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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax expense is as follows for the years indicated (in thousands):
 Year Ended December 31,
 202120202019
Current$57,175 $42,688 $38,082 
Deferred20,787 2,668 14,909 
Total income tax expense$77,962 $45,356 $52,991 
 
The differences between the provision for income taxes and the amount computed by applying the statutory federal income tax rate of 21% in 2021, 2020 and 2019 to income before income taxes are as follows for the years indicated (in thousands):
 Year Ended December 31,
 202120202019
Income tax expense on pretax income at statutory rates$73,030 $43,983 $50,130 
Add (deduct):
State taxes, net of federal benefit9,188 5,928 7,168 
BOLI earnings(745)(1,052)(1,127)
Adjustment to reserve for uncertain tax positions153 (1,212)84 
Tax-exempt interest revenue(2,520)(2,169)(1,827)
Equity compensation(891)(174)(375)
Transaction costs117 217 16 
Tax credit investments(598)(930)(464)
Other228 765 (614)
Total income tax expense$77,962 $45,356 $52,991 
The following summarizes the sources and expected tax consequences of future taxable deductions (revenue) which comprise the net DTA as of the dates indicated (in thousands):
 December 31,
 20212020
DTAs:  
ACL$24,349 $33,213 
Net operating loss carryforwards16,656 22,277 
Deferred compensation11,011 10,012 
Loan purchase accounting adjustments4,227 8,567 
Nonqualified share based compensation1,374 1,833 
Accrued expenses7,936 6,865 
Unamortized pension actuarial losses and prior service cost1,442 1,981 
Unrealized losses on AFS securities5,808 — 
Deferred gains on SBA/USDA loan sales2,217 2,060 
Lease liability7,501 8,055 
Other1,107 2,062 
Total DTAs83,628 96,925 
DTLs:
Unrealized gains on AFS securities— 17,439 
Unrealized gains on cash flow hedges1,189 54 
Acquired intangible assets2,412 2,576 
Premises and equipment5,179 4,241 
Loan origination costs6,466 4,857 
True tax leases5,984 7,846 
Servicing assets6,779 4,816 
Derivatives1,309 2,250 
ROU asset7,102 7,642 
Securities purchase accounting adjustments2,644 3,146 
Uncertain tax positions1,945 1,813 
Other386 230 
Total DTLs41,395 56,910 
Less valuation allowance911 1,604 
Net DTA$41,322 $38,411 
 
The change in the net DTA includes an increase of $2.12 million due to current year merger and acquisition activity.
 
At December 31, 2021, United had:

•$32.9 million of state net operating loss carryforwards subject to annual limitation under IRC Section 382 that begin to expire in 2025, if not previously utilized.

•$51.1 million of state net operating loss carryforwards that begin to expire in 2031, if not previously utilized.

•$51.2 million in federal net operating loss carryforwards subject to annual limitation under IRC Section 382 that begin to expire in 2027, if not previously utilized.

•$3.41 million of state tax credits that begin to expire in 2022, if not previously utilized.
 
Management assesses the valuation allowance recorded against DTAs at each reporting period. The determination of whether a valuation allowance for DTAs is appropriate is subject to considerable judgment and requires an evaluation of all the positive and negative evidence. ASC 740 requires that companies assess whether a valuation allowance should be established against their DTAs based on the consideration of all available evidence using a “more likely than not” standard.
 
At December 31, 2021 and 2020, based on the assessment of all the positive and negative evidence, management concluded that it is more likely than not that nearly all of the net DTA will be realized based upon future taxable income. The valuation allowance
of $911,000 and $1.60 million, respectively, was related to specific state income tax credits that have short carryforward periods and certain acquired state net operating losses, both of which are expected to expire unused.

The valuation allowance could fluctuate in future periods based on the assessment of the positive and negative evidence. Management’s conclusion at December 31, 2021 that it was more likely than not that the net DTA of $41.3 million will be realized is based on management’s estimate of future taxable income. Management’s estimate of future taxable income is based on internal forecasts which consider historical performance, various internal estimates and assumptions, as well as certain external data all of which management believes to be reasonable although inherently subject to significant judgment. If actual results differ significantly from the current estimates of future taxable income, even if caused by adverse macro-economic conditions, the valuation allowance may need to be increased for some or all of the net DTA.

A reconciliation of the beginning and ending unrecognized tax benefit related to uncertain tax positions is as follows for the years indicated (in thousands):
 202120202019
Balance at beginning of year$2,163 $3,370 $3,264 
Additions based on tax positions related to the current year634 421 481 
Decreases resulting from a lapse in the applicable statute of limitations(441)(1,628)(375)
Balance at end of year$2,356 $2,163 $3,370 
 
Approximately $1.86 million of the unrecognized tax benefit at December 31, 2021 would increase income from continuing operations, and thus affect United’s effective tax rate, if ultimately recognized into income.
 
It is United’s policy to recognize interest and penalties accrued relative to unrecognized tax benefits in their respective federal or state income taxes accounts. There were no penalties and interest related to income taxes recorded in the income statement in 2021, 2020 or 2019. No amounts were accrued for interest and penalties on the balance sheet at December 31, 2021 or 2020. 

United and its subsidiaries file a consolidated U.S. federal income tax return, as well as various state returns in the states where it operates. United’s federal and state income tax returns are no longer subject to examination by taxing authorities for years before 2018.