Income Taxes And Tax-Related Items

6 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes and Tax-Related Items

INCOME TAXES AND TAX-RELATED ITEMS

Unrecognized tax benefits were $7 million at both June 30, 2024 and December 31, 2023. The Corporation does not anticipate any final settlements of federal or state tax issues to result in a change of net unrecognized tax benefits within the next twelve months. The liability for tax-related interest and penalties, included in accrued expenses and other liabilities on the Consolidated Balance Sheets, was less than $1 million at both June 30, 2024 and December 31, 2023.

Net deferred tax assets were $1.1 billion at June 30, 2024, compared to $1.0 billion at December 31, 2023. The increase of approximately $153 million in net deferred tax assets resulted primarily from an increase to deferred tax assets related to hedging losses and net unrealized losses on investment securities available-for-sale. Included in deferred tax assets at June 30, 2024 were $2 million of state net operating loss (NOL) carryforwards and $5 million of federal foreign tax carryforwards. State NOL carryforwards expire between 2028 and 2042 and federal foreign tax credit carryforwards expire between 2028 and 2032. The Corporation believes that it is more likely than not that the benefit from federal foreign tax credits and certain state NOL carryforwards will not be realized and, accordingly, maintains its federal valuation allowance of $5 million at both June 30, 2024 and December 31, 2023. The Corporation maintained a state valuation allowance of $1 million at both June 30, 2024 and December 31, 2023. 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.