Income Taxes

Applicable income taxes in the Consolidated Statements of Income were as follows:



(In thousands)	Current		Deferred			Total
Year Ended December 31, 2018:
Federal	$	9,424	$	54,858		$	64,282
State	13,251		3,722			16,973
Foreign	4,435		406			4,841
Total	$	27,110	$	58,986		$	86,096
Year Ended December 31, 2017:
Federal	$	14,384	$	(62,913	)	$	(48,529	)
State	237		9,340			9,577
Foreign	5,484		(156		)	5,328
Total	$	20,105	$	(53,729	)	$	(33,624	)
Year Ended December 31, 2016:
Federal	$	66,810	$	28,629		$	95,439
State	11,402		4,425			15,827
Foreign	5,350		(88		)	5,262
Total	$	83,562	$	32,966		$	116,528

Reconciliations to TCF's effective income tax rates from the statutory federal income tax rates were as follows:



	Year Ended December 31,
	2018		2017		2016
Federal income tax rate	21.00	%	35.00	%	35.00	%
Increase (decrease) resulting from:
State income tax, net of federal tax	3.34		3.92		3.04
Tax-exempt income	(1.64	)	(3.86	)	(2.07	)
Stock compensation	(0.64	)	(1.15	)	—
Non-controlling interest tax effect	(0.59	)	(1.45	)	(0.99	)
Investments in affordable housing limited liability entities	(0.34	)	(0.89	)	(0.24	)
Foreign tax effects	0.26		(0.67	)	(0.50	)
Tax Reform effects, net	(0.26	)	(53.29	)	—
Nondeductible goodwill impairment effect	—		10.43		—
State tax settlements, net of federal tax	—		(1.38	)	0.19
Other, net	0.30		(0.38	)	0.02
Effective income tax rate	21.43	%	(13.72	)%	34.45	%

As a result of the Tax Cuts and Jobs Act, enacted on December 22, 2017 ("Tax Reform"), TCF recorded a reasonable estimate of a net tax benefit of $130.7 million in its consolidated financial statements for 2017, primarily resulting from the re-measurement of the Company's estimated net deferred tax liability. Certain of these amounts were provisional in nature, as all the information necessary to record more precise amounts was not available, prepared or analyzed for 2017. TCF recorded an additional net tax benefit of $1.1 million in the second quarter of 2018 for the finalization of the provisional amounts recorded in 2017.

TCF has determined the effects of its global intangible low taxed income and its foreign derived intangible income to be immaterial. These effects will be included in income tax expense (benefit) in the period in which they are paid or received.

TCF considers its undistributed foreign earnings to be reinvested indefinitely. This position is based on management's determination that cash held in TCF's foreign jurisdictions is not needed to fund its U.S. operations and that it either has reinvested or has intentions to reinvest these earnings. While management currently intends to indefinitely reinvest all of TCF's foreign earnings, should circumstances or tax laws change, TCF may need to record additional income tax expense in the period in which such determination or tax law change occurs.

As a result of Tax Reform, TCF recorded a $2.0 million charge related to U.S. federal income tax on the deemed repatriation of undistributed foreign earnings as of December 31, 2017. TCF recorded an additional $0.2 million charge in the second quarter of 2018 for the finalization of the provisional amounts recorded in 2017. Due to the shift to a worldwide territorial tax regime as part of Tax Reform, future repatriations of foreign earnings will no longer be subject to U.S. federal income tax. However, these foreign earnings may be subject to foreign withholding taxes should they be distributed in the form of dividends. As of December 31, 2018, the estimated withholding taxes that could be due on these earnings was $3.9 million.

Reconciliations of the changes in unrecognized tax benefits were as follows:



	At or For the Year Ended December 31,
(In thousands)	2018			2017			2016
Balance, beginning of period	$	4,645		$	4,690		$	4,249
Increases for tax positions related to the current year	903			200			546
Increases for tax positions related to prior years	1,438			86			627
Decreases for tax positions related to prior years	(970		)	(331		)	(84		)
Settlements with taxing authorities	—			—			(525		)
Decreases related to lapses of applicable statutes of limitation	(144		)	—			(123		)
Balance, end of period	$	5,872		$	4,645		$	4,690

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $3.7 million and $2.2 million at December 31, 2018 and 2017, respectively. TCF recognizes increases and decreases for interest and penalties related to unrecognized tax benefits, where applicable, in income tax expense. TCF recognized approximately $0.1 million of tax expense, $0.6 million of tax benefit and $0.9 million of tax expense for 2018, 2017 and 2016, respectively, related to interest and penalties. Interest and penalties of approximately $0.7 million and $0.6 million were accrued at December 31, 2018 and 2017, respectively.

TCF's federal income tax returns are open and subject to examination for 2015 and later tax return years. TCF's various state income tax returns are generally open for 2014 and later tax return years based on individual state statutes of limitation. TCF's various foreign income tax returns are open and subject to examination for 2014 and later tax return years. Changes in the amount of unrecognized tax benefits within the next 12 months from normal expirations of statutes of limitation are not expected to be material.

TCF's deferred tax assets and deferred tax liabilities were as follows:



	At December 31,
(In thousands)	2018			2017
Deferred tax assets:
Allowance for loan and lease losses	$	33,546		$	41,339
Stock compensation and deferred compensation plans	32,686			21,150
Net operating losses and other carryforwards	20,591			16,452
Debt securities available for sale	9,235			5,345
Accrued expense	2,524			2,507
Other	1,900			3,603
Deferred tax assets	100,482			90,396
Valuation allowance	(14,291		)	(14,267		)
Total deferred tax assets, net of valuation allowance	86,191			76,129
Deferred tax liabilities:
Lease financing	297,603			246,221
Premises and equipment	40,130			30,109
Loan fees and discounts	17,465			12,489
Prepaid expenses	7,921			8,047
Goodwill and other intangibles	2,290			2,475
Other	7,319			4,715
Total deferred tax liabilities	372,728			304,056
Net deferred tax liabilities	$	286,537		$	227,927

The net operating losses and other carryforwards at December 31, 2018 consisted of state net operating losses of $3.3 million that expire in 2019 through 2038, federal credit carryforwards of $2.8 million that expire in 2038 and charitable contribution carryforwards of $0.2 million that expire in 2022. The valuation allowance at December 31, 2018 and 2017 principally applies to net operating losses that, in the opinion of management, are more likely than not to expire unutilized. However, to the extent that tax benefits related to these carryforwards are realized in the future, the reduction in the valuation allowance will reduce income tax expense.