Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Schedule of Components of Income Tax Expense (Benefit)

The components of income tax expense (benefit) for the years ended December 31, 2015, 2014 and 2013 were as follows (dollars in millions):



	Year Ended December 31,
	2015			2014		2013
Current income tax expense (benefit):
Federal	$	(5	)	$	—	$	—
State	(5		)	4		3
Foreign	5			—		—
Total current	(5		)	4		3
Deferred income tax expense (benefit):
Federal	(145		)	152		127
State	(31		)	3		(20		)
Foreign	—			—		—
Total deferred	(176		)	155		107
Non-current income tax expense (benefit)⁽¹⁾	4			—		(1		)
Income tax expense (benefit)	$	(177	)	$	159	$	109


(1)	Non-current income tax expense (benefit) primarily relates to amortization for investments in qualified affordable housing projects recognized under the proportional amortization method.

Schedule of Income before Income Tax, Domestic and Foreign

The following table presents the components of income before income tax expense (benefit) for the years ended December 31, 2015, 2014 and 2013 (dollars in millions):



	Year Ended December 31,
	2015		2014		2013
Domestic	$	84	$	438	$	186
Foreign	7		14		9
Income before income tax expense (benefit)	$	91	$	452	$	195

Summary of Income Tax Contingencies

The following table summarizes the tax years that are either currently under examination or remain open under the statute of limitations and subject to examination by the major tax jurisdictions in which the Company operates:




Jurisdiction	Open Tax Years
Hong Kong	2008-2015
United Kingdom	2013-2015
United States	2012-2015
Various states⁽¹⁾	2007-2015


(1)	Major state tax jurisdictions include California, Georgia, Illinois, New Jersey, New York and Virginia.

The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2015, 2014, and 2013 (dollars in millions):



	Year Ended December 31,
	2015			2014			2013
Unrecognized tax benefits, beginning of period	$	330		$	333		$	492
Additions based on tax positions related to prior years	5			12			10
Additions based on tax positions related to current year	2			—			—
Reductions based on tax positions related to prior years	(304		)	(14		)	(163		)
Settlements with taxing authorities	(3		)	—			(5		)
Statute of limitations lapses	(1		)	(1		)	(1		)
Unrecognized tax benefits, end of period	$	29		$	330		$	333

Schedule of Deferred Tax Assets and Liabilities

The temporary differences and tax carryforwards that created deferred tax assets and deferred tax liabilities at December 31, 2015 and 2014 are summarized in the following table (dollars in millions):



	December 31,
	2015			2014
Deferred tax assets:
Net operating losses	$	782		$	632
Reserves and allowances, net	482			601
Mark to market	158			110
Deferred compensation	44			43
Tax credits	44			37
Basis differences in investments	10			9
Other	28			1
Total deferred tax assets	1,548			1,433
Valuation allowance	(82		)	(91		)
Total deferred tax assets, net of valuation allowance	1,466			1,342
Deferred tax liabilities:
Depreciation and amortization	(433		)	(387		)
Other	—			(4		)
Total deferred tax liabilities	(433		)	(391		)
Net deferred tax assets, net	$	1,033		$	951

Schedule of Effective Income Tax Rate Reconciliation

The effective tax rate differed from the federal statutory rate as summarized in the following table for the years ended December 31, 2015, 2014 and 2013:



	Year Ended December 31,
	2015		2014		2013
Federal statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	0.2		2.0		2.8
Difference between statutory rate and foreign effective tax rate	(2.4	)	(1.0	)	(1.4	)
Tax exempt income	(0.5	)	(0.1	)	(0.3	)
Disallowed executive compensation	6.5		0.6		0.9
Change in valuation allowance	0.1		2.2		1.1
Tax credits	(3.8	)	(0.6	)	(1.8	)
Estimated reserve for uncertain tax positions	4.7		(0.3	)	(2.6	)
Deferred tax adjustments⁽¹⁾	3.5		(3.4	)	4.5
Tax on undistributed earnings and profits in certain foreign subsidiaries	3.9		1.1		2.4
Settled IRS examination	(241.5	)	—		—
Tax impact of exit of market making business	—		—		16.4
Other	(0.4	)	(0.3	)	(1.1	)
Effective tax rate	(194.7	)%	35.2	%	55.9	%


(1)	Includes the impact of New York city tax legislative changes of (5.8)% during the year ended December 31, 2015 and New York state tax legislative changes of (1.8)% during the year ended December 31, 2014.