Income Taxes

12 Months Ended

Dec. 31, 2019

Applicable income taxes in the Consolidated Statements of Income were as follows:



(In thousands)	Current			Deferred			Total
Year Ended December 31, 2019:
Federal	$	(8,471	)	$	40,038		$	31,567
State	23,154			(9,564		)	13,590
Foreign	5,148			(64		)	5,084
Total	$	19,831		$	30,410		$	50,241
Year Ended December 31, 2018:
Federal	$	9,424		$	54,858		$	64,282
State	13,251			3,722			16,973
Foreign	4,435			406			4,841
Total	$	27,110		$	58,986		$	86,096
Year Ended December 31, 2017:
Federal	$	14,384		$	(62,913	)	$	(48,529	)
State	237			9,340			9,577
Foreign	5,484			(156		)	5,328
Total	$	20,105		$	(53,729	)	$	(33,624	)

Reconciliations to the Corporation's effective income tax rates from the statutory federal income tax rates were as follows:



	Year Ended December 31,
	2019		2018		2017
Federal income tax rate	21.00	%	21.00	%	35.00	%
Increase (decrease) resulting from:
Tax basis adjustment	(3.30	)	—		—
State income tax, net of federal tax	3.01		3.34		3.92
Tax credit investments	(1.94	)	(0.34	)	(0.89	)
Tax-exempt income	(1.74	)	(1.64	)	(3.86	)
Merger deferred tax reprice	(1.59	)	—		—
State tax settlements, net of federal tax	(1.40	)	—		(1.38	)
Non-controlling interest tax effect	(0.67	)	(0.59	)	(1.45	)
Stock compensation	(0.64	)	(0.64	)	(1.15	)
Tax reform effects, net	—		(0.26	)	(53.29	)
Nondeductible goodwill impairment effect	—		—		10.43
Other, net	1.34		0.56		(1.05	)
Effective income tax rate	14.07	%	21.43	%	(13.72	)%

As a result of the Tax Cuts and Jobs Act, enacted on December 22, 2017 ("Tax Reform"), the Corporation recorded a reasonable estimate of a net tax benefit of $130.7 million in its consolidated financial statements for 2017, primarily resulting from the re-measurement of the Corporation's estimated net deferred tax liability. Certain of these amounts were provisional in nature, as all the information necessary to record more precise amounts was not available, prepared or analyzed for 2017. The Corporation recorded an additional net tax benefit of $1.1 million in the second quarter of 2018 for the finalization of the provisional amounts recorded in 2017.

The Corporation considers its undistributed foreign earnings to be reinvested indefinitely. This position is based on management's determination that cash held in the Corporation's foreign jurisdictions is not needed to fund its U.S. operations and that it either has reinvested or has intentions to reinvest these earnings. While management currently intends to indefinitely reinvest all of the Corporation's foreign earnings, should circumstances or tax laws change, the Corporation may need to record additional income tax expense in the period in which such determination or tax law change occurs.

Due to the shift to a worldwide territorial tax regime as part of Tax Reform, future repatriations of foreign earnings are no longer subject to U.S. federal income tax. However, these foreign earnings may be subject to foreign withholding taxes should they be distributed in the form of dividends. As of December 31, 2019, the estimated withholding taxes that could be due on these earnings was $4.7 million.

Reconciliations of the changes in unrecognized tax benefits were as follows:



	At or For the Year Ended December 31,
(In thousands)	2019			2018			2017
Balance, beginning of period	$	5,872		$	4,645		$	4,690
Increases for tax positions related to the current year	444			903			200
Increases for tax positions related to prior years	445			1,438			86
Decreases for tax positions related to prior years	(1,498		)	(970		)	(331		)
Settlements with taxing authorities	(2,479		)	—			—
Decreases related to lapses of applicable statutes of limitation	(89		)	(144		)	—
Balance, end of period	$	2,695		$	5,872		$	4,645

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $2.1 million and $3.7 million at December 31, 2019 and 2018, respectively. The Corporation recognizes increases and decreases for interest and penalties related to unrecognized tax benefits, where applicable, in income tax expense (benefit). The Corporation recognized approximately $400 thousand of tax benefit, $100 thousand of tax expense and $600 thousand of tax benefit for 2019, 2018 and 2017, respectively, related to interest and penalties. Interest and penalties of approximately $300 thousand and $700 thousand were accrued at December 31, 2019 and 2018, respectively.

The Corporation's federal income tax returns are open and subject to examination for 2016 and later tax return years. The Corporation's various state income tax returns are generally open for 2015 and later tax return years based on individual state statutes of limitation. The Corporation's various foreign income tax returns are open and subject to examination for 2015 and later tax return years. Changes in the amount of unrecognized tax benefits within the next 12 months from normal expirations of statutes of limitation are not expected to be material.

The Corporation's deferred tax assets and deferred tax liabilities were as follows:



	At December 31,
(In thousands)	2019			2018
Deferred tax assets:
Net operating losses and other carryforwards	$	70,820		$	20,591
Acquisition-related fair value adjustments	44,800			—
Stock compensation and deferred compensation plans	42,980			32,686
Allowance for loan and lease losses	25,178			33,546
Nonaccrual interest	6,209			637
Investment securities available-for-sale	—			9,235
Other	5,516			3,787
Deferred tax assets	195,503			100,482
Valuation allowance	(12,840		)	(14,291		)
Total deferred tax assets, net of valuation allowance	182,663			86,191
Deferred tax liabilities:
Lease financing	339,691			297,603
Goodwill and other intangibles	35,031			2,290
Premises and equipment	30,122			40,130
Investment securities available-for-sale	16,760			—
Loan servicing rights	12,989			—
Loan fees and discounts	10,098			17,465
Prepaid expenses	9,508			7,921
Other	7,862			7,319
Total deferred tax liabilities	462,061			372,728
Net deferred tax liabilities	$	279,398		$	286,537

The net operating losses and other carryforwards at December 31, 2019 consisted of federal net operating losses of $23.0 million that expire in 2026 through 2034, state net operating losses of $7.4 million that expire in 2020 through 2039, charitable contribution carryforwards of $3.4 million that expire in 2024, capital loss carryforwards of $200 thousand that expire in 2022, federal credit carryforwards of $19.5 million that expire in 2028 through 2039 and federal credit carryforwards of $5.0 million that do not expire. The valuation allowance against the Corporation’s deferred tax asset at December 31, 2019 consisted of state net operating losses of $12.3 million and capital loss carryforwards of $600 thousand. The valuation allowance at December 31, 2019 and 2018 principally applies to net operating losses and capital loss carryforwards that, in the opinion of management, are more-likely-than-not to expire unutilized. However, to the extent that tax benefits related to these carryforwards are realized in the future, the reduction in the valuation allowance will reduce income tax expense.