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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
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. Significant components of the Corporation’s deferred tax assets and liabilities are as follows:
 
December 31 (In thousands)20232022
Deferred tax assets:
Allowance for credit losses$18,248 $18,615 
Accumulated other comprehensive loss – Pension Plan— 1,776 
Accumulated other comprehensive loss – Unrealized losses on debt securities AFS18,045 25,443 
Deferred compensation6,177 6,255 
OREO valuation adjustments100 11 
    Net deferred loan fees1,384 1,898 
Deferred contract bonus205 317 
Nonvested equity-based compensation3,019 2,827 
Net operating loss ("NOL") carryforward2,222 2,654 
Capital loss carryforward— 299 
    Fixed assets1,243 510 
Operating lease liability3,620 4,206 
Other1,759 1,950 
Total deferred tax assets$56,022 $66,761 
Deferred tax liabilities:
Accumulated other comprehensive gain – Pension Plan$449 $— 
Deferred investment income2,455 4,890 
Pension Plan19,962 19,678 
MSRs3,196 3,445 
Partnership adjustments1,540 884 
Purchase accounting adjustments807 952 
Operating lease right-of-use asset3,426 3,837 
Lessor adjustments2,308 2,325 
Other614 565 
Total deferred tax liabilities$34,757 $36,576 
Net deferred tax asset$21,265 $30,185 

As of December 31, 2023 and 2022, Park had a net deferred tax asset balance related to federal NOL carryforwards of approximately $2.0 million and $2.4 million, respectively, which expire at various dates from 2030-2039. Park also had a net deferred tax asset balance related to state NOL carryforwards of approximately $0.2 million and $0.3 million at December 31, 2023 and 2022, respectively, which expire at various dates from 2030-2039.

Park performs an analysis to determine if a valuation allowance against deferred tax assets is required in accordance with U.S. GAAP.  Management determined that it was not required to establish a valuation allowance against the December 31, 2023 or 2022 deferred tax assets in accordance with U.S. GAAP since it was more likely than not that the deferred tax asset will be fully utilized in future periods.
The components of the provision for federal income taxes are shown below:
 
December 31, (In thousands)202320222021
Currently payable
Federal
$18,118 $22,574 $28,726 
State
1,190 1,180 1,382 
       Amortization of qualified affordable housing projects8,265 7,743 7,313 
Deferred
Federal
(708)464 (3,006)
State
5 147 (125)
Total$26,870 $32,108 $34,290 

The following is a reconciliation of income tax expense to the amount computed at the statutory federal corporate income tax rate of 21% for the years ended December 31, 2023, 2022 and 2021.
 
202320222021
Statutory federal corporate income tax rate21.0 %21.0 %21.0 %
Changes in rates resulting from:
Tax exempt interest income, net of disallowed interest(1.9)%(1.6)%(1.2)%
Bank owned life insurance(0.7)%(0.7)%(0.5)%
Investments in qualified affordable housing projects, net of tax benefits(1.0)%(0.8)%(0.8)%
KSOP dividend deduction(0.6)%(0.5)%(0.5)%
Other0.7 %0.4 %0.2 %
Effective Tax Rate17.5 %17.8 %18.2 %

Park National Corporation and its subsidiaries do not pay state income tax to the state of Ohio, but pay a franchise tax based on equity. The franchise tax expense is included in "State tax expense" on Park’s Consolidated Statements of Income. Park is also subject to state income tax in various states, including North Carolina and South Carolina. State income tax expense is included in “Income taxes” on Park’s Consolidated Statements of Income. Park’s state income tax expense was $1.2 million, $1.3 million and $1.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.
 
Unrecognized Tax Benefits
The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits.

(In thousands)202320222021
January 1 Balance$69 $339 $633 
    Additions based on tax positions related to the current year47 — — 
    Additions for tax positions of prior years52 25 10 
    Reductions due to statute of limitations(23)(295)(304)
December 31 Balance$145 $69 $339 

The amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in the future periods at December 31, 2023, 2022 and 2021 was $0.1 million, $0.1 million and $0.3 million, respectively. Park does not expect the total amount of unrecognized tax benefits to significantly increase or decrease during 2024.
 
The expense (income) related to interest and penalties recorded on unrecognized tax benefits in the Consolidated Statements of Income for the years ended December 31, 2023, 2022, and 2021 was $1,500, $(56,000), and $(45,500), respectively. The amount accrued for interest and penalties at December 31, 2023, 2022 and 2021 was $11,000, $9,500 and $65,500, respectively.
 
Park National Corporation and its subsidiaries are subject to U.S. federal income tax and income tax in various state jurisdictions. The Corporation is subject to routine audits of tax returns by the Internal Revenue Service and states in which we
conduct business. No material adjustments have been made on closed federal and state tax audits. Generally, all tax years ended prior to December 31, 2020 are closed to examination by federal and state taxing authorities.