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Income Taxes And Tax-Related Items
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes and Tax-Related Items
INCOME TAXES AND TAX-RELATED ITEMS
Net unrecognized tax benefits were $10 million at both September 30, 2018 and December 31, 2017. The Corporation anticipates it is reasonably possible that final settlements with tax authorities will result in a decrease in net unrecognized tax benefits of $1 million within the next twelve months. The liability for tax-related interest and penalties included in accrued expenses and other liabilities was $11 million at September 30, 2018, compared to $10 million at December 31, 2017.
Net deferred tax assets were $153 million at September 30, 2018, compared to $141 million at December 31, 2017. The $12 million increase in net deferred tax assets resulted primarily from an increase in deferred tax assets related to unrealized losses on investment securities available-for-sale and deferred compensation, partially offset by the decrease in the allowance for loan losses and an increase in deferred tax liabilities related to discrete tax items and the defined benefit pension plans. Included in deferred tax assets at both September 30, 2018 and December 31, 2017 were $4 million of state net operating loss carryforwards, which expire between 2018 and 2027. The Corporation believes it is more likely than not the benefit from certain of these state net operating loss carryforwards will not be realized and, accordingly, maintained a valuation allowance of $3 million at both September 30, 2018 and December 31, 2017.
In the ordinary course of business, the Corporation enters into certain transactions that have tax consequences. From time to time, the Internal Revenue Service (IRS) or other tax jurisdictions may review and/or challenge specific interpretive tax positions taken by the Corporation with respect to those transactions. The Corporation believes its tax returns were filed based upon applicable statutes, regulations and case law in effect at the time of the transactions. The IRS or other tax jurisdictions, an administrative authority or a court, if presented with the transactions, could disagree with the Corporation’s interpretation of the tax law.
Based on current knowledge and probability assessment of various potential outcomes, the Corporation believes the current tax reserves are adequate, and the amount of any potential incremental liability arising is not expected to have a material adverse effect on the Corporation’s consolidated financial condition or results of operations. Probabilities and outcomes are reviewed as events unfold, and adjustments to the reserves are made when necessary.