Note 11

Income Taxes

The components of income tax expense were:


	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in Millions)	2016			2015		2016			2015
Federal
Current	$	613		$	419	$	914		$	799
Deferred		(154	)		13		(47	)		33
Federal income tax		459			432		867			832
State
Current		37			96		127			180
Deferred		46			–		52			(5	)
State income tax		83			96		179			175
Total income tax provision	$	542		$	528	$	1,046		$	1,007

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)	2016			2015			2016			2015
Tax at statutory rate	$	727		$	709		$	1,394		$	1,382
State income tax, at statutory rates, net of federal tax benefit		54			63			117			114
Tax effect of
Tax credits and benefits, net of related expenses		(174	)		(182	)		(340	)		(346	)
Tax-exempt income		(49	)		(51	)		(99	)		(103	)
Noncontrolling interests		(5	)		(6	)		(10	)		(10	)
Other items (a)		(11	)		(5	)		(16	)		(30	)
Applicable income taxes	$	542		$	528		$	1,046		$	1,007

(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, 2016, 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 $1.5 billion at June 30, 2016 and December 31, 2015.