Variable Interest Entities

9 Months Ended

Sep. 30, 2023

Equity Method Investments and Joint Ventures [Abstract]

For additional information on our accounting policy and our use of variable interest entities (VIEs), refer to pages 164 to 165 in Note 14 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, "Variable Interest Entities", in our 2022 Form 10-K.

Interests in Investment Funds

As of both September 30, 2023 and December 31, 2022, we had no consolidated funds. As of both September 30, 2023 and December 31, 2022, we managed certain funds, considered VIEs, in which we held a variable interest, but for which we were not deemed to be the primary beneficiary. Our potential maximum loss exposure related to these unconsolidated funds totaled $16 million and $15 million as of September 30, 2023 and December 31, 2022, respectively, and represented the carrying value of our investments, which are recorded in other assets in our consolidated statement of condition. The amount of loss we may recognize during any period is limited to the carrying amount of our investments in the unconsolidated funds.

We also held investments in low-income housing, production and investment tax credit entities, considered VIEs for which we were not deemed to be the primary beneficiary. As of September 30, 2023 and December 31, 2022, our potential maximum loss exposure related to these unconsolidated entities totaled $1.30 billion and $1.60 billion, respectively, most of which represented the carrying value of our investments which are recorded in other assets in our consolidated statement of condition.

State Street accounts for our low-income housing tax credit investments (LIHTC) under the proportional amortization method. Effective January 1, 2023, State Street has also elected to account for our investments in production tax credit investments under the proportional amortization method of accounting. Under the proportional amortization method, the initial cost of the investment is amortized based on a percentage of the actual income tax credits and other income tax benefits allocated in the current period versus the total estimated income tax credits and other income tax benefits expected to be received over the life of the investment. The net benefit, representing the difference between amortization of the investment balance, recognition of the income tax credits and recognition of other income tax benefits from the investment is recognized as a component of income tax expense.

As of September 30, 2023, we had investments in LIHTC and production tax credit investments of $841 million and $301 million, respectively, which are included in other assets in our consolidated statement of condition. Deferred contributions related to LIHTC investments were $198 million at September 30, 2023. These deferred contributions are payable in accordance with the respective agreements and are expected to be paid through 2038. Contingent contributions related to the renewable energy production tax credit investments were $48 million at September 30, 2023. These contributions are contingent on production and expected to be paid through 2029.

The following table presents the impact of our tax credit programs for which we have elected to apply proportional amortization accounting on our consolidated statement of income for the periods indicated:


(In millions)	Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023





Income (loss) recorded on investments within other fee revenue	$	8	$	23
Income recorded in total revenue	8		23

Tax credits and benefits recognized in income tax expense	68		202
Proportional amortization recognized in income tax expense	(52)		(156)
Net benefits included in income tax expense	16		46
Net benefit attributable to tax-advantaged investments included in the consolidated statement of income	$	24	$	69