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Federal, State, and Local Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Federal, State, and Local Taxes Federal, State, and Local Taxes
    
The following table summarizes the components of the Company’s net deferred tax asset (liability) at December 31, 2024 and 2023:
Year Ended December 31,
(in millions)20242023
Deferred Tax Assets:
Allowance for credit losses on loans and leases$314 $253 
Acquisition accounting and fair value adjustments on securities (including OTTI)177188 
Right of Use Liability12132 
Compensation and related benefit obligations5430 
Other3822 
Unrealized gains and amortization of mortgage servicing rights
26— 
Accrued Expenses1619 
Net operating loss carryforwards128 
Gross deferred tax assets$758 $552 
Valuation allowance$(4)$(5)
Net deferred tax asset after valuation allowance$754 $547 
Deferred Tax Liabilities:
Leases$(315)$(492)
Fair value adjustments on loans(198)(210)
Right of Use Asset(109)(32)
Amortizable intangibles(95)(127)
Prepaid pension cost(37)(35)
Premises and equipment(29)(44)
Other(14)(36)
Acquisition accounting and fair value adjustments on debt(8)(9)
Unrealized gains and amortization of mortgage servicing rights
— (79)
Gross deferred tax liabilities$(805)$(1,064)
Net deferred tax liability$(51)$(517)

The net deferred tax liability represents the anticipated federal, state, and local tax expenses or benefits that are expected to be realized in future years upon the utilization of the underlying tax attributes comprising said balances. The net deferred tax liability is included in other liabilities in the Consolidated Statements of Condition at December 31, 2024 and 2023.
The Company evaluates the need for a deferred tax asset valuation allowances based on a more likely than not standard. The Company’s evaluation is based on its history of reporting positive taxable income in all relevant tax jurisdictions, the length of time available to utilize the net operating loss carryforwards, and the recognition of taxable income in future periods from taxable temporary differences.
At December 31, 2024 and December 31, 2023, the Company had a state deferred tax asset for net operating losses of $12 million and $8 million, respectively (net of federal tax impact) related to total state net operating loss carryforwards of $262 million at December 31, 2024, that expire if unused in calendar years through 2033. In connection with our ongoing assessment of deferred taxes, we analyzed each state net operating loss separately, determined the amount of net operating loss available and estimated the amount which we expected to expire unused. Based on that assessment, we recorded a valuation allowance of $4 million and $5 million, respectively, at December 31, 2024 and 2023 to reduce the DTA to the amount which is more likely than not to be realized.
The following table summarizes the Company’s income tax expense for the years ended December 31, 2024, 2023, and 2022:
Year Ended December 31,
(in millions)202420232022
Federal – current$126 $156 $147 
State and local – current25 59 32 
Total current151 215 179 
Federal – deferred(336)(137)(10)
State and local – deferred(75)(49)7 
Total deferred(411)(186)(3)
Income tax expense reported in net income(260)29 176 
Income tax impact reported in stockholders’ equity related to:
Securities available-for-sale(24)15 (223)
Pension liability adjustments(2)6 (6)
Cash flow hedge12 (14)23 
Total income taxes$(274)$36 $(30)

The following table presents a reconciliation of statutory federal income tax expense (benefit) to combined actual income tax expense (benefit) reported in net income for the years ended December 31, 2024, 2023, and 2022:
Year Ended December 31,
(in millions)202420232022
Statutory federal income tax at 21%
$(289)$(10)$174 
State and local income taxes, net of federal income tax effect
(39)8 31 
Non-deductible FDIC deposit insurance premiums66 16 10 
Non-taxable or deductible bargain gain
25 (447)(33)
Other, net5 2 5 
Effect of tax deductibility of deferred compensation3 (3)(3)
Tax exempt income
(8)(6)— 
Non-taxable expense of bank-owned life insurance
(9)(9)(7)
Federal tax credits(14)(31)(1)
Non-deductible goodwill impairment
— 509 — 
Total income tax expense$(260)$29 $176 

The Company invests in affordable housing projects through limited partnerships that generate federal Low Income Housing Tax Credits. The balances of these investments, which are included in other assets in the Consolidated Statements of Condition, were $335 million and $372 million, respectively, at December 31, 2024 and 2023, and included commitments of $139 million and $210 million that are expected to be funded over the next 3 years. The Company elected to apply the proportional amortization method to these investments. Recognized in the determination of income tax (benefit) expense from operations for the years ended December 31, 2024, 2023, and 2022 were $41 million, $34 million, and $11 million, respectively, of affordable housing tax credits and other tax benefits, and an offsetting $37 million, $30 million, and $10 million, respectively, for the amortization of the related investments. No impairment losses were recognized in relation to these investments for the years ended December 31, 2024, 2023, and 2022.

As of December 31, 2024 and 2023, the Company had $43 million and $42 million of unrecognized gross tax benefits, respectively. Gross tax benefits do not reflect the federal tax effect associated with state tax amounts. The total amount of net unrecognized tax benefits that would have affected the effective tax rate, if recognized, was $34 million at December 31, 2024 and 2023.
Interest and penalties related to the underpayment of income taxes are classified as a component of income tax expense in the Consolidated Statements of (Loss) Income. During the years ended December 31, 2024, 2023, and 2022, the Company recognized income tax expense attributed to interest and penalties of $8 million, $8 million, and $4 million, respectively. Accrued interest and penalties on tax liabilities were $42 million and $34 million, respectively, at December 31, 2024 and 2023.
The following table summarizes changes in the liability for unrecognized gross tax benefits for the years ended December 31, 2024, 2023, and 2022:

Year Ended December 31,
(in millions)202420232022
Uncertain tax positions at beginning of year$42 $40 $39 
Additions for tax positions relating to current-year operations1 1 1 
Additions for tax positions relating to prior tax years— 2 — 
Subtractions for tax positions relating to prior tax years— (1)— 
Uncertain tax positions at end of year$43 $42 $40 

The Company and its subsidiaries have filed tax returns in many states. Generally, the tax returns are open by statue for years 2021 through present, unless extended due to examination.

In addition to other state audits, the Company is currently under examination by the following taxing jurisdictions of significance to the Company:
•Federal 2019-2021
•New York State for the tax years 2010 through 2020; and
•New York City for the tax years 2011 through 2014, 2016 through 2020.

It is reasonably possible that there will be developments within the next twelve months that would necessitate an adjustment to the balance of unrecognized tax benefits, including decreases of up to $21 million due to the completion of tax authorities’ exams and the expiration of statutes of limitations.
The Bank is subject to a special federal tax provision regarding its frozen tax bad debt reserve. At December 31, 2024, the Bank’s federal tax bad debt base-year reserve was $62 million, with a related federal deferred tax liability of $13 million, which has not been recognized since the Bank does not expect that this reserve will become taxable in the foreseeable future. Events that would result in taxation of this reserve include redemptions of the Bank’s stock or certain excess distributions by the Bank to the Company.