Citigroup Inc.

The Company is currently under audit by the Internal Revenue Serviceand other major taxing jurisdictions around the world. It is thus reasonablypossible that significant changes in the gross balance of unrecognized taxbenefits may occur within the next 12 months, but the Company does notexpect such audits to result in amounts that would cause a significantchange to its effective tax rate.The following are the major tax jurisdictions in which the Company andits affiliates operate and the earliest tax year subject to examination:JurisdictionTax yearUnited States 2006Mexico 2005New York State and City 2005United Kingdom 2008Japan 2005Brazil 2006Singapore 2003Hong Kong 2004Ireland 2006Foreign pretax earnings approximated $12.3 billion in 2010, $6.1 billionin 2009 and $9.3 billion in 2008 (of which, $0.1 billion profit, $0.6 billionloss and $4.4 billion profit, respectively, are in discontinued operations). Asa U.S. corporation, Citigroup and its U.S. subsidiaries are currently subjectto U.S. taxation on all foreign pretax earnings earned by a foreign branch.Pretax earnings of a foreign subsidiary or affiliate are subject to U.S. taxationwhen effectively repatriated. The Company provides income taxes on theundistributed earnings of non-U.S. subsidiaries except to the extent that suchearnings are indefinitely invested outside the United States. At December 31,2010, $32.1 billion of accumulated undistributed earnings of non-U.S.subsidiaries were indefinitely invested. At the existing U.S. federal incometax rate, additional taxes (net of U.S. foreign tax credits) of $8.6 billionwould have to be provided if such earnings were remitted currently.The current year’s effect on the income tax expense from continuingoperations is included in the “Foreign income tax rate differential” line inthe reconciliation of the federal statutory rate to the Company’s effectiveincome tax rate.Income taxes are not provided for the Company’s “savings bank base yearbad debt reserves” that arose before 1988, because under current U.S. taxrules such taxes will become payable only to the extent such amounts aredistributed in excess of limits prescribed by federal law. At December 31, 2010,the amount of the base year reserves totaled approximately $358 million(subject to a tax of $125 million).The Company has no valuation allowance on deferred tax assets atDecember 31, 2010 and December 31, 2009.In billions of dollarsJurisdiction/ComponentDTA balanceDecember 31, 2010DTA balanceDecember 31, 2009U.S. federalNet operating loss (NOL) $ 3.9 $ 5.1Foreign tax credit (FTC) 13.9 12.0General business credit (GBC) 1.7 1.2Future tax deductions and credits 21.8 17.5Other 0.3 0.5Total U.S. federal $41.6 $36.3State and localNew York NOLs $ 1.1 $ 0.9Other state NOLs 0.6 0.4Future tax deductions 2.9 3.0Total state and local $ 4.6 $ 4.3ForeignAPB 23 subsidiary NOLs 0.5 0.7Non-APB 23 subsidiary NOLs 1.5 0.4Future tax deductions 3.9 4.4Total foreign $ 5.9 $ 5.5Total $52.1 $46.1The following table summarizes the amounts of tax carryforwards andtheir expiry dates as of December 31, 2010:In billions of dollarsYear of expirationAmountU.S. foreign tax credit carryforwards2016 $ 0.42017 5.02018 5.32019 1.32020 1.9Total U.S. foreign tax credit carryforwards $13.9U.S. federal net operating loss (NOL) carryforwards2028 $ 4.12029 7.1Total U.S. federal NOL carryforwards (1) $11.2New York State NOL carryforwards2027 $ 0.12028 10.42029 2.4Total New York State NOL carryforwards (1) $12.9New York City NOL carryforwards2028 $ 4.92029 2.2Total New York City NOL carryforwards (1) $ 7.1(1) Pretax.201