Note 11

Income Taxes

The components of income tax expense were:


	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in Millions)	2017			2016			2017			2016
Federal
Current	$	493		$	613		$	1,024		$	914
Deferred		(37	)		(154	)		(157	)		(47	)
Federal income tax		456			459			867			867
State
Current		81			37			146			127
Deferred		14			46			37			52
State income tax		95			83			183			179
Total income tax provision	$	551		$	542		$	1,050		$	1,046

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)	2017			2016			2017			2016
Tax at statutory rate	$	722		$	727		$	1,417		$	1,394
State income tax, at statutory rates, net of federal tax benefit		67			54			130			117
Tax effect of
Tax credits and benefits, net of related expenses		(197	)		(174	)		(390	)		(340	)
Tax-exempt income		(51	)		(49	)		(100	)		(99	)
Noncontrolling interests		(4	)		(5	)		(9	)		(10	)
Other items (a)		14			(11	)		2			(16	)
Applicable income taxes	$	551		$	542		$	1,050		$	1,046

(a)

Includes excess tax benefits associated with stock-based compensation under accounting guidance effective January 1, 2017. Previously, these benefits were recorded in capital surplus.

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, 2017, 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 $503 million at June 30, 2017 and $479 million at December 31, 2016.