Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income TaxesProvision 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,
	2023	2022	2021
	(Dollars in millions)
Current income tax benefit (provision)	$(3,317)	$(3,505)	$(5,521)
Deferred income tax benefit (provision)(1)	(1,231)	195	(252)
Provision for federal income taxes	$(4,548)	$(3,310)	$(5,773)

(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,
	2023			2022			2021
Statutory corporate tax rate		21.0	%		21.0	%		21.0	%
Research tax credits		(0.2)			(1.5)			—
Equity investments in affordable housing projects		(0.2)			(0.1)			(0.1)
Valuation allowance		0.1			0.7			—
Other		—			0.3			(0.2)
Effective tax rate		20.7	%		20.4	%		20.7	%

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 2023, 2022, and 2021 were impacted by the benefits of our

investments in housing projects eligible for low-income housing tax credits. Our effective tax rate for 2022 was also

impacted by the benefit of the research tax credits claimed in 2022 and amended prior year returns, and the valuation

allowance against the deferred tax asset relating to capital loss carryforwards.

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. 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;

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

•the carryforward period for capital losses; and

•tax planning strategies.

Based on all positive and negative evidence available as of December 31, 2023, we concluded that it is more likely than

not that our deferred tax assets will be realized, except the deferred tax asset relating to capital loss carryforwards. For

the deferred tax asset relating to capital loss carryforwards, we concluded that the negative evidence outweighed the

positive evidence, and it is more likely than not that these capital loss carryforwards will not be utilized during the

allowable five-year carryforward period, which will expire in 2027 and 2028 if unused. Therefore, a valuation allowance

has been recorded against our capital loss carryforward deferred tax asset, which is included in “Other, net” in the table

below.

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

	As of December 31,
	2023		2022
	(Dollars in millions)
Deferred tax assets:
Mortgage and mortgage-related assets		$5,944		$6,764
Allowance for loan losses and basis in acquired property, net		1,571		2,055
Derivative instruments		766		1,153
Partnership and other equity investments		21		52
Interest-only securities		3,801		3,811
Other, net		617		295
Total deferred tax assets		12,720		14,130
Deferred tax liabilities:
Debt instruments		894		1,104
Valuation allowance		(145)		(115)
Deferred tax assets, net		$11,681		$12,911

Unrecognized Tax Benefits

The following table displays the changes in our unrecognized tax benefits.

	For the Year Ended December 31,
	2023		2022		2021
	(Dollars in millions)
Unrecognized tax benefits as of January 1		$60		$—		$—
Gross increases - tax positions in current year		9		60		—
Unrecognized tax benefits as of December 31		$69		$60		$—

If these positions were to resolve favorably, our effective tax would be reduced in future periods by $69 million. It is

reasonably possible that changes in our gross balance of unrecognized tax benefits may occur within the next twelve

months. Our tax years 2020 through 2022 remain open to examination by the IRS.