Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Components of Provision for Income Taxes

$ in millions	2021		2020		2019
Current
U.S.:
Federal	$	2,554	$	1,641	$	873
State and local	475		399		260
Non-U.S.:
U.K.	551		395		166
Japan	105		185		177
Hong Kong	192		185		82
Other1	667		684		341
Total	$	4,544	$	3,489	$	1,899
Deferred
U.S.:
Federal	$	(11)	$	(249)	$	185
State and local	33		(38)		46
Non-U.S.:
U.K.	(37)		(2)		5
Japan	4		12		11
Hong Kong	(9)		(3)		—
Other1	24		30		(82)
Total	$	4	$	(250)	$	165
Provision for income taxes	$	4,548	$	3,239	$	2,064

1.Other Non-U.S. tax provisions for 2021, 2020 and 2019 primarily include Brazil, Singapore and the Netherlands.

Reconciliation of the U.S. Federal Statutory Income Tax Rate to the Effective Income Tax Rate

	2021		2020		2019
U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%
U.S. state and local income taxes, net of U.S. federal income tax benefits	2.1		2.0		2.2
Domestic tax credits and tax exempt income	(0.6)		(0.8)		(1.6)
Non-U.S. earnings	1.4		1.7		(0.8)
Employee share-based awards	(0.6)		(0.7)		(1.1)
Other	(0.2)		(0.7)		(1.4)
Effective income tax rate	23.1	%	22.5	%	18.3	%

The Firm’s effective tax rate for 2019 includes net discrete tax benefits of $475 million, primarily associated with remeasurement of reserves and related interest as a result of new information pertaining to the resolution of multi-jurisdiction tax examinations, as well as benefits related to conversion of employee share-based awards.

Deferred Tax Assets and Liabilities

$ in millions	At December 31, 2021		At December 31, 2020
Gross deferred tax assets
Net operating loss and tax credit carryforwards	$	276	$	330
Employee compensation and benefit plans	2,430		2,248
Allowance for credit losses and other reserves	599		669
Valuation of inventory, investments and receivables	474		19
Other	15		43
Total deferred tax assets	3,794		3,309
Deferred tax assets valuation allowance	208		236
Deferred tax assets after valuation allowance	$	3,586	$	3,073
Gross deferred tax liabilities
Fixed assets	1,287		1,130
Intangibles and goodwill	2,046		1,156
Total deferred tax liabilities	$	3,333	$	2,286
Net deferred tax assets	$	253	$	787

Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse.

The Firm believes the recognized net deferred tax assets (after valuation allowance) at December 31, 2021 are more likely than not to be realized based on expectations as to future taxable income in the jurisdictions in which it operates.

The earnings of certain foreign subsidiaries are indefinitely reinvested due to regulatory and other capital requirements in foreign jurisdictions. As of December 31, 2021, the unrecognized deferred tax liability attributable to indefinitely reinvested earnings is immaterial.

Rollforward of Unrecognized Tax Benefits

$ in millions	2021		2020		2019
Balance at beginning of period	$	755	$	755	$	1,080
Increase based on tax positions related to the current period	201		139		57
Increase based on tax positions related to prior periods	74		178		61
Increase based on the acquisition of E*TRADE	—		26		—
Decrease based on tax positions related to prior periods	(37)		(297)		(419)
Decreases related to settlements with taxing authorities	(10)		(36)		(17)
Decreases related to lapse of statute of limitations	(12)		(10)		(7)
Balance at end of period	$	971	$	755	$	755
Net unrecognized tax benefits1	$	860	$	665	$	549

1.Represent ending unrecognized tax benefits adjusted for the impact of the federal benefit of state issues, competent authority arrangements and foreign tax credit offsets. If recognized, these net benefits would favorably impact the effective tax rate in future periods.

It is reasonably possible that significant changes in the balance of unrecognized tax benefits may occur within the next 12 months. At this time, however, it is not possible to reasonably estimate the expected change to the total amount

of unrecognized tax benefits and the impact on the Firm’s effective tax rate over the next 12 months.

Interest Expense (Benefit) Associated with Unrecognized Tax Benefits, Net of Federal and State Income Tax Benefits

$ in millions	2021		2020		2019
Recognized in income statement	$	14	$	56	$	8
Accrued at end of period	142		134		92

Interest and penalties related to unrecognized tax benefits are recognized as a component of the provision for income taxes. Penalties related to unrecognized tax benefits for the years mentioned above were immaterial.

Earliest Tax Year Subject to Examination in Major Tax Jurisdictions

Jurisdiction	Tax Year
U.S.	2017
New York State and New York City	2010
U.K.	2011
Japan	2015
Hong Kong	2015

The Firm is under continuous examination by the IRS and other tax authorities in certain countries, such as Japan and the U.K., and in states and localities in which it has significant business operations, such as New York.

The Firm believes that the resolution of these tax examinations will not have a material effect on the annual financial statements, although a resolution could have a material impact in the income statement and on the effective tax rate for any period in which such resolutions occur.