Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

The following is a summary of total income tax expense:


Years ended December 31 (in millions)	2019		2018		2017
Income tax expense applicable to pre-tax income	$	132.0	$	108.2	$	129.9
Deferred income tax expense (benefit) applicable to items reported in total other comprehensive income (loss) (note 17)	27.2		(12.2)		8.3
Total	$	159.2	$	96.0	$	138.2

Income Tax Effects Related to Items Recognized in Other Comprehensive Income

The components of income tax expense applicable to pre-tax income are summarized as follows:


Years ended December 31 (in millions)	2019		2018		2017
Current tax expense:
Federal	$	90.8	$	83.0	$	88.9
State	26.9		23.3		15.2
Total current tax expense	117.7		106.3		104.1
Deferred tax expense (1)	14.3		1.9		25.8
Total income tax expense	$	132.0	$	108.2	$	129.9

(1)Includes the effect of (decreases) increases in the valuation allowance for state deferred tax assets of $(7.7) million, $0.3 million and $(0.6) million in 2019, 2018 and 2017, respectively.

Summary of Income Tax Reconciliation

The following is a reconciliation of expected income tax expense, computed at the U.S. federal statutory rate of 21% in both 2019 and 2018, and 35% in 2017, to actual income tax expense:


	2019						2018						2017
Years ended December 31 (dollars in millions)	Amount		Rate		Amount		Rate		Amount		Rate
Expected income tax expense	$	137.0	21.0	%	$	121.0	21.0	%	$	163.5	35.0	%
State income tax, net of federal tax effect	22.6		3.4		23.2		4.1		12.2		2.6
Non-deductible FDIC insurance premiums	4.4		0.7		6.5		1.1		—		—
Tax-exempt interest	(21.4)		(3.3)		(19.4)		(3.4)		(26.6)		(5.7)
Federal income tax credits	(12.7)		(2.0)		(12.3)		(2.1)		(11.6)		(2.5)
Tax-exempt income from BOLI	(2.2)		(0.3)		(1.5)		(0.3)		(2.2)		(0.5)
Tax benefits recognized in connection with:
The Tax Cuts and Jobs Act	—		—		(9.2)		(1.6)		(6.5)		(1.4)
Equity-based compensation	(0.1)		—		(1.3)		(0.2)		(1.1)		(0.2)
Other, net	4.4		0.7		1.2		0.2		2.2		0.5
Actual income tax expense	$	132.0			$	108.2			$	129.9
Effective income tax rate			20.2	%			18.8	%			27.8	%

Deferred Tax Assets and Liabilities

The tax effects of temporary differences that give rise to People’s United’s deferred tax assets and liabilities are as follows:


As of December 31 (in millions)	2019		2018
Deferred tax assets:
State tax net operating loss carryforwards, net of federal tax effect	$	71.8	$	79.4
Allowance for loan losses and non-accrual interest	65.5		62.3
Acquisition-related deferred tax assets	30.5		13.3
Tax credits and net operating loss carryforwards	24.7		—
Equity-based compensation	18.1		15.6
ROU lease assets, net of lease liabilities	7.5		—
D.C. Solar investment basis difference	6.8		—
Unrealized loss on debt securities transferred to held-to-maturity	3.6		4.7
Unrealized loss on debt securities available-for-sale	—		15.4
Other deductible temporary differences	28.2		28.5
Total deferred tax assets	256.7		219.2
Less: valuation allowance for state deferred tax assets	(72.4)		(80.1)
Total deferred tax assets, net of the valuation allowance	184.3		139.1
Deferred tax liabilities:
Leasing activities	(92.7)		(82.0)
Pension and other postretirement benefits	(20.0)		(9.7)
Book over tax income recognized on consumer loans	(18.0)		(17.5)
Unrealized gain on debt securities available-for-sale	(6.6)		—
Mark-to-market and original issue discounts for tax purposes	(5.2)		(10.4)
Temporary differences related to merchant services joint venture	(3.5)		(3.7)

Other taxable temporary differences	(4.7)		(4.4)
Total deferred tax liabilities	(150.7)		(127.7)
Net deferred tax asset	$	33.6	$	11.4

Unrecognized Income Tax Benefits

The following is a reconciliation of the beginning and ending balances of People's United’s unrecognized income tax benefits related to uncertain tax positions:


Years ended December 31 (in millions)	2019		2018		2017
Balance at beginning of year	$	5.2	$	2.7	$	2.8
Additions for tax positions taken in prior years	0.5		2.5		0.1
Additions related to D.C. Solar:
Established by United Financial prior to acquisition	8.7		—		—
Established by People's United subsequent to acquisition	18.9		—		—
Reductions attributable to audit settlements/lapse of statute of limitations	—		—		(0.2)
Balance at end of year	$	33.3	$	5.2	$	2.7