Income Taxes

The following table is an analysis of the effective tax rate:



	Years Ended December 31,
(Dollars in millions)	2016		2015		2014
Federal income tax rate	35	%	35	%	35	%
Net tax effects of:
State income taxes, net of federal income tax benefit	6		5		7
Tax-exempt interest income	(1	)	(2	)	(1	)
Amortization of LIHC investments	10		15		9
Tax credits	(18	)	(26	)	(15	)
Other	(1	)	(5	)	(4	)
Effective tax rate	31	%	22	%	31	%

The components of income tax expense were as follows:



	Years Ended December 31,
(Dollars in millions)	2016			2015			2014
Current income tax expense:
Federal	$	228		$	114		$	199
State	105			61			38
Foreign	7			14			14
Total current expense	340			189			251
Deferred income tax expense (benefit):
Federal	58			4			63
State	24			(15		)	31
Foreign	(3		)	(9		)	3
Total deferred expense	79			(20		)	97
Total income tax expense	$	419		$	169		$	348

The components of the Company's net deferred tax balances as of December 31, 2016 and 2015 were as follows:



	December 31,
(Dollars in millions)	2016		2015
Deferred tax assets:
Allowance for credit losses	$	443	$	395
Accrued expense, net	384		274
Unrealized losses on pension and postretirement benefits	384		401
Unrealized net losses on securities available for sale	135		102
Fair value adjustments for valuation of FDIC covered assets	105		125
Other	52		142
Total deferred tax assets	1,503		1,439
Deferred tax liabilities:
Leasing	736		838
Intangible assets	79		98
Pension liabilities	479		427
Other	147		7
Total deferred tax liabilities	1,441		1,370
Net deferred tax asset	$	62	$	69

At December 31, 2016, we had net operating loss and tax credit carry forwards for which related deferred tax assets of $81 million and $123 million, respectively, were recorded. The net operating loss and tax credit carry forwards expire in varying amounts through 2035.

Deferred tax assets are evaluated for realization based on the existence of sufficient taxable income of the appropriate character. Management has determined that no valuation allowance is required.

The changes in unrecognized tax positions were as follows:



	Years Ended December 31,
(Dollars in millions)	2016		2015			2014
Balance, beginning of year	$	8	$	11		$	18
Gross increases as a result of tax positions taken during prior periods	—		1			1
Gross decreases as a result of tax positions taken during prior periods	—		(5		)	(10		)
Gross increases as a result of tax positions taken during current period	3		1			2
Balance, end of year	$	11	$	8		$	11

The amount of unrecognized tax positions that would affect the effective tax rate, if recognized, was $11 million, $8 million and $11 million at December 31, 2016, 2015 and 2014, respectively.

The Company recognizes interest and penalties as a component of income tax expense. As of December 31, 2016 and 2015, there were no accruals recorded for gross interest and penalties. As of December 31, 2014, we accrued $1 million of gross interest and penalties.

The Company is subject to U.S. federal income tax as well as various state and foreign income taxes. With limited exception, the Company is not open to examination for periods before 2010 by U.S. federal and state taxing authorities.