Federal and State Income Taxes

12 Months Ended

Dec. 31, 2018

Federal and State Income Taxes [Text Block]

Federal and State Income Taxes

The Tax Cuts and Jobs Act (the "Tax Reform Act"), which was enacted on December 22, 2017, reduced the federal corporate tax rate from 35% to 21% for periods beginning January 1, 2018. We completed our accounting during 2018 for uncertainties that resulted from the Tax Reform Act.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax assets and liabilities are as follows (in thousands):



	December 31,
	2018		2017
Deferred tax assets:
Available for sale securities mark to market	$	24,441	$	12,083
Share-based compensation	4,434		7,598
Credit loss allowances	49,804		58,666
Valuation adjustments	9,619		8,102
Deferred compensation	25,608		12,215
Unearned fees	9,814		9,265
Purchased loan discount	27,283		—
Other	31,812		30,859
Total deferred tax assets	182,815		138,788

Deferred tax liabilities:
Depreciation	13,901		15,817
Mortgage servicing rights	61,844		63,112
Lease financing	10,040		9,973
Acquired identifiable intangible	28,620		—
Other	32,954		34,880
Total deferred tax liabilities	147,359		123,782
Net deferred tax assets	$	35,456	$	15,006

No valuation allowance was necessary on deferred tax assets as of December 31, 2018 and 2017.

The significant components of the provision for income taxes attributable to continuing operations for BOK Financial are shown below (in thousands):



	Year Ended December 31,
	2018			2017		2016
Current income tax expense:
Federal	$	103,748		$	141,607	$	107,379
State	15,253			14,592		11,028
Total current income tax expense	119,001			156,199		118,407

Deferred income tax expense:
Federal	(190		)	25,525		(11,340		)
State	250			869		(690		)
Total deferred income tax expense	60			26,394		(12,030		)
Total income tax expense	$	119,061		$	182,593	$	106,377

The reconciliations of income attributable to continuing operations at the U.S. federal statutory tax rate to income tax expense are as follows (in thousands):



	Year Ended December 31,
	2018			2017			2016
Amount:
Federal statutory tax	$	118,752		$	181,397		$	118,530
Tax exempt revenue	(8,311		)	(12,402		)	(10,544		)
Effect of state income taxes, net of federal benefit	12,430			10,701			6,478
Utilization of tax credits, net of proportional amortization of low-income housing limited partnership investments	(4,559		)	(6,811		)	(6,256		)
Share-based compensation	(2,105		)	(2,817		)	—
Implementation of Tax Reform Act	(1,728		)	11,672			—
Deposit insurance	3,099			—			—
Other, net	1,483			853			(1,831		)
Total income tax expense	$	119,061		$	182,593		$	106,377



	Year Ended December 31,
	2018		2017		2016
Percent of pretax income:
Federal statutory tax	21.0	%	35.0	%	35.0	%
Tax exempt revenue	(1.5	)	(2.4	)	(3.1	)
Effect of state income taxes, net of federal benefit	2.2		2.0		1.9
Utilization of tax credits, net of proportional amortization of low-income housing limited partnership investments	(0.8	)	(1.3	)	(1.8	)
Share-based compensation	(0.4	)	(0.5	)	—
Implementation of Tax Reform Act	(0.3	)	2.3		—
Deposit insurance	0.5		—		—
Other, net	0.4		0.1		(0.6	)
Total	21.1	%	35.2	%	31.4	%

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):



	2018			2017			2016
Balance as of January 1	$	18,110		$	15,841		$	13,232
Additions for tax for current year positions	2,649			4,645			5,640
Settlements during the period	—			—			—
Lapses of applicable statute of limitations	(1,890		)	(2,376		)	(3,031		)
Balance as of December 31	$	18,869		$	18,110		$	15,841

Of the above unrecognized tax benefits, $12.9 million, if recognized, would have affected the effective tax rate.

BOK Financial recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. The Company recognized $1.7 million for 2018, $1.2 million for 2017 and $1.0 million for 2016 in interest and penalties. The Company had approximately $5.0 million and $4.0 million accrued for the payment of interest and penalties at December 31, 2018 and 2017, respectively. Federal statutes remain open for federal tax returns filed in the previous three reporting periods. Various state income tax statutes remain open for the previous three to six reporting periods.