Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Provision for Federal Income Taxes

We are subject to federal income tax, but we are exempt from state and local income taxes. The following table displays the components of our provision for federal income taxes.

	For the Year Ended December 31,
	2021		2020		2019
	(Dollars in millions)
Current income tax benefit (provision)	$	(5,521)	$	(3,803)	$	(2,089)
Deferred income tax benefit (provision)(1)	(252)		729		(1,328)
Provision for federal income taxes	$	(5,773)	$	(3,074)	$	(3,417)

(1)Amount excludes the current income tax effect of items recognized directly in “Total stockholders' equity.”

The following table displays the difference between the statutory corporate tax rate and our effective tax rate.

	For the Year Ended December 31,
	2021			2020			2019
Statutory corporate tax rate		21.0	%		21.0	%		21.0	%
Equity investments in affordable housing projects		(0.1)			(0.1)			(0.2)
Change in unrecognized tax benefits		—			—			(1.2)
Other		(0.2)			(0.2)			(0.2)
Effective tax rate		20.7	%		20.7	%		19.4	%

Our effective tax rate is the provision for federal income taxes expressed as a percentage of income or loss before federal income taxes. Our effective tax rates for the years 2021, 2020, and 2019 were impacted by the benefits of our investments in housing projects eligible for low-income housing tax credits. Our effective tax rate for 2019 was also impacted by the favorable resolution of our uncertain tax position, which reduced our provision for federal income taxes by $205 million.

Deferred Tax Assets and Liabilities

We evaluate our deferred tax assets for recoverability using a consistent approach which considers the relative impact of negative and positive evidence, including our historical profitability and projections of future taxable income.

As of December 31, 2021, we continued to conclude that the positive evidence in favor of the recoverability of our deferred tax assets outweighed the negative evidence and that it is more likely than not that our deferred tax assets will be realized. Our framework for assessing the recoverability of deferred tax assets requires us to weigh all available evidence, to the extent it exists, including:

•the sustainability of recent profitability required to realize the deferred tax assets;

•the cumulative net income or losses in our consolidated statements of operations and comprehensive income in recent years;

•unsettled circumstances that, if unfavorably resolved, would adversely affect future operations and profit levels on a continuing basis in future years; and

•the funding available to us under the senior preferred stock purchase agreement.

The following table displays our deferred tax assets and deferred tax liabilities.

	As of December 31,
	2021			2020
	(Dollars in millions)
Deferred tax assets:
Mortgage and mortgage-related assets		$	7,547		$	8,241
Allowance for loan losses and basis in acquired property, net		1,060			1,798
Derivative instruments		778			602
Partnership and other equity investments		88			129
Interest-only securities		3,977			2,561
Total deferred tax assets		13,450			13,331
Deferred tax liabilities:
Unrealized gains on AFS securities, net		2			20
Other, net		733			364
Total deferred tax liabilities		735			384
Deferred tax assets, net		$	12,715		$	12,947

Unrecognized Tax Benefits

We have no unrecognized tax benefits for the years ended December 31, 2021 and 2020. We had unrecognized tax benefits of $416 million as of January 1, 2019 that were reduced by decreases in prior year tax positions of $416 million in 2019. We had no unrecognized tax benefits as of December 31, 2019.

Our tax years 2016 and 2018 through 2020 remain open to examination by the IRS.