Note 11

Income Taxes

The components of income tax expense were:


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in Millions)	2015			2014			2015			2014
Federal
Current	$	556		$	423		$	1,355		$	1,334
Deferred		(114	)		10			(81	)		(19	)
Federal income tax		442			433			1,274			1,315
State
Current		103			101			283			268
Deferred		(11	)		(11	)		(16	)		(17	)
State income tax		92			90			267			251
Total income tax provision	$	534		$	523		$	1,541		$	1,566

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)	2015			2014			2015			2014
Tax at statutory rate	$	713		$	704		$	2,095		$	2,091
State income tax, at statutory rates, net of federal tax benefit		60			62			174			163
Tax effect of
Tax credits and benefits, net of related expenses		(177	)		(186	)		(523	)		(535	)
Tax-exempt income		(51	)		(51	)		(154	)		(154	)
Noncontrolling interests		(5	)		(5	)		(15	)		(15	)
Other items (a)		(6	)		(1	)		(36	)		16
Applicable income taxes	$	534		$	523		$	1,541		$	1,566

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