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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The following schedule presents the major components of our income tax expense:
(In millions)202320222021
Federal:
Current$168 $236 $230 
Deferred— (38)27 
Total Federal168 198 257 
State:
Current47 52 55 
Deferred(9)(5)5 
Total State38 47 60 
Total income tax expense$206 $245 $317 
The following schedule presents a reconciliation of income tax expense computed at the statutory federal income tax rate of 21% and the actual income tax expense:
(In millions)202320222021
Income tax expense at statutory federal rate$186 $242 $304 
State income taxes including credits, net31 38 48 
Other nondeductible expenses29 13 8 
Nontaxable income(41)(40)(36)
Share-based compensation(1)(4)(3)
Other2 (4)(4)
Total income tax expense$206 $245 $317 
The net DTA or DTL is included in either “Other assets” or “Other liabilities” on the consolidated balance sheet. The following schedule presents the tax effects of temporary differences that give rise to significant portions of DTAs and DTLs:
(In millions)December 31,
20232022
Gross deferred tax assets:
Book loan loss deduction in excess of tax$181 $157 
Deferred compensation81 83 
Security investments and derivative fair value adjustments879 1,011 
Lease liabilities50 49 
Capitalized costs37 82 
Other48 29 
Total deferred tax assets before valuation allowance1,276 1,411 
Valuation allowance— — 
Total deferred tax assets1,276 1,411 
Gross deferred tax liabilities:
Premises and equipment, due to differences in depreciation(101)(99)
Federal Home Loan Bank stock dividends(3)(2)
Leasing operations(49)(49)
Prepaid expenses(5)(5)
Prepaid pension reserves— (3)
Mortgage servicing(5)(12)
Deferred loan costs(34)(34)
ROU assets(43)(44)
Qualified opportunity fund deferred gains(27)(26)
Equity investments(10)(9)
Total deferred tax liabilities(277)(283)
Net deferred tax assets (liabilities)$999 $1,128 
We have certain fixed-rate AFS securities whose fair value has declined due to increases in benchmark interest rates, resulting in unrealized losses in the AFS portfolio and a corresponding DTA. The sale of these securities could result in significant realized losses, which would require future earnings to utilize the deferred tax assets. We have the ability and intent to hold these securities to recovery.
We evaluate DTAs on a regular basis to determine whether a valuation allowance is required. In conducting this evaluation, we consider 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, the following:
•Future reversals of existing DTLs — These DTLs have a reversal pattern generally consistent with DTAs, and are used to realize the DTAs.
•Tax planning strategies — We have considered prudent and feasible tax planning strategies that we would implement to preserve the value of the DTAs, if necessary.
•Future projected taxable income — We expect future taxable income will offset the reversal of remaining net DTAs.
Based on this evaluation, we concluded that a valuation allowance was not required at December 31, 2023 and December 31, 2022.
At December 31, 2023, the tax effect of remaining net operating loss and tax credit carryforwards was less than $1 million, expiring through 2039.
We have a liability for unrecognized tax benefits relating to uncertain tax positions for tax credits on technology initiatives. The following schedule presents a roll-forward of gross unrecognized tax benefits:
(In millions)202320222021
Balance at beginning of year$13 $14 $11 
Tax positions related to current year:
Additions2 2 2 
Tax positions related to prior years:
Additions10 — 1 
Reductions— (1)— 
Settlements with taxing authorities(3)— — 
Lapses in statutes of limitations(7)(2)— 
Balance at end of year$15 $13 $14 
At December 31, 2023 and 2022, the liability for unrecognized tax benefits included approximately $13 million and $12 million (net of the federal tax benefit on state taxes) that, if recognized, would affect the effective tax rate. The amount of gross unrecognized tax benefits related to tax credits on technology initiatives that may increase or decrease during the 12 months subsequent to December 31, 2023 is dependent on the timing and outcome of various ongoing federal and state examinations. For tax years not currently under examination, the gross unrecognized tax benefits on technology initiatives may decrease by approximately $8 million.
Interest and penalties related to unrecognized tax benefits are included in “Income tax expense” on the statement of income. At December 31, 2023 and 2022, accrued interest and penalties included in “Other liabilities” on the consolidated balance sheet, net of any federal and state tax benefits, totaled approximately $2 million and $1 million, respectively.
We file income tax returns in U.S. federal and various state jurisdictions, and we are no longer subject to income tax examinations for years prior to 2013 for federal and certain state returns.