Note 11

Income Taxes

The components of income tax expense were:


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in Millions)	2015		2014		2015			2014
Federal
Current	$	419	$	421	$	799		$	911
Deferred		13		38		33			(29	)
Federal income tax		432		459		832			882
State
Current		96		84		180			167
Deferred		–		4		(5	)		(6	)
State income tax		96		88		175			161
Total income tax provision	$	528	$	547	$	1,007		$	1,043

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 June 30,						Six Months Ended June 30,
(Dollars in Millions)	2015			2014			2015			2014
Tax at statutory rate	$	709		$	719		$	1,382		$	1,387
State income tax, at statutory rates, net of federal tax benefit		63			58			114			101
Tax effect of
Tax credits and benefits, net of related expenses		(182	)		(184	)		(346	)		(349	)
Tax-exempt income		(51	)		(51	)		(103	)		(103	)
Noncontrolling interests		(6	)		(5	)		(10	)		(10	)
Other items (a)		(5	)		10			(30	)		17
Applicable income taxes	$	528		$	547		$	1,007		$	1,043

(a)

Includes the resolution of certain tax matters with taxing authorities in the first quarter of 2015.

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 June 30, 2015, 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 June 30, 2015, and $1.7 billion at December 31, 2014.