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Income Taxes (Tables)
 12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
Components of income tax expense (benefit)
Total income taxes were as follows:
Year Ended December 31,
2016
 
2015
 
2014
 
(in millions)
Provision (benefit) for income taxes
$
89

 
$
230

 
$
(56
)
Income taxes related to adjustments included in common equity:

 

 

Unrealized gains (losses) on investment securities, net
(135
)
 
(242
)
 
114

Unrealized gains (losses) on derivatives classified as cash flow hedges
9

 
2

 
(46
)
Employer accounting for post-retirement plans
2

 
—

 
(4
)
Other-than-temporary impairment on debt securities
—

 
—

 
43

Total income taxes
$
(35
)
 
$
(10
)
 
$
51

The components of income tax expense (benefit) were as follows:
Year Ended December 31,
2016
 
2015
 
2014
 
(in millions)
Current:
 
 
 
 
 
Federal
$
191

 
$
3

 
$
(35
)
State and local
27

 
35

 
(222
)
Foreign
11

 
2

 
16

Total current
229

 
40

 
(241
)
Deferred
(140
)
 
190

 
185

Total income tax expense (benefit)
$
89

 
$
230

 
$
(56
)
The significant components of deferred provision attributable to income were:
Year Ended December 31,
2016
 
2015
 
2014
 
(in millions)
Deferred income tax provision (excluding the effects of other components)
$
(140
)
 
$
201

 
$
144

Decrease in Federal operating loss carryforwards
—

 
—

 
1

(Decrease) increase in State valuation allowance
—

 
(5
)
 
11

Increase in State capital loss carryforwards
—

 
(6
)
 
—

(Increase) decrease in foreign and general business tax credits
—

 
—

 
29

Deferred income tax provision
$
(140
)
 
$
190

 
$
185
Effective Tax Rates
The following table provides an analysis of the difference between effective rates based on the total income tax provision attributable to pretax income and the statutory U.S. Federal income tax rate:
Year Ended December 31,
2016
 
2015
 
2014
 
(dollars are in millions)
Tax expense at the U.S. Federal statutory income tax rate
$
76

 
35.0
 %
 
$
196

 
35.0
 %
 
$
104

 
35.0
 %
Increase (decrease) in rate resulting from:

 

 

 

 

 

State and local taxes, net of Federal benefit
10

 
4.6

 
20

 
3.6

 
15

 
5.0

Adjustment of tax rate used to value deferred taxes(1)
4

 
1.8

 
47

 
8.4

 
63

 
21.1

Other non-deductible / non-taxable items(2)
21

 
9.6

 
1

 
.2

 
—

 
—

Items affecting prior periods(3)
(2
)
 
(.9
)
 
(7
)
 
(1.3
)
 
(29
)
 
(9.7
)
Uncertain tax positions(4)
(4
)
 
(1.8
)
 
4

 
.7

 
(192
)
 
(64.4
)
Low income housing tax credit investments
(17
)
 
(7.8
)
 
(26
)
 
(4.6
)
 
(26
)
 
(8.7
)
Change in valuation allowances reserves(5)
—

 
—

 
(5
)
 
(.9
)
 
10

 
3.4

Other
1

 
.5

 
—

 
—

 
(1
)
 
(.3
)
Total income tax expense (benefit)
$
89

 
40.8
 %
 
$
230

 
41.1
 %
 
$
(56
)
 
(18.8
)%
 
(1) 
For 2015, the amount mainly relates to the effects of revaluing our deferred tax assets for New York City Tax Reform that was enacted on April 13, 2015. For 2014, the amount mainly relates to the effects of revaluing our deferred tax assets for New York State Tax Reform that was enacted on March 31, 2014.
(2) 
For 2016, the amount mainly relates to the accrual of non-deductible penalties.
(3) 
For 2014, the amount relates to changes in estimates as a result of filing the Federal and State income tax returns and a change in State tax expense as a result of filing amended State tax returns upon the closing of the Federal audits for the 2006 - 2009 tax years.
(4) 
For 2014, the amount mainly reflects the resolution and settlement with taxation authorities of certain significant State and local tax audits during 2014 which is discussed further below.
(5) 
For 2014, the amount relates to the establishment of a valuation allowance against our deferred tax assets as a result of New York State Tax Reform that was enacted on March 31, 2014.
Components of net deferred tax position
The components of the net deferred tax asset are presented in the following table:
At December 31,
2016
 
2015
 
(in millions)
Deferred tax assets:
 
 
 
Allowance for credit losses
$
392

 
$
346

Employee benefit accruals
108

 
124

Accrued expenses
110

 
79

Interests in real estate mortgage investment conduits(1)
548

 
561

Unrealized losses on investment securities
275

 
140

Partnerships
113

 
104

Other
360

 
360

Total deferred tax assets
1,906

 
1,714

Valuation allowance
(6
)
 
(6
)
Total deferred tax assets, net of valuation allowance
1,900

 
1,708

Deferred tax liabilities:
 
 
 
Fair value adjustments
48

 
137

Mortgage servicing rights
—

 
52

Other
49

 
45

Total deferred tax liabilities
97

 
234

Net deferred tax asset
$
1,803

 
$
1,474

 
1) 
Real estate mortgage investment conduits ("REMICs") are investment vehicles that hold commercial and residential mortgages in trust and issue securities representing an undivided interest in these mortgages. HSBC Bank USA holds portfolios of noneconomic residual interests in a number of REMICs. This item represents tax basis in such interests which has accumulated as a result of tax rules requiring the recognition of income related to such noneconomic residuals.
Reconciliation of unrecognized tax benefits
A reconciliation of the beginning and ending amount of unrecognized tax benefits related to uncertain tax positions is as follows:
 
2016
 
2015
 
2014
 
(in millions)
Balance at January 1,
$
26

 
$
14

 
$
540

Additions based on tax positions related to the current year
2

 
4

 
18

Reductions based on tax positions related to the current year
—

 
—

 
(10
)
Additions for tax positions of prior years
—

 
8

 
5

Reductions for tax positions of prior years
(8
)
 
—

 
(337
)
Reductions related to settlements with taxing authorities
(4
)
 
—

 
(202
)
Balance at December 31,
$
16

 
$
26

 
$
14