Income Taxes

9 Months Ended

Sep. 30, 2012

Income Taxes

Note 9 Income Taxes

The components of income tax expense were:

	Three Months Ended September 30,					Nine Months Ended September 30,
(Dollars in Millions)	2012		2011			2012		2011
Federal
Current	$	461	$	450		$	1,416	$	907
Deferred		50		(41	)		26		232
Federal income tax		511		409			1,442		1,139
State
Current		77		85			239		157
Deferred		5		(4	)		3		18
State income tax		82		81			242		175
Total income tax provision	$	593	$	490		$	1,684	$	1,314

A reconciliation of expected income tax expense at the federal statutory rate of 35 percent to the Company’s applicable income tax expense follows:

	Three Months Ended September 30,						Nine Months Ended   September 30,
(Dollars in Millions)	2012			2011			2012			2011
Tax at statutory rate	$	709		$	610		$	2,030		$	1,671
State income tax, at statutory rates, net of federal tax benefit		53			53			157			114
Tax effect of
Tax credits, net of related expenses		(120	)		(124	)		(322	)		(319	)
Tax-exempt income		(55	)		(57	)		(165	)		(170	)
Noncontrolling interests		15			8			39			22
Other items		(9	)		—			(55	)		(4	)
Applicable income taxes	$	593		$	490		$	1,684		$	1,314

The Company’s income tax returns are subject to review and examination by federal, state, local and foreign government authorities. On an ongoing basis, numerous federal, state, local and foreign examinations are in progress and cover multiple tax years. As of September 30, 2012, the federal taxing authority has completed its examination of the Company through the fiscal year ended December 31, 2008. The years open to examination by foreign, state and local government authorities vary by jurisdiction.

The Company’s net deferred tax liability was $1.6 billion at September 30, 2012, and $1.1 billion at December 31, 2011.