Income Taxes (Tables)

12 Months Ended

Dec. 31, 2022

Schedule of Significant Components of Provision for Income Taxes Attributable to Continuing Operations

The following table presents significant components of the provision for income taxes attributable to continuing operations for the years ended December 31, 2022, 2021 and 2020.

Table 15.1: Significant Components of the Provision for Income Taxes Attributable to Continuing Operations


	Year Ended December 31,
(Dollars in millions)	2022		2021		2020
Current income tax provision:
Federal taxes	$	2,125	$	2,173	$	1,676
State taxes	423		485		370
International taxes	104		152		67
Total current provision	$	2,652	$	2,810	$	2,113
Deferred income tax provision (benefit):
Federal taxes	$	(662)	$	490	$	(1,357)
State taxes	(112)		91		(266)
International taxes	2		24		(4)
Total deferred provision (benefit)	(772)		605		(1,627)
Total income tax provision	$	1,880	$	3,415	$	486

Schedule of Effective Income Tax Rate

The following table presents the reconciliation of the U.S. federal statutory income tax rate to the effective income tax rate applicable to income from continuing operations for the years ended December 31, 2022, 2021 and 2020.

Table 15.2: Effective Income Tax Rate


	Year Ended December 31,
	2022		2021		2020
Income tax at U.S. federal statutory tax rate	21.0	%	21.0	%	21.0	%
State taxes, net of federal benefit	3.1		3.1		3.5
Non-deductible expenses	0.6		0.4		3.2
Affordable housing, new markets and other tax credits	(4.2)		(2.3)		(11.4)
Tax-exempt interest and other nontaxable income	(0.4)		(0.3)		(1.7)

Changes in valuation allowance	1.0		0.4		2.3
Other, net	(0.8)		(0.7)		(1.7)
Effective income tax rate	20.3	%	21.6	%	15.2	%

Schedule of Significant Components of Deferred Tax Assets and Liabilities

The following table presents significant components of our deferred tax assets and liabilities as of December 31, 2022 and 2021. The valuation allowance below represents the adjustment of our foreign tax credit carryforward, certain state deferred tax assets and net operating loss carryforwards to the amount we have determined is more likely than not to be realized.

Table 15.3: Significant Components of Deferred Tax Assets and Liabilities


(Dollars in millions)	December 31, 2022		December 31, 2021
Deferred tax assets:
Allowance for credit losses	$	3,025	$	2,657
Security and loan valuations	2,497		0
Rewards programs	790		825
Net unrealized loss on derivatives	689		0
Net operating loss and tax credit carryforwards	437		367
Compensation and employee benefits	411		337
Lease liabilities	346		345




Partnership investments	253		238
Other assets	507		359
Subtotal	8,955		5,128
Valuation allowance	(446)		(355)
Total deferred tax assets	8,509		4,773
Deferred tax liabilities:
Right-of-use assets	284		284
Original issue discount	241		361
Partnership investments	119		128
Mortgage servicing rights	95		88
Security and loan valuations	0		49


Net unrealized gains on derivatives	0		32
Other liabilities	111		123
Total deferred tax liabilities	850		1,065
Net deferred tax assets	$	7,659	$	3,708

_________

Schedule of Reconciliation of Change in Unrecognized Tax Benefits

The following table presents the accrued balance of tax, interest and penalties related to unrecognized tax benefits.

Table 15.4: Reconciliation of the Change in Unrecognized Tax Benefits


(Dollars in millions)	Gross Unrecognized Tax Benefits		Accrued Interest and Penalties		Gross Tax, Interest and Penalties
Balance as of January 1, 2020	$	431	$	31	$	462
Additions for tax positions related to the current year	33		0		33
Additions for tax positions related to prior years	3		21		24
Reductions for tax positions related to prior years due to IRS and other settlements	(16)		(6)		(22)
Balance as of December 31, 2020	451		46		497

Additions for tax positions related to prior years	1		4		5
Reductions for tax positions related to prior years due to IRS and other settlements	(47)		(36)		(83)
Balance as of December 31, 2021	405		14		419
Additions for tax positions related to the current year	3		0		3
Additions for tax positions related to prior years	14		6		20
Reductions for tax positions related to prior years due to IRS and other settlements	(381)		(10)		(391)
Balance as of December 31, 2022	$	41	$	10	$	51
Portion of balance at December 31, 2022 that, if recognized, would impact the effective income tax rate	$	32	$	8	$	40