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Income Taxes
 12 Months Ended
Dec. 31, 2015
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
NOTE 14 - INCOME TAXES
The components of income tax provision included in the Consolidated Statements of Income during the years ended December 31 were as follows:
(Dollars in millions)
2015
 
2014
 
2013
Current income tax provision/(benefit):
 
 
 
 
 
Federal

$707

 

$365

 

($158
)
State
36

 
29

 
(15
)
Total
743

 
394

 
(173
)
Deferred income tax provision/(benefit):
 
 
 
 
 
Federal
27

 
99

 
444

State
(6
)
 
—

 
51

Total
21

 
99

 
495

Total provision for income taxes 1

$764

 

$493

 

$322


1 Amortization expense related to qualified affordable housing investment costs is recognized in the provision for income taxes for each of the periods presented as allowed by an accounting standard adopted in 2014. Prior to 2014, these amounts were recognized in other noninterest expense.


The provision for income taxes does not reflect the tax effects of unrealized gains and losses and other income and expenses recorded in AOCI. For additional information on AOCI, see Note 21, “Accumulated Other Comprehensive (Loss)/Income.”
A reconciliation of the income tax provision, using the statutory federal income tax rate of 35%, to the Company’s actual income tax provision and effective tax rate during the years ended December 31 were as follows:
 
2015
 
2014
 
2013
(Dollars in millions)
Amount
 
% of
Pre-Tax Income
 
Amount
 
% of
Pre-Tax Income
 
Amount
 
% of
Pre-Tax Income
Income tax provision at federal statutory rate

$944

 
35.0
 %
 

$793

 
35.0
 %
 

$583

 
35.0
 %
Increase/(decrease) resulting from:
 
 
 
 
 
 
 
 
 
 
 
State income taxes, net
25

 
0.9

 
12

 
0.5

 
21

 
1.2

Tax-exempt interest
(88
)
 
(3.3
)
 
(89
)
 
(3.9
)
 
(80
)
 
(4.8
)
Internal restructuring
—

 
—

 
—

 
—

 
(343
)
 
(20.6
)
Changes in UTBs (including interest), net
(31
)
 
(1.1
)
 
(82
)
 
(3.6
)
 
152

 
9.1

Income tax credits, net of amortization 1
(69
)
 
(2.6
)
 
(65
)
 
(2.9
)
 
(53
)
 
(3.2
)
Non-deductible expenses
—

 
—

 
(57
)
 
(2.5
)
 
49

 
3.0

Other
(17
)
 
(0.6
)
 
(19
)
 
(0.8
)
 
(7
)
 
(0.4
)
Total provision for income taxes and effective tax rate

$764

 
28.3
 %
 

$493

 
21.8
 %
 

$322

 
19.3
 %
1 Excludes tax credits of $8 million, $21 million, and $0 for the years ended December 31, 2015, 2014, and 2013, respectively, which were recognized as a reduction to the related investment asset.

Deferred income tax assets and liabilities result from differences between the timing of the recognition of assets and liabilities for financial reporting purposes and for income tax purposes. These assets and liabilities are measured using the enacted federal and state tax rates expected to apply in the periods in which the deferred tax assets or liabilities are expected to be realized. The net deferred income tax liability is recorded in other liabilities in the Consolidated Balance Sheets.


The significant DTAs and DTLs, net of the federal impact for state taxes, at December 31 were as follows:
(Dollars in millions)
2015
 
2014
DTAs:
 
 
 
ALLL

$651

 

$710

Accrued expenses
297

 
358

State NOLs and other carryforwards
192

 
201

Net unrealized losses in AOCI
257

 
56

Other
97

 
127

Total gross DTAs
1,494

 
1,452

Valuation allowance
(79
)
 
(98
)
Total DTAs
1,415

 
1,354

DTLs:
 
 
 
Leasing
707

 
762

Compensation and employee benefits
140

 
113

MSRs
372

 
515

Loans
109

 
93

Goodwill and intangible assets
216

 
190

Fixed assets
131

 
140

Other
65

 
61

Total DTLs
1,740

 
1,874

Net DTL

($325
)
 

($520
)

The DTAs include state NOLs and other state carryforwards that will expire, if not utilized, in varying amounts from 2016 to 2035. At December 31, 2015 and 2014, the Company had a valuation allowance recorded against its state carryforwards and certain state DTAs of $79 million and $98 million, respectively. The decrease in the valuation allowance was primarily due to a decrease in the valuation allowance recorded against STM's state NOLs. A valuation allowance is not required for the federal and the remaining state DTAs because the Company believes it is more-likely-than-not that these assets will be realized.

The following table provides a rollforward of the Company's gross federal and state UTBs, excluding interest and penalties, during the years ended December 31.
(Dollars in millions)
2015
 
2014
Balance at January 1

$210

 

$291

Increases in UTBs related to prior years
4

 
1

Decreases in UTBs related to prior years
(4
)
 
(36
)
Increases in UTBs related to the current year
10

 
87

Decreases in UTBs related to settlements
(119
)
 
(130
)
Decreases in UTBs related to lapse of the applicable statutes of limitations
(1
)
 
(3
)
Balance at December 31

$100

 

$210


The amount of UTBs that would favorably affect the Company's effective tax rate, if recognized, was $67 million at December 31, 2015.
Interest related to UTBs is recorded in the provision for income taxes. The Company had a gross liability of $8 million and $20 million for interest related to its UTBs at December 31, 2015 and 2014, respectively. During the years ended December 31, 2015 and 2014, the Company recognized a gross benefit of $4 million and expense of $3 million, respectively, for interest on the UTBs.
The Company files U.S. federal, state, and local income tax returns. The Company's federal income tax returns are no longer subject to examination by the IRS for taxable years prior to 2010. With limited exceptions, the Company is no longer subject to examination by state and local taxing authorities for taxable years prior to 2006. It is reasonably possible that the liability for UTBs could decrease by as much as $17 million during the next 12 months due to completion of tax authority examinations and the expiration of statutes of limitations. It is uncertain how much, if any, of this potential decrease will impact the Company’s effective tax rate.