Note 12

Income Taxes

The components of income tax expense were:


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(Dollars in Millions)	2014			2013		2014			2013
Federal
Current	$	423		$	390	$	1,334		$	1,506
Deferred		10			57		(19	)		(35	)
Federal income tax		433			447		1,315			1,471
State
Current		101			84		268			161
Deferred		(11	)		11		(17	)		(3	)
State income tax		90			95		251			158
Total income tax provision	$	523		$	542	$	1,566		$	1,629

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						Nine Months Ended
	September 30,						September 30,
(Dollars in Millions)	2014			2013			2014			2013
Tax at statutory rate	$	704		$	690		$	2,091		$	2,061
State income tax, at statutory rates, net of federal tax benefit		62			62			163			102
Tax effect of
Tax credits and benefits, net of related expenses		(186	)		(176	)		(535	)		(394	)
Tax-exempt income		(51	)		(52	)		(154	)		(159	)
Noncontrolling interests		(5	)		13			(15	)		42
Other items		(1	)		5			16			(23	)
Applicable income taxes	$	523		$	542		$	1,566		$	1,629

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, 2014, 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 $1.8 billion at September 30, 2014, and $1.3 billion at December 31, 2013.