Typically, Harvey said, companies don’t want to trigger foreign tax credits any earlier than necessary because of the 10-year clock.
‘Potentially Detrimental’
“It’s sad that in order to get a financial statement benefit, Bank of America may have needed to do something that was potentially detrimental to them,” said Harvey, who was a senior adviser to former IRS Commissioner Douglas Shulman.
In addition, Bank of America has $8.5 billion in U.K. net operating losses and $3.3 billion in other credits.
Bank of America’s net deferred tax assets are more limited than those of competitor Citigroup which has exhausted its net operating loss carry-forwards and now has $22 billion in foreign tax credits.
In securities filings, Citigroup said it will be able to use all of the credits and provides details of several maneuvers available to increase taxable income before the credits begin to expire. For example, the company could accelerate recognition of U.S. taxable income, defer deductions and replace tax-exempt assets with taxable ones.