Note 11

Income Taxes

The components of income tax expense were:


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in Millions)	2016			2015			2016			2015
Federal
Current	$	717		$	556		$	1,631		$	1,355
Deferred		(232	)		(114	)		(279	)		(81	)
Federal income tax		485			442			1,352			1,274
State
Current		108			103			235			283
Deferred		(27	)		(11	)		25			(16	)
State income tax		81			92			260			267
Total income tax provision	$	566		$	534		$	1,612		$	1,541

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)	2016			2015			2016			2015
Tax at statutory rate	$	729		$	713		$	2,123		$	2,095
State income tax, at statutory rates, net of federal tax benefit		53			60			170			174
Tax effect of
Tax credits and benefits, net of related expenses		(183	)		(177	)		(523	)		(523	)
Tax-exempt income		(49	)		(51	)		(148	)		(154	)
Noncontrolling interests		(5	)		(5	)		(15	)		(15	)
Other items (a)		21			(6	)		5			(36	)
Applicable income taxes	$	566		$	534		$	1,612		$	1,541

(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, 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 $1.2 billion at September 30, 2016, and $1.5 billion at December 31, 2015.