Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The components of income tax expense are as follows:

Table 109: Components of Income Tax Expense                         

Year ended December 31 In millions	2024		2023		2022
Current
Federal	$	1,098	$	1,021	$	782
State	221		320		227
Total current	1,319		1,341		1,009
Deferred
Federal	(1)		(149)		307
State	(29)		(103)		44
Total deferred	(30)		(252)		351
Total	$	1,289	$	1,089	$	1,360

Significant components of deferred tax assets and liabilities are as follows:

Table 110: Deferred Tax Assets and Liabilities                    

December 31 – in millions	2024		2023
Deferred tax assets
Net unrealized losses on securities and financial instruments	$	2,098	$	2,417
Allowance for loan and lease losses	1,105		1,147
Lease obligations	475		508
Compensation and benefits	312		261
Allowance for unfunded lending related commitments	177		161
Accrued expenses	188		209
Other	340		384
Total gross deferred tax assets	4,695		5,087
Valuation allowance	(23)		(26)
Total deferred tax assets	4,672		5,061
Deferred tax liabilities
Leasing	919		938
Fixed assets	397		477
Right of Use Assets	412		445
Mortgage servicing rights	434		359
Goodwill and intangibles	249		252
Other	472		461
Total deferred tax liabilities	2,883		2,932
Net deferred tax asset	$	1,789	$	2,129

A reconciliation between the statutory and effective tax rates follows:

Table 111: Reconciliation of Statutory and Effective Tax Rates

Year ended December 31	2024		2023		2022
Statutory tax rate	21.0	%	21.0	%	21.0	%
Increases (decreases) resulting from:
State taxes net of federal benefit	3.0		2.9		2.7
Tax-exempt interest	(1.4)		(1.7)		(1.2)
Life insurance	(0.9)		(0.9)		(0.8)
Tax credits	(5.0)		(5.2)		(3.2)
Other	1.1		0.1		(0.3)
Effective tax rate	17.8	%	16.2	%	18.2	%

The net operating loss carryforwards at December 31, 2024 and 2023 follow:

Table 112: Net Operating Loss Carryforwards

Dollars in millions	December 31, 2024		December 31, 2023		Expiration
Net Operating Loss Carryforwards (a):
State	$	585	$	624	2025-2036

(a)There were no federal net operating loss carryforwards at both December 31, 2024 and 2023.

The majority of tax credit carryforwards expire in 2027-2044 and were insignificant at both December 31, 2024 and 2023. We anticipate that we will be able to fully utilize our tax credit carryforwards. Some state net operating loss carryforwards are from acquired entities and utilization is subject to various statutory limitations.

Retained earnings included $0.1 billion at both December 31, 2024 and 2023 in allocations for bad debt deductions of former thrift subsidiaries for which no income tax has been provided. Under current law, if certain subsidiaries use these bad debt reserves for purposes other than to absorb bad debt losses, they will be subject to Federal income tax at the current corporate tax rate.

A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:

Table 113: Change in Unrecognized Tax Benefits

In millions	2024		2023		2022
Balance of gross unrecognized tax benefits at January 1	$	368	$	318	$	275
Increases:
Positions taken during a current period	23		20
Positions taken during a prior period	35		35		46
Decreases:
Settlements with taxing authorities	(1)		(4)		(3)
Reductions resulting from lapse of statute of limitations	(60)		(1)
Balance of gross unrecognized tax benefits at December 31	$	365	$	368	$	318
Favorable impact if recognized	$	314	$	306	$	258

We do not expect that the balance of unrecognized tax benefits will significantly increase or decrease in the next twelve months.

We are subject to U.S. federal income tax as well as income tax in most states and some foreign jurisdictions. Table 114 summarizes the status of significant IRS examinations.

Table 114: IRS Tax Examination Status

	Year(s)		Status at December 31, 2024
	The PNC Financial Services Group, Inc.	BBVA USA Bancshares, Inc.
Federal	2020 2021	2018 2020	Under Exam

In addition, we are under continuous examinations by various state taxing authorities. With few exceptions, we are no longer subject to state and local and foreign income tax examinations by taxing authorities for periods before 2015. For all open audits, any potential adjustments have been considered in establishing our unrecognized tax benefits as of December 31, 2024.

Our policy is to classify interest and penalties associated with income taxes as income tax expense. For 2024 and 2023, the amount of gross interest and penalties was insignificant. The related amounts of accrued interest and penalties were $0.1 billion at December 31, 2024 and insignificant at December 31, 2023.