Income Taxes

The effective tax rates for the three months ended September 30, 2016 and 2015 were 29.8% and 29.4%, respectively. The effective tax rates for the nine months ended September 30, 2016 and 2015 were 30.0% and 25.6%, respectively. The effective tax rate for the nine months ended September 30, 2016 was higher than the corresponding period of 2015 primarily due to changes in unrecognized tax benefits during 2015 as described below, partially offset by a $13 million tax benefit related to specific tax-advantaged assets recorded during the current year.

In February 2010, BB&T received an IRS statutory notice of deficiency for tax years 2002-2007 related to the disallowance of foreign tax credits and other deductions claimed by a subsidiary in connection with a financing transaction. BB&T paid the disputed tax, penalties and interest during 2010 and filed a lawsuit seeking a refund in the U.S. Court of Federal Claims. During 2013, the court denied the refund claim and BB&T appealed the decision to the U.S. Court of Appeals for the Federal Circuit. During May 2015, the appeals court rendered a decision overturning a portion of the earlier ruling and affirming the remainder, resulting in the recognition of income tax benefits, including the reversal of interest and penalties, of $107 million during the second quarter of 2015. During September 2015, BB&T filed a petition requesting the case be heard by the U.S. Supreme Court. During March 2016, the U.S. Supreme Court declined to hear the case, which preserves the earlier ruling and effectively concluded this matter.

The following table presents changes in unrecognized tax benefits:



	As of/For the Year-to-Date Period Ended
	September 30, 2016			December 31, 2015
	(Dollars in millions)
Beginning balance of unrecognized tax benefits	$	426		$	503
Additions (reductions) for tax positions of prior years	(5		)	(76		)
Settlements	(418		)	(1		)
Lapse of statute of limitations	—			(1		)
Unrecognized deferred tax benefits from acquisitions	—			1
Ending balance of unrecognized tax benefits	$	3		$	426

Unrecognized tax benefits that would have impacted effective rate if recognized
Federal	$	—		$	422
State	2			3

At September 30, 2016, the liabilities for tax-related interest and penalties recorded on the Consolidated Balance Sheets were immaterial, compared to $181 million at December 31, 2015.