Income Taxes

12 Months Ended

Dec. 31, 2019

NOTE N—INCOME TAXES

The income tax provisions included in the consolidated statements of income are summarized as follows:


	Year Ended December 31
(In thousands)	2019		2018			2017
Current expense:
Federal	$	43,337	$	52,041		$	65,459
State		6,798		9,429			7,960
Deferred expense:
Federal		12,522		8,298			20,920
Tax Act remeasurement		0		(120	)		37,732
State		1,683		1,175			2,175

Total income taxes	$	64,340	$	70,823		$	134,246

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. The Tax Act lowered the Federal corporate tax rate from 35% to 21% effective January 1, 2018 and made numerous other tax law changes. U.S. generally accepted accounting principles (GAAP) requires companies to recognize the effect of tax law changes in the period of enactment. As a result of the Tax Act, United was required to remeasure deferred tax assets and liabilities at the new tax rate and as a result, recorded provisional deferred income tax expense of $37,732,000 in the fourth quarter of 2017. Upon final analysis of available information and refinement of its calculations during 2018, United decreased the provisional amount by $120,000 which is

included as a component of deferred income tax expense in the table above.

The following is a reconciliation of income tax expense to the amount computed by applying the statutory federal income tax rate to income before income taxes:


	Year Ended December 31
(Dollars in thousands)	2019						2018						2017
	Amount			%			Amount			%			Amount			%
Tax on income before taxes at statutory federal rate	$	68,132			21.0 %		$	68,704			21.0 %		$	99,689			35.0 %
Plus: State income taxes net of federal tax benefits		6,690			2.1			8,362			2.6			6,207			2.2

		74,822			23.1			77,066			23.6			105,896			37.2
Increase (decrease) resulting from:
Tax-exempt interest income		(2,813	)		(0.9	)		(3,298	)		(1.0	)		(5,362	)		(1.9	)
Tax credits		(5,636	)		(1.7	)		(2,054	)		(0.6	)		(1,171	)		(0.4	)
Deferred taxes due to the Tax Act		(0	)		0.0			(120	)		0.0			37,732			13.2
Other items-net		(2,033	)		(0.7	)		(771	)		(0.3	)		(2,849	)		(1.0	)

Income taxes	$	64,340			19.8 %		$	70,823			21.7 %		$	134,246			47.1 %

For years ended 2019, 2018 and 2017, United incurred federal income tax expense of

$54,000,

a federal tax benefit of

180,000

and federal income tax expense of

2,088,000

, respectively

, applicable to the sales and calls of securities

. Income taxes paid approximated $56,459,000

, $

55,336,000

, and $

73,096,000

in 2019, 2018 and 2017, respectively. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At December 31, 2019, United had

federal or state net operating loss

carryforwards

Taxes not on income, which consists mainly of business franchise taxes, were $11,330,000, $11,428,000, and $12,586,000, for the years ended December 31, 2019, 2018 and 2017, respectively. These amounts are recorded in other expense in the Consolidated Statements of Income.

Significant components of United’s deferred tax assets and liabilities (included in other assets in the Consolidated Balance Sheets) at December 31, 2019 and 2018 are as follows:


(In thousands)	2019		2018
Deferred tax assets:
Allowance for credit losses	$	18,358	$	18,109
Accrued benefits payable		13.459		13,914
Other accrued liabilities		992		846
Pension plan accruals		3,313		1,217
Unrealized loss on securities available for sale		0		5,572
Other real estate owned		2,482		2,482
Lease liabilities under operating leases		14,293		0
Deferred mortgage points		0		983
Purchase accounting intangibles		5,917		18,091

Total deferred tax assets		58,814		61,214


Deferred tax liabilities:
Premises and equipment		2,963		1,414
Unrealized gain on securities available for sale		2,755		0
Right-of-use assets under operating leases		13,464		0
Deferred mortgage points		389		0
Other		2,300		2,899

Total deferred tax liabilities		21,871		4,313

Net deferred tax assets	$	36,943	$	56,901

At December 31, 2019 and 2018, United believes that all of the deferred tax amounts shown above are more likely than not to be realized based on an assessment of all available positive and negative evidence and therefore

valuation allowance has been recorded.

In accordance with ASC Topic 740, “Income Taxes,” United records a liability for uncertain income tax positions based on a recognition threshold of

more-likely-than-not,

and a measurement attribute for all tax positions taken on a tax return, in order for those tax positions to be recognized in the financial statements.

Below is a reconciliation of the total amounts of unrecognized tax benefits:


	December 31
(In thousands)	2019			2018
Unrecognized tax benefits at beginning of year	$	2,005		$	2,894
Increase in unrecognized tax benefits as a result of tax positions taken during the current period		152			156
Decreases in the unrecognized tax benefits as a result of a lapse of the applicable statute of limitations		(589	)		(1,045	)

Unrecognized tax benefits at end of year	$	1,568		$	2,005

The entire amount of unrecognized tax benefits, if recognized, would impact United’s effective tax rate. Over the next 12 months, the statute of limitations will close on certain income tax returns. However, at this time,

United cannot reasonably estimate the amount of tax benefits, if any, it may recognize over the next 12 months.

United is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2016, 2017 and 2018 and certain State Taxing authorities for the years ended December 31, 2016 through 2018.

As of December 31, 2019, and 2018, the total amount of accrued interest related to uncertain tax positions was $667,000 and $675,000, respectively. United accounts for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes.

interest or penalties were recognized in the results of operations for the years of 2019, 2018 and 2017.