assets will be realized through the reversal of its existing taxable  temporary differences and its projected future taxable income. As required under U.S. GAAP, the Bancorp recognized a  deferred tax asset for compensation expense recognized for  financial reporting that may be deductible for tax purposes in the  future for certain stock-based awards granted to its employees. As  a result of the Bancorp’s stock price as of December 31, 2010, as  much as $24 million of deferred tax assets previously established  for these stock-based awards will not be realized within the next 12  months and will negatively impact the Bancorp’s income tax  expense in 2011. The Bancorp cannot predict its stock price or  whether its employees will exercise other stock-based awards with  lower exercise prices in the future; therefore, it is possible that the  impact to income tax expense will be greater than or less than $24  million in 2011.  The IRS concluded its audit for 2006 and 2007 during the  third quarter of 2010. As a result, all issues have been resolved with  the IRS through 2007. The statute of limitations for the Bancorp’s  federal income tax returns remains open for tax years 2007 through  2010. The IRS is currently auditing the Bancorp’s federal income  tax returns for 2008 and 2009. On occasion, as various state and  local taxing jurisdictions examine the returns of the Bancorp and  its subsidiaries, the Bancorp may agree to extend the statute of  limitations for a short period of time. Otherwise, with the  exception of a few states with insignificant uncertain tax positions,  Retained earnings at December 31, 2010 and 2009 included  $157 million in allocations of earnings for bad debt deductions of  former thrift subsidiaries for which no income tax has been  provided. Under current tax law, if certain of the Bancorp’s  subsidiaries use these bad debt reserves for purposes other than to  absorb bad debt losses, they will be subject to federal income tax at  the current corporate tax rate.  Any interest and penalties incurred in connection with income  taxes are recorded as a component of income tax expense in the  Consolidated Financial Statements. During the years ended  December 31, 2010 and 2009, the Bancorp recognized an interest  benefit of $8 million and interest expense of $3 million,  respectively, net of the related tax impact. This $3 million  recognized in 2009 is exclusive of the $55 million interest reduction  discussed previously. At December 31, 2010 and 2009, the  Bancorp had accrued interest liabilities, net of the related tax  benefits, of $1 million and $13 million, respectively. No material  liabilities were recorded for penalties.  the statutes of limitations for state income tax returns remain open  only for tax years in accordance with each state’s statutes.  Fifth Third Bancorp 107 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS