Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Schedule of Components of Income Tax Expense (Benefit)

Total income taxes were as follows:



Year Ended December 31,	2016			2015			2014
	(in millions)
Provision (benefit) for income taxes	$	(258	)	$	(471	)	$	224
Income taxes related to adjustments included in common equity:
Unrealized gains on cash flow hedging instruments	9			21			24
Changes in funded status of postretirement benefit plans	(2		)	25			(2		)
Total income taxes	$	(251	)	$	(425	)	$	246

Provision (benefit) for income taxes, all of which were in the United States, were:



Year Ended December 31,	2016			2015			2014
	(in millions)
Current provision (benefit)	$	(278	)	$	56		$	108
Deferred provision (benefit)	20			(527		)	116
Total income provision (benefit)	$	(258	)	$	(471	)	$	224

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



Year Ended December 31,	2016			2015			2014
	(in millions)
Deferred income tax provision excluding the effects of other components	$	895		$	28		$	473
Increase in Federal operating loss carryforwards	(859		)	(479		)	(366		)
Decrease in State valuation allowances	(17		)	(171		)	(53		)
Increase in State operating loss carryforwards and other temporary differences	1			95			42
Decrease in foreign and general business tax credits	—			—			20
Deferred income tax provision (benefit)	$	20		$	(527	)	$	116

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,	2016					2015					2014
	(dollars are in millions)
Tax provision (benefit) at the U.S. Federal statutory income tax rate	$	(285	)	(35.0	)%	$	(303	)	(35.0	)%	$	270		35.0	%
Increase (decrease) in rate resulting from:
State and local taxes, net of Federal benefit	(11		)	(1.3	)	(14		)	(1.6	)	12			1.6
Adjustment with respect to tax for prior periods⁽¹⁾	33			4.0		(16		)	(1.8	)	38			4.9
Adjustment of tax rate used to value deferred taxes⁽²⁾	6			.8		(40		)	(4.6	)	(52		)	(6.7	)
Change in valuation allowance⁽³⁾	29			3.6		(90		)	(10.4	)	(28		)	(3.6	)
Uncertain tax positions⁽⁴⁾	(24		)	(3.0	)	(4		)	(.5	)	(2		)	(.3	)
Other non-deductible/non-taxable items⁽⁵⁾	(7		)	(.8	)	(4		)	(.5	)	(11		)	(1.4	)
Other	1			—		—			(.1	)	(3		)	(.4	)
Total income tax expense (benefit)	$	(258	)	(31.7	)%	$	(471	)	(54.5	)%	$	224		29.1	%

⁽¹⁾

For 2016, the amounts were impacted by a $12 million adjustment related to the Federal audit of the 2013 tax year as well as the impact of a reversal of approximately $15 million associated with an out of period adjustment to our deferred tax asset balance. 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.

⁽²⁾

For 2016, the amount largely relates to the effect of revaluing our deferred tax assets based on the recently filed tax returns. 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 2016, the amounts primarily reflect an increase in valuation allowance reserves on certain state net operating loss carryforwards. 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.


⁽⁴⁾	For 2016, the amount primarily relates to the resolution of an uncertain items related to the Federal Audit of the 2013 tax year. The amount for 2016 also reflects the conclusion of certain State audits. For 2015 and 2014, the amounts primarily relate to the conclusion of State audits and expiration of State statutes of limitations.


⁽⁵⁾	For 2016, 2015 and 2014, the amount primarily relates to tax exempt income and, for 2015 and 2014, nondeductible penalties.

Schedule of Deferred Tax Assets and Liabilities

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



	December 31, 2016			December 31, 2015
	(in millions)
Deferred Tax Assets:
Receivables held for sale	$	387		$	541
Federal and State unused tax benefit carryforwards	2,577			1,719
Market value adjustment related to derivatives and long-term debt carried at fair value	16			275
Interests in Real Estate Mortgage Investment Conduits⁽¹⁾	380			345
Accrued expenses not currently deductible	78			480
Other	204			379
Total deferred tax assets	3,642			3,739
Valuation allowance	(690		)	(707		)
Total deferred tax assets net of valuation allowance	2,952			3,032
Deferred Tax Liabilities:
Fee income	26			54
Other	29			55
Total deferred tax liabilities	55			109
Net deferred tax asset	$	2,897		$	2,923

⁽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, is more-likely-than-not that the deferred tax asset will not be realized:



	December 31, 2016		December 31, 2015
	(in millions)
State unused tax benefit carryforwards	$	634	$	651
Deferred capital loss on sale to affiliates	56		56
Total	$	690	$	707

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:



	2016			2015			2014
	(in millions)
Balance at beginning of year	$	86		$	93		$	111
Additions for tax positions of prior years	4			1			3
Reductions for tax positions of prior years	(2		)	(3		)	(3		)
Settlements	(60		)	(1		)	(18		)
Reductions for lapse of statute of limitations	(8		)	(4		)	—
Balance at end of year	$	20		$	86		$	93