
Note 10		Income Taxes

The components of income tax expense were:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in Millions)	2013		2012		2013			2012
Federal
Current	$	390	$	461	$	1,506		$	1,416
Deferred		57		50		(35	)		26

Federal income tax		447		511		1,471			1,442
State
Current		84		77		161			239
Deferred		11		5		(3	)		3

State income tax		95		82		158			242

Total income tax provision	$	542	$	593	$	1,629		$	1,684

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)	2013			2012			2013			2012
Tax at statutory rate	$	690		$	709		$	2,061		$	2,030
State income tax, at statutory rates, net of federal tax benefit		62			53			102			157
Tax effect of
Tax credits, net of related expenses (a)		(176	)		(120	)		(394	)		(322	)
Tax-exempt income		(52	)		(55	)		(159	)		(165	)
Noncontrolling interests		13			15			42			39
Other items		5			(9	)		(23	)		(55	)

Applicable income taxes	$	542		$	593		$	1,629		$	1,684

(a)

Excludes tax credits of $209 million for the three and nine months ended September 30, 2013 which were recognized as a reduction to the related investment asset.

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, 2013, the federal taxing authority has completed its examination of the Company through the fiscal year ended December 31, 2010. The years open to examination by foreign, state and local government authorities vary by jurisdiction.

The Company’s net deferred tax liability was $1.2 billion at September 30, 2013, and $1.3 billion at December 31, 2012.