Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Schedule of Components of Income Tax Expense (Benefit)

Total income taxes were as follows:



Year Ended December 31,	2015			2014			2013
	(in millions)
Provision (benefit) for income taxes related to continuing operations	$	(471	)	$	224		$	325
Income taxes related to adjustments included in common shareholder’s equity:
Unrealized gains (losses) on securities available-for-sale, not other-than-temporarily impaired, net	—			—			(62		)
Unrealized gains (losses) on other-than-temporarily impaired debt securities available-for-sale	—			—			(1		)
Unrealized gains on cash flow hedging instruments	21			24			143
Changes in funded status of postretirement benefit plans	25			(2		)	8
Foreign currency translation adjustments	—			—			(10		)
Total income taxes	$	(425	)	$	246		$	403

Provision (benefit) for income taxes related to our continuing operations all of which were in the United States were:



Year Ended December 31,	2015			2014		2013
	(in millions)
Current provision (benefit)	$	56		$	108	$	(917	)
Deferred provision (benefit)	(527		)	116		1,242
Total income provision (benefit)	$	(471	)	$	224	$	325

The significant components of deferred provision (benefit) attributable to income from continuing operations were:



Year Ended December 31,	2015			2014			2013
	(in millions)
Deferred income tax provision excluding the effects of other components	$	28		$	473		$	1,443
Increase in Federal operating loss carryforwards	(479		)	(366		)	(141		)
Decrease in State valuation allowances	(171		)	(53		)	(51		)
Decrease in State operating loss carryforwards and other temporary differences	95			42			11
(Increase) decrease in foreign and general business tax credits	—			20			(20		)
Deferred income tax provision (benefit)	$	(527	)	$	116		$	1,242

Summary of Effective Tax Rates

A reconciliation of income tax expense (benefit) compared with the amounts at the U.S. Federal statutory rate was as follows:



Year Ended December 31,	2015					2014					2013
	(dollars are in millions)
Tax provision (benefit) at the U.S. Federal statutory income tax rate	$	(303	)	(35.0	)%	$	270		35.0	%	$	363		35.0	%
Increase (decrease) in rate resulting from:
State and local taxes, net of Federal benefit	(14		)	(1.6	)	12			1.6		9			.9
Adjustment with respect to tax for prior periods⁽¹⁾	(16		)	(1.8	)	38			4.9		11			1.1
Adjustment of tax rate used to value deferred taxes⁽²⁾	(40		)	(4.6	)	(52		)	(6.7	)	(5		)	(.5	)
Change in valuation allowance⁽³⁾	(90		)	(10.4	)	(28		)	(3.6	)	(11		)	(1.1	)
Uncertain tax positions⁽⁴⁾	(4		)	(.5	)	(2		)	(.3	)	(10		)	(1.0	)
Other non-deductible/non-taxable items⁽⁵⁾	(4		)	(.5	)	(11		)	(1.4	)	(29		)	(2.8	)
Other	—			(.1	)	(3		)	(.4	)	(3		)	(.3	)
Total income tax expense (benefit)	$	(471	)	(54.5	)%	$	224		29.1	%	$	325		31.3	%

⁽¹⁾

For 2015, the amount relates to an adjustment to a deferred tax balance sheet account as a result of the Federal audit for the 2012 tax year. For 2014, the amount relates to changes in estimates as a result of filing the Federal and State income tax returns and a change in State tax expense as a result of filing amended State tax returns upon the closing of the Federal audits for the 2006 - 2009 tax years. For 2013, the amount relates to corrections to current and deferred tax balance sheet accounts and changes in estimates as a result of filing the Federal and State income tax returns.


⁽²⁾	For 2015, the amount mainly relates to the effects of revaluing our deferred tax assets for New York City Tax Reform that was enacted on April 13, 2015. For 2014, the amount primarily relates to the effects of revaluing our deferred tax assets as a result of New York State Tax Reform that was enacted on March 31, 2014.

⁽³⁾

For 2015, the amount is due to the release of valuation allowance reserves on previously unrecognized State net operating loss carryforwards and temporary differences. For 2014, the amount relates to changes in valuation allowance reserves in States with net operating loss carryforward periods of 12 to 20 years and a release of valuation allowance reserves as a result of filing amended State tax returns upon the closing of the Federal audits for the 2006-2009 tax years. For 2013, the amount relates to changes in valuation allowance in States with net operating loss carryforward periods of 12 to 20 years.


⁽⁴⁾	For 2015, 2014 and 2013, the amounts primarily relate to the conclusion of State audits and expiration of State statutes of limitations.


⁽⁵⁾	For 2014, the amount primarily relates to tax exempt income and nondeductible penalties. For 2013, the amount includes a change in the estimated deductibility of accrued costs for certain regulatory matters that were accrued during 2011.

Schedule of Deferred Tax Assets and Liabilities

The components of the net deferred tax asset are presented in the following table:



	December 31, 2015			December 31, 2014
	(in millions)
Deferred Tax Assets:
Credit loss reserves	$	144		$	881
Receivables held for sale	541			—
Federal and State unused tax benefit carryforwards	1,719			1,335
Market value adjustment related to derivatives and long-term debt carried at fair value	275			449
Interests in Real Estate Mortgage Investment Conduits ⁽¹⁾	345			326
Accrued expenses not currently deductible	480			191
Other	235			280
Total deferred tax assets	3,739			3,462
Valuation allowance	(707		)	(878		)
Total deferred tax assets net of valuation allowance	3,032			2,584
Deferred Tax Liabilities:
Fee income	54			74
Other	55			66
Total deferred tax liabilities	109			140
Net deferred tax asset	$	2,923		$	2,444

⁽¹⁾

Real Estate Mortgage Investment Conduits ("REMIC") are investment vehicles that hold commercial and residential mortgages in trust and issue securities representing an undivided interest in these mortgages. We hold portfolios of noneconomic residual interests in a number of REMICs through one of our subsidiaries. This item represents the tax basis in such interests which has accumulated as a result of tax rules requiring the recognition of income related to such noneconomic residuals.

Summary of Valuation Allowance

The deferred tax valuation allowance is attributed to the following deferred tax assets that based on the available evidence it is more-likely-than-not that the deferred tax asset will not be realized:



	December 31, 2015		December 31, 2014
	(in millions)
State unused tax benefit carryforwards	$	651	$	822
Deferred capital loss on sale to affiliates	56		56
Total	$	707	$	878

Schedule of Unrecognized Tax Benefits Roll Forward

A reconciliation of the beginning and ending amount of unrecognized tax benefits related to uncertain tax positions is as follows:



	2015			2014			2013
	(in millions)
Balance at beginning of year	$	93		$	111		$	165
Additions for tax positions of prior years	1			3			3
Reductions for tax positions of prior years	(3		)	(3		)	(41		)
Settlements	(1		)	(18		)	(8		)
Reductions for lapse of statute of limitations	(4		)	—			(8		)
Balance at end of year	$	86		$	93		$	111