INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Income Tax Provision

Details of the Company’s income tax provision are presented below:

In millions of dollars	2022		2021		2020
Current
Federal	$	407	$	522	$	305
Non-U.S.	4,106		3,288		4,113
State	270		228		440
Total current income taxes	$	4,783	$	4,038	$	4,858
Deferred
Federal	$	(807)	$	1,059	$	(1,430)
Non-U.S.	353		8		(690)
State	(687)		346		(213)
Total deferred income taxes	$	(1,141)	$	1,413	$	(2,333)
Provision for income tax on continuing operations before noncontrolling interests(1)	$	3,642	$	5,451	$	2,525
Provision (benefit) for income taxes on:
Discontinued operations	$	(41)	$	—	$	—
Gains (losses) included in AOCI, but excluded from net income	(1,573)		(1,684)		1,520
Employee stock plans	(8)		(6)		(4)
Opening adjustment to Retained earnings(2)	—		—		(911)

(1)Includes the tax on realized investment gains and impairment losses resulting in a provision (benefit) of $14 million and $(137) million in 2022, $169 million and $(57) million in 2021 and $454 million and $(14) million in 2020, respectively.

(2)2020 reflects the tax effect of ASU 2016-13 for current expected credit losses (CECL).

Tax Rate

The reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate applicable to income from continuing operations (before noncontrolling interests and the cumulative effect of accounting changes) for each of the periods indicated is as follows:

	2022		2021		2020
Federal statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	2.0		2.1		1.3
Non-U.S. income tax rate differential	4.3		1.6		3.5
Tax audit resolutions	(3.2)		(0.4)		0.3
Nondeductible FDIC premiums	1.0		0.6		1.3
Tax advantaged investments	(3.0)		(2.3)		(4.4)
Valuation allowance releases(1)	(2.3)		(1.7)		(4.4)
Other, net	(0.4)		(1.1)		(0.1)
Effective income tax rate	19.4	%	19.8	%	18.5	%

(1)See “Deferred Tax Assets” below for a description of the components.

As presented in the table above, Citi’s effective tax rate for 2022 was 19.4%, compared to 19.8% in 2021.

Deferred Income Taxes

Deferred income taxes at December 31 related to the following:

In millions of dollars	2022		2021
Deferred tax assets
Credit loss deduction	$	5,162	$	5,330
Deferred compensation and employee benefits	2,059		2,335
U.S. tax on non-U.S. earnings	1,191		1,138
Investment and loan basis differences	5,149		2,970
Tax credit and net operating loss carry-forwards	14,623		15,620
Fixed assets and leases	3,551		3,064
Other deferred tax assets	4,055		3,549
Gross deferred tax assets	$	35,790	$	34,006
Valuation allowance	$	2,438	$	4,194
Deferred tax assets after valuation allowance	$	33,352	$	29,812
Deferred tax liabilities
Intangibles and leases	$	(2,271)	$	(2,446)
Non-U.S. withholding taxes	(1,142)		(987)
Debt issuances	(595)		(126)
Other deferred tax liabilities	(1,672)		(1,464)
Gross deferred tax liabilities	$	(5,680)	$	(5,023)
Net deferred tax assets	$	27,672	$	24,789

Unrecognized Tax Benefits

The following is a rollforward of the Company’s unrecognized tax benefits:

In millions of dollars	2022		2021		2020
Total unrecognized tax benefits at January 1	$	1,296	$	861	$	721
Increases for current year’s tax positions	55		97		51
Increases for prior years’ tax positions	168		515		217
Decreases for prior years’ tax positions	(119)		(107)		(74)
Amounts of decreases relating to settlements	(50)		(64)		(40)
Reductions due to lapse of statutes of limitation	(26)		(2)		(13)
Foreign exchange, acquisitions and dispositions	(13)		(4)		(1)
Total unrecognized tax benefits at December 31	$	1,311	$	1,296	$	861

The portions of the total unrecognized tax benefits at December 31, 2022, 2021 and 2020 that, if recognized, would affect Citi’s tax expense are $1.0 billion, $1.0 billion and $0.7 billion, respectively. The remaining uncertain tax positions have offsetting amounts in other jurisdictions or are temporary differences.

Interest and penalties (not included in unrecognized tax benefits above) are a component of Provision for income taxes. 

	2022				2021				2020
In millions of dollars	Pretax		Net of tax		Pretax		Net of tax		Pretax		Net of tax
Total interest and penalties on the Consolidated Balance Sheet at January 1	$	214	$	164	$	118	$	96	$	100	$	82
Total interest and penalties in the Consolidated Statement of Income	27		16		32		24		14		10
Total interest and penalties on the Consolidated Balance Sheet at December 31(1)	234		176		214		164		118		96

(1)Includes $3 million, $3 million and $4 million for non-U.S. penalties in 2022, 2021 and 2020, respectively. Also includes $0 million, $0 million and $1 million for state penalties in 2022, 2021 and 2020, respectively.

As of December 31, 2022, Citi was under audit by the Internal Revenue Service and other major taxing jurisdictions around the world. It is thus reasonably possible that significant changes in the gross balance of unrecognized tax benefits may occur within the next 12 months. The potential range of amounts that could affect Citi’s effective tax rate is between $0 and $500 million.

The following are the major tax jurisdictions in which the Company and its affiliates operate and the earliest tax year subject to examination:

Jurisdiction	Tax year
United States	2016
Mexico	2017
New York State and City	2009
United Kingdom	2016
India	2021
Singapore	2021
Hong Kong	2016
Ireland	2018

Non-U.S. Earnings

Non-U.S. pretax earnings approximated $16.2 billion in 2022, $12.9 billion in 2021 and $13.8 billion in 2020. As a U.S. corporation, Citigroup and its U.S. subsidiaries are currently subject to U.S. taxation on all non-U.S. pretax earnings of non-U.S. branches. Beginning in 2018, there is a separate foreign tax credit (FTC) basket for branches. Also, dividends from a non-U.S. subsidiary or affiliate are effectively exempt from U.S. taxation. The Company provides income taxes on the book over tax basis differences of non-U.S. subsidiaries except to the extent that such differences are indefinitely reinvested outside the U.S.

At December 31, 2022, $5.9 billion of basis differences of non-U.S. entities was indefinitely invested. At the existing tax rates (including withholding taxes), additional taxes (net of U.S. FTCs and valuation allowances) of $2.4 billion would have to be provided if such assertions were reversed.

Deferred Tax Assets

As of December 31, 2022, Citi had a valuation allowance of $2.4 billion, composed of valuation allowances of $0.9 billion on its branch basket FTC carry-forwards, $1.0 billion on its U.S. residual DTA related to its non-U.S. branches, $0.4 billion on local non-U.S. DTAs and $0.1 billion on state net operating loss carry-forwards. There was a decrease of $1.8 billion from the December 31, 2021 balance of $4.2 billion. The amount of Citi’s valuation allowances (VA) may change in future years.

In 2022, Citi’s VA for carry-forward FTCs in its branch basket decreased by $0.8 billion, primarily due to carry-forward expirations.

The level of branch pretax income, the local branch tax rate and the allocations of overall domestic losses (ODL) and expenses for U.S. tax purposes to the branch basket are the main factors in determining the branch VA. There was no branch basket VA release in 2022.

In Citi’s general basket for FTCs, changes in the forecasted amount of income in U.S. locations derived from sources outside the U.S., in addition to tax examination changes from prior years, could alter the amount of VA that is needed against such FTCs. The remaining VA for the general basket of $0.8 billion was released, primarily due to increases in interest rates and prior-year audit adjustments.

The non-U.S. local VA decreased by $0.2 billion.

The following table summarizes Citi’s DTAs:

In billions of dollars
Jurisdiction/component(1)	DTAs balance December 31, 2022		DTAs balance December 31, 2021
U.S. federal(2)
Net operating losses (NOLs)(3)	$	3.3	$	3.2
Foreign tax credits (FTCs)	1.9		2.8
General business credits (GBCs)	5.2		4.5
Future tax deductions and credits	10.1		8.4
Total U.S. federal	$	20.5	$	18.9
State and local
New York NOLs	$	1.9	$	1.2
Other state NOLs	0.2		0.2
Future tax deductions	2.2		1.8
Total state and local	$	4.3	$	3.2
Non-U.S.
NOLs	$	0.7	$	0.5
Future tax deductions	2.2		2.2
Total non-U.S.	$	2.9	$	2.7
Total	$	27.7	$	24.8

(1)All amounts are net of valuation allowances.

(2)Included in the net U.S. federal DTAs of $20.5 billion as of December 31, 2022 were deferred tax liabilities of $3.3 billion that will reverse in the relevant carry-forward period and may be used to support the DTAs.

(3)Consists of non-consolidated tax return NOL carry-forwards that are eventually expected to be utilized in Citigroup’s consolidated tax return. 

The following table summarizes the amounts of tax carry-forwards and their expiration dates: 

In billions of dollars
Year of expiration	December 31, 2022		December 31, 2021
U.S. tax return general basket foreign tax credit carry-forwards(1)
2022	$	—	$	0.5
2023	—		0.4
2025	0.8		1.5
2027	1.1		1.1
Total U.S. tax return general basket foreign tax credit carry-forwards	$	1.9	$	3.5
U.S. tax return branch basket foreign tax credit carry-forwards(1)
2022	$	—	$	1.0
2028	0.7		0.6
2029	0.2		0.2
Total U.S. tax return branch basket foreign tax credit carry-forwards	$	0.9	$	1.8
U.S. tax return general business credit carry-forwards
2032	$	0.4	$	0.4
2033	0.3		0.3
2034	0.2		0.2
2035	0.2		0.2
2036	0.2		0.2
2037	0.5		0.5
2038	0.5		0.5
2039	0.7		0.7
2040	0.7		0.7
2041	0.8		0.8
2042	0.7		—
Total U.S. tax return general business credit carry-forwards	$	5.2	$	4.5
U.S. subsidiary separate federal NOL carry-forwards
2027	$	0.1	$	0.1
2028	0.1		0.1
2030	0.3		0.3
2033	1.6		1.6
2034	2.0		2.0
2035	3.3		3.3
2036	2.1		2.1
2037	1.0		1.0
Unlimited carry-forward period	5.3		4.6
Total U.S. subsidiary separate federal NOL carry-forwards(2)	$	15.8	$	15.1
New York State NOL carry-forwards(2)
2034	$	11.5	$	6.6
New York City NOL carry-forwards(2)
2034	$	10.3	$	7.2
Non-U.S. NOL carry-forwards(1)
Various	$	1.1	$	1.1

(1)Before valuation allowance.

(2)Pretax.

The time remaining for utilization of the FTC component has shortened, given the passage of time. Although realization is not assured, Citi believes that the realization of the recognized net DTAs of $27.7 billion at December 31, 2022 is more-likely-than-not, based upon expectations as to future taxable income in the jurisdictions in which the DTAs arise and consideration of available tax planning strategies (as defined in ASC 740, Income Taxes).

The majority of Citi’s U.S. federal net operating loss carry-forward and all of its New York State and City net operating loss carry-forwards are subject to a carry-forward period of 20 years. This provides enough time to fully utilize the DTAs pertaining to these existing NOL carry-forwards. This is due to Citi’s forecast of sufficient U.S. taxable income and because New York State and City continue to tax Citi’s non-U.S. income.

With respect to the FTCs component of the DTAs, the carry-forward period is 10 years. Utilization of FTCs in any year is generally limited to 21% of foreign source taxable income in that year. However, ODL that Citi has incurred of approximately $8 billion as of December 31, 2022 are allowed to be reclassified as foreign source income to the extent of 50%–100% (at taxpayer’s election) of domestic source income produced in subsequent years. Such resulting foreign source income would support the realization of the FTC carry-forwards after VA. As noted in the tables above, Citi’s FTC carry-forwards were $1.9 billion ($2.8 billion before VA) as of December 31, 2022, compared to $2.8 billion ($5.3 billion before VA) as of December 31, 2021. Citi believes that it will more-likely-than-not generate sufficient U.S. taxable income within the 10-year carry-forward period to be able to utilize the net FTCs after the VA, after considering any FTCs produced in the tax return for such period, which must be used prior to any carry-forward utilization.