Income Taxes And Tax-Related Items

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes and Tax-Related Items

INCOME TAXES AND TAX-RELATED ITEMS

At March 31, 2020, net unrecognized tax benefits were $19 million, compared to $17 million at December 31, 2019. The Corporation anticipates that it is reasonably possible that final settlement of federal and state tax issues will not result in a change to net unrecognized tax benefits within the next twelve months. Included in accrued expenses and other liabilities on the Consolidated Balance Sheets was a liability for tax-related interest and penalties of $6 million and $8 million on March 31, 2020 and December 31, 2019, respectively.

Net deferred tax liabilities were $13 million at March 31, 2020, compared to net deferred tax assets of $42 million at December 31, 2019, primarily driven by increases to deferred tax liabilities related to unrealized gains on investment securities available-for-sale and net hedging gains, partially offset by increases to deferred tax assets related to the allowance for loan losses and allowance for depreciation. Included in deferred tax assets at both March 31, 2020 and December 31, 2019 were $3 million of state net operating loss carryforwards, which expire between 2020 and 2029. The Corporation believes that it is more likely than not that 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 March 31, 2020 and December 31, 2019. The determination regarding valuation allowance was based on evidence of loss carryback capacity, projected future reversals of existing taxable temporary differences to absorb the deferred tax assets and assumptions made regarding future events.

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 that 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.