INCOME TAXES

Income tax expense is summarized as follows:



(In thousands)	2016			2015			2014
Federal:
Current	$	217,400		$	158,164		$	178,450
Deferred	(4,108		)	(31,843		)	14,277
	213,292			126,321			192,727
State:
Current	26,900			14,027			18,573
Deferred	(4,334		)	2,040			11,661
	22,566			16,067			30,234
	$	235,858		$	142,388		$	222,961

Income tax expense computed at the statutory federal income tax rate of 35% reconciles to actual income tax expense as follows:



(In thousands)	2016			2015			2014

Income tax expense at statutory federal rate	$	246,718		$	158,151		$	217,498
State income taxes including credits, net	14,668			10,443			19,652
Other nondeductible expenses	3,149			3,205			2,949
Nontaxable income	(24,688		)	(20,397		)	(17,869		)
Tax credits and other taxes	(1,704		)	(2,926		)	(1,717		)
Other	(2,285		)	(6,088		)	2,448
	$	235,858		$	142,388		$	222,961

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets (“DTA”) and deferred tax liabilities are presented below:



(In thousands)	December 31,
	2016			2015
Gross deferred tax assets:
Book loan loss deduction in excess of tax	$	240,881		$	254,223
Pension and postretirement	19,332			24,749
Deferred compensation	87,420			91,665
Security investments and derivative fair value adjustments	56,628			11,254
Net operating losses, capital losses and tax credits	4,664			4,659
FDIC-supported transactions	5,086			9,157
Other	46,052			46,016
	460,063			441,723
Valuation allowance	(4,127		)	(4,261		)
Total deferred tax assets	455,936			437,462
Gross deferred tax liabilities:
Core deposits and purchase accounting	(1,140		)	(3,392		)
Premises and equipment, due to differences in depreciation	(7,548		)	(10,588		)
Federal Home Loan Bank stock dividends	(3,800		)	(10,042		)
Leasing operations	(75,109		)	(85,255		)
Prepaid expenses	(6,534		)	(9,001		)
Prepaid pension reserves	(17,659		)	(18,087		)
Mortgage servicing	(9,844		)	(6,845		)
Subordinated debt modification	(30,762		)	(46,451		)
Deferred loan fees	(25,425		)	(23,723		)
Equity investments	(27,651		)	(21,037		)
Total deferred tax liabilities	(205,472		)	(234,421		)
Net deferred tax assets	$	250,464		$	203,041

The amount of net DTAs is included with other assets in the balance sheet. The $4.1 million and $4.3 million valuation allowances at December 31, 2016 and 2015, respectively, were for certain acquired net operating loss carryforwards included in our acquisition of the remaining interests in a less significant subsidiary. At December 31, 2016, excluding the $4.1 million, the tax effect of remaining net operating loss and tax credit carryforwards was approximately $0.5 million expiring through 2030.

We evaluate the DTAs on a regular basis to determine whether an additional valuation allowance is required. In conducting this evaluation, we have considered all available evidence, both positive and negative, based on the more likely than not criteria that such assets will be realized. This evaluation includes, but is not limited to: (1) available carryback potential to prior tax years; (2) potential future reversals of existing deferred tax liabilities, which historically have a reversal pattern generally consistent with DTAs; (3) potential tax planning strategies; and (4) future projected taxable income. Based on this evaluation, and considering the weight of the positive evidence compared to the negative evidence, we have concluded that an additional valuation allowance is not required as of December 31, 2016.

We have a liability for unrecognized tax benefits relating to uncertain tax positions for tax credits on technology initiatives. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:



(In thousands)	2016			2015		2014

Balance at beginning of year	$	5,448		$	3,255	$	2,385
Tax positions related to current year:
Additions	1,554			786		—
Reductions	—			—		—
Tax positions related to prior years:
Additions	542			1,407		870
Reductions	—			—		—
Settlements with taxing authorities	—			—		—
Lapses in statutes of limitations	(3,255		)	—		—
Balance at end of year	$	4,289		$	5,448	$	3,255

At December 31, 2016 and 2015, the liability for unrecognized tax benefits included approximately $3.4 million and $3.9 million, respectively (net of the federal tax benefit on state issues) that, if recognized, would affect the effective tax rate. We do not have any unrecognized tax benefits that may decrease during the 12 months subsequent to December 31, 2016.

Interest and penalties related to unrecognized tax benefits are included in income tax expense in the statement of income. At December 31, 2016 and 2015, accrued interest and penalties recognized in the balance sheet, net of any federal and/or state tax benefits, were approximately $0.1 million and $0.7 million, respectively.

The Company and its subsidiaries file income tax returns in U.S. federal and various state jurisdictions. The Company is no longer subject to income tax examinations for years prior to 2012 for federal returns and 2011 for certain state returns.