XML 33 R21.htm IDEA: XBRL DOCUMENT v3.10.0.1
Income Taxes
6 Months Ended
Jun. 30, 2018
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
NOTE 12 - INCOME TAXES
For the three months ended June 30, 2018 and 2017, the provision for income taxes was $171 million and $222 million, representing effective tax rates of 19% and 30%, respectively. For the six months ended June 30, 2018 and 2017, the provision for income taxes was $318 million and $381 million, representing effective tax rates of 19% and 28%, respectively. The effective tax rate for the six months ended June 30, 2018 was favorably impacted by a net $4 million discrete income tax benefit, while the effective tax rate for the six months ended June 30, 2017 was favorably impacted by a net $23 million discrete income tax benefit related primarily to share-based compensation.
The $4 million net discrete income tax benefit for the six months ended June 30, 2018 was driven primarily by a $20 million tax benefit for share-based compensation and a $19 million tax benefit for an adjustment to the Company's December 31, 2017 remeasurement of its estimated DTAs and DTLs at the reduced federal corporate income tax rate of 21%. These income tax benefits were offset largely by a $35 million discrete tax expense related to an increase in the valuation allowance recorded for STM's state carryforwards. Any additional adjustment to the Company's December 31, 2017 remeasurement of its estimated DTAs and DTLs would be recorded as an adjustment to the provision for income taxes in 2018 in the period the adjustment amount is determined.
At June 30, 2018 and December 31, 2017, the Company had a valuation allowance recorded against its state carryforwards and certain state DTAs of $180 million and $143 million, respectively. This increase in the valuation allowance was due primarily to the impact of the pending merger of STM and the Bank on the future realization of STM's state NOL carryforwards. See Note 18, “Business Segment Reporting,” for additional information regarding the pending merger of STM and the Bank.
The provision for income taxes includes both federal and state income taxes and differs from the provision using statutory rates due primarily to favorable permanent tax items such as interest income from lending to tax-exempt entities, tax credits, and amortization expense related to qualified affordable housing investment costs. The Company calculated the provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income and adjusting for discrete items that occurred during the period