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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The significant components of income tax expense from continuing operations were as follows.
Year ended December 31, ($ in millions)
202420232022
Current income tax expense
U.S. federal$107 $85 $1 
Foreign6 5 3 
State and local26 36 9 
Total current expense139 126 13 
Deferred income tax expense (benefit)
U.S. federal53 26 493 
Foreign1 (1)(1)
State and local(26)(7)61 
Total deferred expense (benefit)28 18 553 
Other tax expense (a)— — 61 
Total income tax expense from continuing operations$167 $144 $627 
(a)Represents the realization of stranded tax amounts, under the portfolio method, connected to our qualified defined benefit pension plan that was settled during the year ended December 31, 2022. These stranded tax amounts had accumulated in other comprehensive loss over time. Refer to Note 18 for additional information.
A reconciliation of income tax expense from continuing operations with the amounts at the statutory U.S. federal income tax rate is shown in the following table.
Year ended December 31, ($ in millions)
202420232022
Statutory U.S. federal tax expense$175 $232 $492 
Change in tax resulting from
Nondeductible expenses53 44 31 
Tax credits, excluding expirations(49)(55)(73)
State and local income taxes, net of federal income tax benefit30 (4)77 
Valuation allowance change, excluding expirations(28)(91)54 
Unrecognized tax benefits(11)38 (4)
Tax law enactment— (18)— 
Settlement of qualified defined benefit pension plan— — 61 
Other, net(3)(2)(11)
Total income tax expense from continuing operations$167 $144 $627 
For the year ended December 31, 2024, consolidated income tax expense from continuing operations was largely driven by pretax earnings and nondeductible FDIC premium expenses, partially offset by an income tax benefit related to various tax credits. For the year ended December 31, 2023, consolidated income tax expense from continuing operations was largely driven by pretax earnings, partially offset by the release of the valuation allowance on foreign tax credit carryforwards as well as an income tax benefit related to various tax credits. The release of the valuation allowance was primarily driven by the identification and execution of a tax planning strategy allowing for additional utilization of foreign tax credits. For the year ended December 31, 2022, consolidated income tax expense from continuing operations was largely driven by pretax earnings, the settlement of our qualified defined benefit pension plan, and an increase of the valuation allowance on foreign tax credit carryforwards, partially offset by an income tax benefit related to various tax credits. The increase in the valuation allowance was primarily driven by a reduction in forecasted foreign-sourced income caused by revised estimates from certain previously executed and forecasted securitization transactions. During 2022, we lowered our income tax benefit from these securitization transactions due to the recharacterization of certain income that was previously foreign-sourced income as domestically sourced and higher interest expense assumptions.
We record rehabilitation, energy, and clean vehicle tax credits as part of our ITC category. During the fourth quarter of 2024, we elected to change our method of accounting for ITCs from the flow-through method to the deferral method. Refer to the section titled Change in Accounting Principle in Note 1 for additional information. Our ITCs are generally accounted for using the deferral method and recognized as a reduction of the corresponding asset value. However, ITCs that qualify for proportional amortization treatment are accounted for using the flow-through method and are recognized as a reduction to current income tax expense.
The significant components of deferred tax assets and liabilities are reflected in the following table.
December 31, ($ in millions)
20242023
Deferred tax assets
Adjustments to securities and hedging transactions (a)$1,080 $1,066 
Tax credit carryforwards679 506 
Adjustments to loan value420 569 
State and local taxes301 305 
Fixed assets257 165 
Other454 426 
Gross deferred tax assets3,191 3,037 
Valuation allowance(138)(176)
Deferred tax assets, net of valuation allowance3,053 2,861 
Deferred tax liabilities
Lease transactions653 1,117 
Deferred acquisition costs380 387 
Long-term debt62 64 
Other52 57 
Gross deferred tax liabilities1,147 1,625 
Net deferred tax assets (b)$1,906 $1,236 
(a)Securities include deferred tax assets related to available-for-sale securities, held-to-maturity securities, and equity securities. At December 31, 2024, and 2023, there were $882 million and $808 million of deferred tax assets related to available-for-sale securities, respectively.
(b)Amounts include $1.9 billion and $1.2 billion of net deferred tax assets included in other assets on our Consolidated Balance Sheet for tax jurisdictions in a total net deferred tax asset position, and $10 million included in accrued expenses and other liabilities on our Consolidated Balance Sheet for tax jurisdictions in a total net deferred tax liability position at both December 31, 2024, and 2023.
As of each reporting date, we consider existing evidence, both positive and negative, that could impact our view with regard to future realization of deferred tax assets. We continue to believe it is more likely than not that the benefit for certain foreign tax credit carryforwards and state net operating loss carryforwards will not be realized. In recognition of this risk, we continue to provide a partial valuation allowance on the deferred tax assets relating to these carryforwards, and it is reasonably possible that the valuation allowance may change in the next 12 months.
The following table summarizes net deferred tax assets including related valuation allowances at December 31, 2024.
($ in millions)Deferred tax assetValuation allowanceNet deferred tax assetYears of expiration
Tax credit carryforwards
General business credits$611 $— $611 2044
Foreign tax credits68 (27)41 2025–2034
Total tax credit carryforwards679 (27)652 
Tax loss carryforwards
Net operating losses — state128 (a)(111)17 2025–Indefinite
Net operating losses — federal7 — 7 2028–Indefinite
Total U.S. federal and state tax loss carryforwards135 (111)24 
Other net deferred tax assets1,230 — 1,230 n/a
Net deferred tax assets$2,044 $(138)$1,906 
n/a = not applicable
(a)State net operating loss carryforwards are included in the state and local taxes and other liabilities totals disclosed in our deferred inventory table above.
As of December 31, 2024, we have recognized insignificant deferred tax liabilities for incremental U.S. federal taxes that stem from temporary differences related to investment in foreign subsidiaries or corporate joint ventures as there is no assertion of indefinite reinvestment outside of the United States.
The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits.
($ in millions)202420232022
Balance at January 1,$91 $46 $53 
Additions based on tax positions related to the current year— — — 
Additions for tax positions of prior years6 48 2 
Reductions for tax positions of prior years(20)(2)(2)
Settlements— (1)(7)
Expiration of statute of limitations— — — 
Balance at December 31,$77 $91 $46 
Included in the unrecognized tax benefits balances are some items, the recognition of which would not affect the effective tax rate, such as the tax effect of certain temporary differences and the portion of gross state unrecognized tax benefits that would be offset by the tax benefit of the associated U.S. federal deduction. The balance of unrecognized tax benefits that, if recognized, would affect our effective tax rate was $64 million for the year ended December 31, 2024, $75 million for the year ended December 31, 2023, and $36 million for the year ended December 31, 2022.
We recognize accrued interest and penalties related to uncertain income tax positions in interest expense and other operating expenses, respectively. As of December 31, 2024, the cumulative accrued balance for interest and penalties was $7 million, and interest and penalties of $1 million were accrued during the year ended December 31, 2024. As of December 31, 2023, the cumulative accrued balance for interest and penalties was $6 million, and penalties of $3 million were accrued during the year ended December 31, 2023. As of December 31, 2022, the cumulative accrued balance for interest and penalties was $3 million, and interest and penalties of $2 million were accrued during the year ended December 31, 2022.
It is reasonably possible that the unrecognized tax benefits will decrease by up to $62 million over the next 12 months if certain tax matters ultimately settle with the applicable taxing jurisdictions.
We file tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. Our most significant operations are in the United States and Canada. The oldest tax years that remain subject to examination for those jurisdictions are 2019 and 2011, respectively.