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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Reconciliation of Total Provision for Income Taxes with Amounts Computed at Federal Tax Rate of 35%

The following table reconciles the total provision for income taxes recorded in the consolidated statements of income with the amounts computed at the statutory federal tax rate for the periods presented below.

TABLE 108: INCOME TAXES



	FOR THE YEAR ENDED DECEMBER 31,
(In Millions)	2019			2018			2017
Federal Rate	21.0		%	21.0		%	35.0		%
Tax at Statutory Rate	$	408.3		$	411.1		$	571.9
Tax Exempt Income	(11.5		)	(6.9		)	(9.6		)
Foreign Tax Rate Differential	4.6			(7.3		)	(50.0		)
Excess Tax Benefit Related to Share-Based Compensation	(17.5		)	(16.8		)	(31.6		)
State Taxes, net	55.0			66.3			40.7
Impact of Tax Cuts and Jobs Act	—			(4.8		)	(53.1		)
Change in Accounting Method	—			(24.4		)	—
Valuation Allowance	29.5			(0.8		)	0.3
Other	(16.5		)	(15.0		)	(33.7		)

Provision for Income Taxes	$	451.9		$	401.4		$	434.9

Components of Consolidated Provision for Income Taxes

The components of the consolidated provision for income taxes for each of the three years ended December 31 are as follows:

TABLE 111: PROVISION FOR INCOME TAXES



	FOR THE YEAR ENDED DECEMBER 31,
(In Millions)	2019		2018			2017
Current Tax Provision:
Federal	$	216.4	$	132.8		$	347.3
State	50.7		95.4			38.3
Non-U.S.	150.5		162.7			125.4

Total	417.6		390.9			511.0
Deferred Tax Provision:
Federal	$	16.5	$	33.8		$	(96.4	)
State	16.5		(13.8		)	24.6
Non-U.S.	1.3		(9.5		)	(4.3		)

Total	34.3		10.5			(76.1		)

Provision for Income Taxes	$	451.9	$	401.4		$	434.9

The TCJA was enacted on December 22, 2017, and reduced the U.S. federal corporate tax rate from 35% to 21%. It also required companies to pay a mandatory deemed repatriation tax on earnings of foreign subsidiaries that were previously tax deferred. At December 31, 2017, Northern Trust made a reasonable estimate as to the impact of the TCJA. During 2018, Northern Trust completed the related calculations and additional analyses associated with the implementation of the TCJA, resulting in a number of adjustments to the 2018 tax provision as follows:

TABLE 109: IMPACT OF TAX CUTS AND JOBS ACT



(In Millions)	2018			2017
Federal Taxes on Mandatory Deemed Repatriation	$	(16.8	)	$	150.0
Impact Related to Federal Deferred Taxes	12.7			(210.0		)
Other Adjustments	(0.7		)	6.9

Provision (Benefit) for Income Taxes	$	(4.8	)	$	(53.1	)

Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits

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

TABLE 110: UNRECOGNIZED TAX BENEFITS



(In Millions)	2019			2018			2017
Balance at January 1	$	21.9		$	27.7		$	17.2
Additions for Tax Positions Taken in the Current Year	0.9			0.5			9.9
Additions for Tax Positions Taken in Prior Years	4.0			1.7			6.2
Reductions for Tax Positions Taken in Prior Years	(1.5		)	(7.8		)	(5.4		)
Reductions Resulting from Expiration of Statutes	—			(0.2		)	(0.2		)

Balance at December 31	$	25.3		$	21.9		$	27.7

Tax Charges (Benefits) Recorded Directly to Stockholders' Equity

In addition to the amounts shown above, tax charges and benefits have been recorded directly to stockholders’ equity for the following:

TABLE 112: TAX CHARGES AND BENEFITS RECORDED DIRECTLY TO STOCKHOLDERS’ EQUITY

Deferred Tax Liabilities and Assets

Deferred tax assets and liabilities have been computed as follows:

TABLE 113: NET DEFERRED TAX LIABILITIES



	DECEMBER 31,
(In Millions)	2019			2018
Deferred Tax Liabilities:
Lease Financing	$	36.9		$	43.3
Software Development	249.4			193.2
Accumulated Depreciation	99.8			129.5
Compensation and Benefits	8.3			10.9
State Taxes, net	66.4			58.9
Other Liabilities	206.7			114.5

Gross Deferred Tax Liabilities	667.5			550.3

Deferred Tax Assets:
Allowance for Credit Losses	26.1			29.0
Other Assets	147.0			120.6

Gross Deferred Tax Assets	173.1			149.6

Valuation Reserve	(29.8		)	(0.3		)
Deferred Tax Assets, net of Valuation Reserve	143.3			149.3

Net Deferred Tax Liabilities	$	524.2		$	401.0

FOR THE YEAR ENDED DECEMBER 31,

(In Millions)

Tax Effect of Other Comprehensive Income