	Year Ended December 31
	2018			2017		2016
	(In thousands)
Current
Federal	$	408,428		$	363,043	$	428,750
State and local		113,706			94,714		95,426
Total current		522,134			457,757		524,176
Deferred
Federal		(12,780	)		367,308		147,662
State and local		28,637			33,482		26,351
Total deferred		15,857			400,790		174,013
Amortization of investments in qualified affordable housing projects		52,169			57,009		45,095
Total income taxes applicable to pre-tax income	$	590,160		$	915,556	$	743,284

The Company files a consolidated federal income tax return reflecting taxable income earned by all domestic subsidiaries. In prior years, applicable federal tax law allowed certain financial institutions the option of deducting as bad debt expense for tax purposes amounts in excess of actual losses. In accordance with GAAP, such financial institutions were not required to provide deferred income taxes on such excess. Recapture of the excess tax bad debt reserve established under the previously allowed method will result in taxable income if M&T Bank fails to maintain bank status as defined in the Internal Revenue Code or charges are made to the reserve for other than bad debt losses. At December 31, 2018, M&T Bank’s tax bad debt reserve for which no federal income taxes have been provided was $137,121,000. No actions are planned that would cause this reserve to become wholly or partially taxable.

Income taxes attributable to gains or losses on bank investment securities were a benefit of $1,628,000 in 2018, and an expense of $7,195,000 in 2017 and $11,925,000 in 2016. No alternative minimum tax expense was recognized in 2017 or 2016.

The Tax Cuts and Jobs Act (“Tax Act”) was signed into law on December 22, 2017, reducing the corporate federal income tax rate from 35% to 21% effective January 1, 2018 and making other changes to U.S. corporate income tax laws, including eliminating the alternative minimum tax as of January 1, 2018. GAAP requires that the impact of the provisions of the Tax Act be accounted for in the period of enactment. Accordingly, the incremental income tax expense recorded by the Company in the fourth quarter of 2017 related to the Tax Act was $85 million. That additional expense was largely attributable to the reduction in carrying value of net deferred tax assets reflecting lower future tax benefits resulting from the lower corporate income tax rate. During 2018 the Company received approval from the Internal Revenue Service to change the timing of recognition of certain loan fees retroactive to 2017. Given the reduction of the federal income tax rate, the change resulted in a $15 million reduction of income tax expense in 2018. The Company also adopted new accounting guidance for share-based transactions during the first quarter of 2017. That guidance requires that all excess tax benefits and tax deficiencies associated with share-based compensation be recognized as a component of income tax expense in the income statement. Previously, tax effects resulting from changes in M&T’s share price subsequent to the grant date were recorded through shareholders’ equity at the time of vesting or exercise. The adoption of the amended accounting guidance resulted in a $9 million and $22 million reduction of income tax expense in 2018 and 2017, respectively.

Total income taxes differed from the amount computed by applying the statutory federal income tax rate to pre-tax income as follows:

	Year Ended December 31
	2018			2017			2016
	(In thousands)

Income taxes at statutory federal income tax rate	$	526,730		$	813,352		$	720,439
Increase (decrease) in taxes:
Tax-exempt income		(26,186	)		(40,778	)		(35,364	)
State and local income taxes, net of federal income tax effect		112,451			83,327			79,155
Qualified affordable housing project federal tax credits, net		(12,240	)		(16,015	)		(15,091	)
Initial impact of enactment of Tax Act		—			85,431			—
Other		(10,595	)		(9,761	)		(5,855	)
	$	590,160		$	915,556		$	743,284

Deferred tax assets (liabilities) were comprised of the following at December 31:

	2018			2017			2016
	(In thousands)

Losses on loans and other assets	$	322,818		$	345,609		$	590,288
Retirement benefits		30,057			45,322			143,067
Postretirement and other employee benefits		23,563			26,009			52,512
Incentive and other compensation plans		24,796			25,050			36,616
Interest on loans		—			37,900			61,266
Stock-based compensation		26,759			26,676			52,181
Unrealized losses		52,580			—			10,741
Other		43,880			66,247			106,876
Gross deferred tax assets		524,453			572,813			1,053,547
Leasing transactions		(186,787	)		(181,159	)		(266,268	)
Unrealized gains		—			(94,285	)		—
Capitalized servicing rights		(54,894	)		(51,781	)		(71,108	)
Depreciation and amortization		(61,881	)		(52,733	)		(63,959	)
Interest on loans		(18,920	)		—			—
Other		(28,350	)		(21,599	)		(87,200	)
Gross deferred tax liabilities		(350,832	)		(401,557	)		(488,535	)
Net deferred tax asset	$	173,621		$	171,256		$	565,012

The Company believes that it is more likely than not that the deferred tax assets will be realized through taxable earnings or alternative tax strategies.

The income tax credits shown in the statement of income of M&T in note 25 arise principally from operating losses before dividends from subsidiaries.

A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:

	Federal, State and Local Tax			Accrued Interest			Unrecognized Income Tax Benefits
	(In thousands)

Gross unrecognized tax benefits at January 1, 2016	$	24,537		$	7,969		$	32,506
Increases as a result of tax positions taken during 2016		12,237			—			12,237
Increases as a result of tax positions taken in prior years		—			656			656
Decreases as a result of tax positions taken in prior years		(885	)		(710	)		(1,595	)
Gross unrecognized tax benefits at December 31, 2016		35,889			7,915			43,804
Increases as a result of tax positions taken during 2017		13,019			—			13,019
Increases as a result of tax positions taken in prior years		—			1,379			1,379
Decreases as a result of settlements with taxing authorities		(332	)		(168	)		(500	)
Decreases as a result of tax positions taken in prior years		(3,144	)		(3,475	)		(6,619	)
Gross unrecognized tax benefits at December 31, 2017		45,432			5,651			51,083
Increases as a result of tax positions taken during 2018		13,426			—			13,426
Increases as a result of tax positions taken in prior years		—			1,969			1,969
Decreases as a result of settlements with taxing authorities		(664	)		(289	)		(953	)
Decreases as a result of tax positions taken in prior years		(1,920	)		(702	)		(2,622	)
Gross unrecognized tax benefits at December 31, 2018	$	56,274		$	6,629			62,903
Less: Federal, state and local income tax benefits								(13,209	)
Net unrecognized tax benefits at December 31, 2018 that, if recognized, would impact the effective income tax rate							$	49,694

The Company’s policy is to recognize interest and penalties, if any, related to unrecognized tax benefits in income taxes in the consolidated statement of income. The balance of accrued interest at December 31, 2018 is included in the table above. The Company’s federal, state and local income tax returns are routinely subject to examinations from various governmental taxing authorities. Such examinations may result in challenges to the tax return treatment applied by the Company to specific transactions. Management believes that the assumptions and judgment used to record tax-related assets or liabilities have been appropriate. Should determinations rendered by tax authorities ultimately indicate that management’s assumptions were inappropriate, the result and adjustments required could have a material effect on the Company’s results of operations. Examinations by the Internal Revenue Service of the Company’s federal income tax returns have been largely concluded through 2017, although under statute the income tax returns from 2015 through 2017 could be adjusted. The Company also files income tax returns in over forty states and numerous local jurisdictions. Substantially all material state and local matters have been concluded for years through 2013. It is not reasonably possible to estimate when examinations for any subsequent years will be completed.