Income Taxes

As of September 30, 2018, and December 31, 2017, we had no liability for unrecognized tax benefits.

The differences between the 21 percent and 35 percent statutory federal income tax rates and our effective income tax rate were as follows:



(Dollars in millions)	Three months ended September 30,										Nine months ended September 30,
	2018					2017					2018					2017
Tax at statutory rate:	$	130		21.0	%	$	46		35.0	%	$	175		21.0	%	$	187		35.0	%
Increase (decrease) resulting from:
Tax-exempt income from municipal bonds	(5		)	(0.8	)	(9		)	(7.0	)	(15		)	(1.8	)	(27		)	(5.1	)
Dividend received exclusion	(3		)	(0.5	)	(8		)	(6.2	)	(11		)	(1.3	)	(25		)	(4.7	)
Tax accounting method changes	(50		)	(8.1	)	0			0.0		(50		)	(6.0	)	0			0.0
Other	(7		)	(1.1	)	(2		)	(0.9	)	(6		)	(0.7	)	(5		)	(0.8	)
Provision for income taxes	$	65		10.5	%	$	27		20.9	%	$	93		11.2	%	$	130		24.4	%

The provision for federal income taxes is based upon filing a consolidated income tax return for the company and its subsidiaries.

See our 2017 Annual Report on Form 10-K, Item 8, Note 11, Income Taxes, Page 153, which discusses enactment of the Tax Cuts and Jobs Act (Tax Act) on December 22, 2017, and its impact on our financial results for that period. Interpretive guidance of the Tax Act will be received throughout 2018, and we will update our estimates and our disclosure on a quarterly basis as interpretative guidance is received within each quarter that it is received. During the three months ended September 30, 2018, the Internal Revenue Service (IRS) issued guidance on executive compensation which had an immaterial impact on our financial statements. Additional clarification or guidance may be issued by the U.S. Treasury and the IRS in the fourth quarter which will allow us to update our estimates for items for which our accounting for the Tax Act is incomplete. We will complete our accounting for the effects of the Tax Act under the SAB 118 guidance in the fourth quarter of 2018.

During the third quarter of 2018, we received approval from the IRS to change our method of tax accounting for certain items applicable for the 2017 tax year and tax return, primarily related to the valuation of our tax base unpaid losses. Accounting guidance does not allow recognition of the impact of certain tax accounting method changes until approved by the IRS. As a result, we recognized a benefit in the third quarter provision for income taxes for the difference between the current tax rate and the 2017 tax rate for the related items. This reduced our effective tax rate by 8.1 percent and 6.0 percent for the three months and nine months ended September 30, 2018, respectively.

As of September 30, 2018, we had no operating or capital loss carryforwards.