Income Taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective tax rate was 21.8 percent and 20.9 percent for the three months ended September 30, 2024 and 2023, respectively, and 21.5 percent and 19.5 percent for the nine months ended September 30, 2024 and 2023, respectively. The higher effective tax rates for the three and nine month periods primarily reflected discrete tax benefits in the prior periods.

We are under continuous examination by the Internal Revenue Service (IRS) and tax authorities in other countries and states in which we have significant business operations. The tax years under examination and open for examination vary by jurisdiction. We are currently under examination by the IRS for the 2017 and 2018 tax years.

We believe it is reasonably possible that our unrecognized tax benefits could decrease within the next twelve months by as much as $102 million, principally as a result of potential resolutions of prior years’ tax items with various taxing authorities. The prior years’ tax items include unrecognized tax benefits relating to the deductibility of certain expenses or losses and the attribution of taxable income to a particular jurisdiction or jurisdictions. Of the $102 million of unrecognized tax benefits, approximately $81 million relates to amounts that, if recognized, would impact the effective tax rate in a future period.

Tax Credit Investments

As of September 30, 2024 and 2023, we had $1,558 million and $1,263 million in tax credit investments, respectively, included in Other assets on the Consolidated Balance Sheets, comprised of Low Income Housing Tax Credit investments and other qualifying investments. We account for such tax credit investments using the Proportional Amortization Method.

The following table presents tax credit investment expenses and associated income tax credits and other income tax benefits for the three and nine months ended September 30:

	Three Months Ended September 30,				Nine Months Ended September 30,
(Millions)	2024		2023		2024		2023
Proportional amortization recognized in tax provision	$	48	$	39	$	143	$	122
Income tax credits and Other income tax benefits (a) recognized in tax provision	51		49		164		153

(a) Other income tax benefits are a result of tax deductible expenses generated by our tax credit investments

Income tax credits and other income tax benefits associated with our tax credit investments are also recognized in the Consolidated Statements of Cash Flows in the Operating activities section primarily under Accounts payable and other liabilities. Refer to Note 6 to our “Consolidated Financial Statements” in the 2023 Form 10-K for additional information on our tax credit investments for the year ended December 31, 2023.