Income Taxes

12 Months Ended

Dec. 31, 2020

Applicable income taxes in the Consolidated Statements of Income were as follows:


(In thousands)	Current		Deferred		Total
Year Ended December 31, 2020:
Federal	$	95,116	$	(70,261)	$	24,855
State	16,206		(4,579)		11,627
Foreign	3,420		(1)		3,419
Total	$	114,742	$	(74,841)	$	39,901
Year Ended December 31, 2019:
Federal	$	(8,471)	$	40,038	$	31,567
State	23,154		(9,564)		13,590
Foreign	5,148		(64)		5,084
Total	$	19,831	$	30,410	$	50,241
Year Ended December 31, 2018:
Federal	$	9,424	$	54,858	$	64,282
State	13,251		3,722		16,973
Foreign	4,435		406		4,841
Total	$	27,110	$	58,986	$	86,096

Reconciliations to the Corporation's effective income tax rates from the statutory federal income tax rates were as follows:


	Year Ended December 31,
	2020		2019		2018
Federal income tax rate	21.00	%	21.00	%	21.00	%
Increase (decrease) resulting from:
CARES Act federal NOL carryback	(5.93)		—		—
Tax credit investments	(4.03)		(1.94)		(0.34)
Executive compensation limitation	3.54		0.67		0.36
State income tax, net of federal tax	3.40		3.01		3.34
Tax-exempt income	(3.04)		(1.74)		(1.64)
FDIC Insurance	1.80		0.96		0.25
Tax basis adjustment	(1.35)		(3.30)		—
State tax settlements, net of federal tax	(0.67)		(1.40)		—
TCF/Chemical Merger deferred tax reprice	—		(1.59)		—







Other, net	0.06		(1.60)		(1.54)
Effective income tax rate	14.78	%	14.07	%	21.43	%

The Corporation considers its undistributed foreign earnings to be reinvested indefinitely. This position is based on management's determination that cash held in the Corporation's foreign jurisdictions is not needed to fund its U.S. operations and that it either has reinvested or has intentions to reinvest these earnings. While management currently intends to indefinitely reinvest all of the Corporation's foreign earnings, should circumstances or tax laws change, the Corporation may need to record additional income tax expense in the period in which such determination or tax law change occurs.

Due to the shift to a worldwide territorial tax regime as part of tax reform enacted by the Tax Cuts and Jobs Act, future repatriations of foreign earnings are no longer subject to U.S. federal income tax. However, these foreign earnings may be subject to foreign withholding taxes should they be distributed in the form of dividends. As of December 31, 2020, the estimated withholding taxes that could be due on these earnings was $5.3 million.

The CARES Act was enacted in March 2020 in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOLs from 2018, 2019 and 2020 to be carried back five years to generate refunds of previously paid income taxes. Additionally, it provides retroactive changes in depreciation rules for certain qualified improvement property. Guidance implementing the CARES Act’s provisions provided retroactive choices to opt into or out of the full expensing of equipment purchases in the year of acquisition. During the year ended December 31, 2020, the Corporation implemented these and other options provided by the CARES Act, which resulted in a forecasted full year 2020 federal tax NOL. Carrying back 2020 federal tax NOLs to pre-2018 years results in tax refunds and a permanent tax benefit associated with the difference between the 21% federal tax rate in 2020 and the 35% federal tax rate prior to 2018.

Reconciliations of the changes in unrecognized tax benefits were as follows:


	At or For the Year Ended December 31,
(In thousands)	2020		2019		2018
Balance, beginning of period	$	2,695	$	5,872	$	4,645
Increases for tax positions related to the current year	282		444		903
Increases for tax positions related to prior years	1,178		445		1,438
Decreases for tax positions related to prior years	(261)		(1,498)		(970)
Settlements with taxing authorities	(2,317)		(2,479)		—
Decreases related to lapses of applicable statutes of limitation	(78)		(89)		(144)
Balance, end of period	$	1,499	$	2,695	$	5,872

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $1.2 million and $2.1 million at December 31, 2020 and 2019, respectively. The Corporation recognizes increases and decreases for interest and penalties related to unrecognized tax benefits, where applicable, in income tax expense (benefit). The Corporation recognized approximately $0.2 million of tax benefit, $0.4 million of tax benefit and $0.1 million of tax expense for 2020, 2019 and 2018, respectively, related to interest and penalties. Interest and penalties of approximately $0.1 million and $0.3 million were accrued at December 31, 2020 and 2019, respectively.

The Corporation's federal income tax returns are open and subject to examination for 2017 and later tax return years. The Corporation's various state income tax returns are generally open for 2016 and later tax return years based on individual state statutes of limitation. The Corporation's various foreign income tax returns are open and subject to examination for 2016 and later tax return years. Changes in the amount of unrecognized tax benefits within the next 12 months from normal expirations of statutes of limitation are not expected to be material.

The Corporation's deferred tax assets and deferred tax liabilities were as follows:


	At December 31,
(In thousands)	2020		2019
Deferred tax assets:
Allowance for loan and lease losses	$	121,614	$	25,178
Net operating losses and other carryforwards	74,240		70,820
Stock compensation and deferred compensation plans	45,588		42,980
Acquisition-related fair value adjustments	25,721		44,800
Nonaccrual interest	7,823		6,209


Other	8,290		5,516
Deferred tax assets	283,276		195,503
Valuation allowance	(10,828)		(12,840)
Total deferred tax assets, net of valuation allowance	272,448		182,663
Deferred tax liabilities:
Lease financing	296,184		339,691
Investment securities available-for-sale	56,839		16,760
Goodwill and other intangibles	32,494		35,031
Loan fees and discounts	24,572		10,098
Premises and equipment	16,213		30,122
Deferred Income	12,453		—
Prepaid expenses	10,507		9,508
Loan servicing rights	7,666		12,989
Other	4,926		7,862
Total deferred tax liabilities	461,854		462,061
Net deferred tax liabilities	$	189,406	$	279,398

The net operating losses and other carryforwards at December 31, 2020 consisted of federal net operating losses of $23.1 million that expire in 2028 through 2036, state net operating losses of $4.6 million that expire in 2023 through 2040, charitable contribution carryforwards of $1.3 million that expire in 2025, capital loss carryforwards of $0.2 million that expire in 2022, federal credit carryforwards of $29.4 million that expire in 2028 through 2040 and federal credit carryforwards of $4.9 million that do not expire. The valuation allowance against the Corporation’s deferred tax asset at December 31, 2020 consisted of state net operating losses of $10.7 million and other items of $0.1 million. The valuation allowance at December 31, 2020 and 2019 principally applies to net operating losses and capital loss carryforwards that, in the opinion of management, are more-likely-than-not to expire unutilized. However, to the extent that tax benefits related to these carryforwards are realized in the future, the reduction in the valuation allowance will reduce income tax expense.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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