Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Income Taxes Included in Income Statement

Income taxes included in the income statement are summarized below. We file a consolidated federal income tax return.



Year ended December 31, in millions	2017		2016			2015
Currently payable:
Federal	$	334	$	149		$	337
State	—		19			42
Total currently payable	334		168			379
Deferred:
Federal	274		13			(69		)
State	29		(2		)	(7		)
Total deferred	303		11			(76		)
Total income tax (benefit) expense ^(a)	$	637	$	179		$	303

(a)

There was no income tax (benefit) expense on securities transactions in 2017, 2016, and 2015. Income tax expense excludes equity- and gross receipts-based taxes, which are assessed in lieu of an income tax in certain states in which we operate. These taxes, which are recorded in “noninterest expense” on the income statement, totaled $22 million in 2017, $18 million in 2016, and $16 million in 2015.

Significant Components of Deferred Tax Assets and Liabilities Included in "Accrued Income and Other Assets" and "Accrued Expense and Other Liabilities"

Significant components of our deferred tax assets and liabilities included in “accrued income and other assets” and “accrued expense and other liabilities,” respectively, on the balance sheet, are as follows:



December 31, in millions	2017		2016
Allowance for loan and lease losses	$	233	$	373
Employee benefits	147		276
Net unrealized securities losses	138		146
Federal net operating losses and credits	205		130
Fair value adjustments	63		136
Non-tax accruals	89		150
State net operating losses and credits	7		15
Other	223		236
Gross deferred tax assets	1,105		1,462
Less: Valuation Allowance	15		26
Total deferred tax assets	1,090		1,436
Leasing transactions	588		728
Other	182		101
Total deferred tax liabilities	770		829
Net deferred tax assets (liabilities) ^(a)	$	320	$	607


(a)	From continuing operations.

Total Income Tax Expense (Benefit) and Resulting Effective Tax Rate

The following table shows how our total income tax expense (benefit) and the resulting effective tax rate were derived:



Year ended December 31, dollars in millions	2017					2016					2015
Year ended December 31, dollars in millions	Amount			Rate		Amount			Rate		Amount			Rate
Income (loss) before income taxes times 35% statutory federal tax rate	$	675		35.0	%	$	339		35.0	%	$	428		35.0	%
Amortization of tax-advantaged investments	104			5.4		88			9.0		81			6.7
Foreign tax adjustments	1			.1		1			.1		(1		)	(.1	)
Tax-exempt interest income	(37		)	(1.9	)	(25		)	(2.6	)	(18		)	(1.5	)
Corporate-owned life insurance income	(46		)	(2.4	)	(44		)	(4.5	)	(45		)	(3.6	)
State income tax, net of federal tax benefit	19			1.0		11			1.1		22			1.8
Tax credits	(218		)	(11.3	)	(208		)	(21.3	)	(155		)	(12.7	)
Tax Cuts and Jobs Act	147			7.6		—			—		—			—
Other	(8		)	(.5	)	17			1.7		(9		)	(.8	)
Total income tax expense (benefit)	$	637		33.0	%	$	179		18.5	%	$	303		24.8	%

Change in Liability for Unrecognized Tax Benefits

The change in our liability for unrecognized tax benefits is as follows:



Year ended December 31, in millions	2017			2016
Balance at beginning of year	$	53		$	12
Increase for other tax positions of prior years	3			10
Increase from Acquisitions	3			33
Decrease for payments and settlements	(4		)	—
Decrease related to tax positions taken in prior years	(16		)	(2		)
Balance at end of year	$	39		$	53