Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income taxes

JPMorgan Chase and its eligible subsidiaries file a consolidated U.S. federal income tax return. JPMorgan Chase uses the asset and liability method to provide for income taxes on all transactions recorded in the Consolidated Financial Statements. This method requires that income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts of assets or liabilities for book and tax purposes. Accordingly, a deferred tax asset or liability for each temporary difference is determined based on the tax rates that the Firm expects to be in effect when the underlying items of income and expense are realized. JPMorgan Chase’s expense for income taxes includes the current and deferred portions of that expense. A valuation allowance is established to reduce deferred tax assets to the amount the Firm expects to realize.

Due to the inherent complexities arising from the nature of the Firm’s businesses, and from conducting business and being taxed in a substantial number of jurisdictions, significant judgments and estimates are required to be made. Agreement of tax liabilities between JPMorgan Chase and the many tax jurisdictions in which the Firm files tax returns may not be finalized for several years. Thus, the Firm’s final tax-related assets and liabilities may ultimately be different from those currently reported.

Effective tax rate and expense

The following table presents a reconciliation of the applicable statutory U.S. federal income tax rate to the effective tax rate.

Effective tax rate
Year ended December 31,	2023			2022		2021
Statutory U.S. federal tax rate	21.0	%		21.0	%	21.0	%
Increase/(decrease) in tax rate resulting from:
U.S. state and local income taxes, net of U.S. federal income tax benefit	2.8			3.5		3.0
Tax-exempt income	(0.9)			(0.9)		(0.9)
Non-U.S. earnings	1.5			0.4		0.1
Business tax credits	(4.4)			(5.4)		(4.2)
Other, net	(0.4)			(0.2)		(0.1)
Effective tax rate	19.6	%	(a)	18.4	%	18.9	%

(a) Income tax expense associated with the First Republic acquisition was reflected in the estimated bargain purchase gain, which resulted in a reduction in the Firm’s effective tax rate.

The following table reflects the components of income tax expense/(benefit) included in the Consolidated statements of income.

Income tax expense/(benefit)
Year ended December 31, (in millions)	2023		2022		2021
Current income tax expense/(benefit)
U.S. federal	$	8,973	$	5,606	$	2,865
Non-U.S.	4,355		2,992		2,718
U.S. state and local	3,266		2,630		1,897
Total current income tax expense/(benefit)	16,594		11,228		7,480
Deferred income tax expense/(benefit)
U.S. federal	(3,475)		(2,004)		3,460
Non-U.S.	35		(154)		(101)
U.S. state and local	(1,094)		(580)		389
Total deferred income tax expense/(benefit)	(4,534)		(2,738)		3,748
Total income tax expense	$	12,060	$	8,490	$	11,228

Total income tax expense includes $68 million of tax benefits in 2023, $331 million of tax benefits in 2022, and $69 million of tax expenses in 2021, resulting from the resolution of tax audits.

Tax effect of items recorded in stockholders’ equity

The preceding table does not reflect the tax effect of certain items that are recorded each period directly in stockholders’ equity, which are predominantly reflected in OCI as disclosed in Note 24. For the year ended December 31, 2023, stockholders’ equity also reflected the tax effect associated with the Firm’s adoption of the TDR accounting guidance recognized in retained earnings. Refer to Note 1 for further information.

Results from U.S. and non-U.S. earnings

The following table presents the U.S. and non-U.S. components of income before income tax expense.

Year ended December 31, (in millions)	2023		2022		2021
U.S.	$	46,868	$	34,626	$	50,126
Non-U.S.(a)	14,744		11,540		9,436
Income before income tax expense	$	61,612	$	46,166	$	59,562

(a)For purposes of this table, non-U.S. income is defined as income generated from operations located outside the U.S.

The Firm will recognize any U.S. income tax expense it may incur on global intangible low tax income as income tax expense in the period in which the tax is incurred.

Affordable housing tax credits

The Firm recognized $2.0 billion of tax credits and other tax benefits associated with investments in affordable housing projects within income tax expense for the year ended 2023, and $1.8 billion and $1.7 billion for the years ended 2022 and 2021, respectively. The amount of amortization of such investments reported in income tax expense was $1.6 billion, $1.4 billion and $1.3 billion, respectively. The carrying value of these investments, which are reported in other assets on the Firm’s Consolidated balance sheets, was $14.6 billion and $12.1 billion at December 31, 2023 and 2022, respectively. The amount of commitments related to these investments, which are reported in accounts payable and other liabilities on the Firm’s Consolidated balance sheets, was $6.8 billion and $5.4 billion at December 31, 2023 and 2022, respectively.

Deferred taxes

Deferred income tax expense/(benefit) reflects the differences between assets and liabilities measured for financial reporting purposes versus income tax return purposes. Deferred tax assets are recognized if, in management’s judgment, their realizability is determined to be more likely than not. If a deferred tax asset is determined to be unrealizable, a valuation allowance is established. The significant components of deferred tax assets and liabilities are reflected in the following table, the net deferred tax assets are reflected in other assets on the Firm’s Consolidated balance sheets.

December 31, (in millions)	2023			2022
Deferred tax assets
Allowance for loan losses	$	5,809		$	5,193
Employee benefits	1,247			1,342
Accrued expenses and other	9,887		(a)	8,577
Non-U.S. operations	860			1,148
Tax attribute carryforwards	290			365
Gross deferred tax assets	18,093			16,625
Valuation allowance	(183)			(198)
Deferred tax assets, net of valuation allowance	$	17,910		$	16,427
Deferred tax liabilities
Depreciation and amortization	$	779		$	2,044
Mortgage servicing rights, net of hedges	1,794			1,864
Leasing transactions	2,254			2,843
Other, net	2,935			3,801
Gross deferred tax liabilities	7,762			10,552
Net deferred tax assets	$	10,148		$	5,875

(a) Includes the estimated net deferred tax asset associated with the First Republic acquisition. The allocation of the tax basis to individual assets may be refined during the measurement period, which could result in an impact to the gross deferred tax assets and liabilities.

JPMorgan Chase has recorded deferred tax assets of $290 million at December 31, 2023 in connection with tax attribute carryforwards. State and local capital loss carryforwards were $1.2 billion, U.S. federal NOL carryforwards were $586 million, non-U.S. NOL carryforwards were $570 million, and other U.S. federal tax attributes were $118 million. If not utilized, a portion of the U.S. federal NOL carryforwards and other U.S. federal tax attributes will expire between 2026 and 2037 whereas others have an unlimited carryforward period. Similarly, certain non-U.S. NOL carryforwards will expire between 2026 and 2040 whereas others have an unlimited carryforward period. The state and local capital loss carryforwards will expire in 2026 and 2027. 

The valuation allowance at December 31, 2023, was due to the state and local capital loss carryforwards and certain non-U.S. deferred tax assets, including NOL carryforwards.

Unrecognized tax benefits

At December 31, 2023, 2022 and 2021, JPMorgan Chase’s unrecognized tax benefits, excluding related interest expense and penalties, were $5.4 billion, $5.0 billion and $4.6 billion, respectively, of which $3.9 billion, $3.8 billion and $3.4 billion, respectively, if recognized, would reduce the annual effective tax rate. Included in the amount of unrecognized tax benefits are certain items that would not affect the effective tax rate if they were recognized in the Consolidated statements of income. These unrecognized items include the tax effect of certain temporary differences, the portion of gross state and local unrecognized tax benefits that would be offset by the benefit from associated U.S. federal income tax deductions, and the portion of gross non-U.S. unrecognized tax benefits that would have offsets in other jurisdictions. JPMorgan Chase evaluates the need for changes in unrecognized tax benefits based on its anticipated tax return filing positions as part of its U.S. federal and state and local tax returns. In addition, the Firm is presently under audit by a number of taxing authorities, most notably by the Internal Revenue Service, as summarized in the Tax examination status table below. The evaluation of unrecognized tax benefits as well as the potential for audit settlements make it reasonably possible that over the next 12 months the gross balance of unrecognized tax benefits may increase or decrease by as much as approximately $1.1 billion. The change in the unrecognized tax benefit would result in a payment or income statement recognition.

The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits.

Year ended December 31, (in millions)	2023		2022		2021
Balance at January 1,	$	5,043	$	4,636	$	4,250
Increases based on tax positions related to the current period	1,440		1,234		798
Increases based on tax positions related to prior periods	37		123		393
Decreases based on tax positions related to prior periods	(1,110)		(824)		(657)
Decreases related to cash settlements with taxing authorities	(9)		(126)		(148)
Balance at December 31,	$	5,401	$	5,043	$	4,636

After-tax interest expense/(benefit) and penalties related to income tax liabilities recognized in income tax expense were $229 million, $141 million and $174 million in 2023, 2022 and 2021, respectively.

At December 31, 2023 and 2022, in addition to the liability for unrecognized tax benefits, the Firm had accrued $1.6 billion and $1.3 billion, respectively, for income tax-related interest and penalties.

Tax examination status

JPMorgan Chase is continually under examination by the Internal Revenue Service, by taxing authorities throughout the world, and by many state and local jurisdictions throughout the U.S. The following table summarizes the status of tax years that remain subject to income tax examination of JPMorgan Chase and its consolidated subsidiaries by significant jurisdictions as of December 31, 2023.

	Periods under examination	Status
JPMorgan Chase – U.S.	2011 – 2013	Field examination of amended returns; certain matters at Appellate level
JPMorgan Chase – U.S.	2014 - 2020	Field examination of original and amended returns; certain matters at Appellate level
JPMorgan Chase – New York State	2012 - 2014	Field Examination
JPMorgan Chase – New York City	2015 - 2017	Field Examination
JPMorgan Chase – U.K.	2011 – 2020	Field examination of certain select entities