010
Balance at January 1,	$	7,189		$	7,767		$	6,608
Increases based on tax positions related to the current period	680			516			813
Decreases based on tax positions related to the current period	—			(110		)	(24		)
Increases based on tax positions related to prior periods	234			496			1,681
Decreases based on tax positions related to prior periods	(853		)	(1,433		)	(1,198		)
Decreases related to settlements with taxing authorities	(50		)	(16		)	(74		)
Decreases related to a lapse of applicable statute of limitations	(42		)	(31		)	(39		)
Balance at December 31,	$	7,158		$	7,189		$	7,767

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, 2012, 2011 and 2010.



Income before income tax expense - U.S. and non-U.S.
Year ended December 31, (in millions)	2012		2011		2010
U.S.	$	24,895	$	16,336	$	16,568
Non-U.S.^(a)	4,022		10,413		8,291
Income before income tax expense	$	28,917	$	26,749	$	24,859


(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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