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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Total income taxes was as follows:
Year Ended December 31,202320222021
 (in millions)
Provision for income taxes$95 $177 $224 
Income tax expense (benefit) included in common equity related to:
Unrealized gains (losses) on investment securities166 (719)(258)
Unrealized gains (losses) on fair value option liabilities attributable to our own credit spread(8)19 4 
Unrealized gains (losses) on derivatives designated as cash flow hedges43 (84)(19)
Employer accounting for post-retirement plans1 2 1 
Total income taxes$297 $(605)$(48)
The components of the provision for income taxes were as follows:
Year Ended December 31,202320222021
 (in millions)
Current:
Federal$11 $(109)$(111)
State and local35 — (7)
Foreign(2)2 2 
Total current44 (107)(116)
Deferred51 284 340 
Provision for income taxes$95 $177 $224 
The following table provides an analysis of the difference between effective rates based on the provision for income taxes attributable to pretax income and the statutory U.S. Federal income tax rate:
Year Ended December 31,202320222021
 (dollars are in millions)
Tax expense at the U.S. Federal statutory income tax rate$102 21.0 %$152 21.0 %$192 21.0 %
Increase (decrease) in rate resulting from:
State and local taxes, net of Federal benefit21 4.3 30 4.1 31 3.4 
Adjustment of State tax rate used to value deferred taxes(8)(1.6)(16)(2.2)(6)(.7)
Non-deductible FDIC assessment fees17 3.5 11 1.5 13 1.4 
Other non-deductible / non-taxable items(3)(.6)11 1.5 3 .3 
Items affecting prior periods(1)
(3)(.6)11 1.5 — — 
Low income housing and other tax credit investments(30)(6.2)(22)(3.0)(15)(1.7)
Other(1)(.3)— — 6 .9 
Provision for income taxes$95 19.5 %$177 24.4 %$224 24.6 %
(1)For 2022, the amount primarily relates to changes in estimates as a result of filing the 2021 Federal and State income tax returns.
The components of the net deferred tax asset are presented in the following table:
At December 31,20232022
 (in millions)
Deferred tax assets:
Allowance for credit losses$175 $172 
Unrealized losses on cash flow hedges86 129 
Accrued expenses127 66 
Interests in real estate mortgage investment conduits(1)
104 109 
Unrealized losses on investment securities574 740 
Capitalized costs(2)
299 310 
Lease liabilities123 55 
Other154 172 
Total deferred tax assets1,642 1,753 
Deferred tax liabilities:
Lease ROU assets109 34 
Amortization of intangible assets24 23 
Fair value adjustments28 32 
Other29 51 
Total deferred tax liabilities190 140 
Net deferred tax asset$1,452 $1,613 
(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.
(2)Reflects our tax return election to capitalize certain service costs.
A reconciliation of the beginning and ending amount of unrecognized tax benefits related to uncertain tax positions is as follows:
202320222021
 (in millions)
Balance at January 1,$25 $26 $20 
Additions based on tax positions related to the current year1 — — 
Additions for tax positions of prior years— 1 9 
Reductions for tax positions of prior years(3)(2)(3)
Balance at December 31,$23 $25 $26 
The total amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate was $20 million, $22 million and $22 million at December 31, 2023, 2022 and 2021, respectively. Included in the unrecognized tax benefits are certain items the recognition of which would not affect the effective tax rate, such as the tax effect of temporary differences and the amount of State taxes that would be deductible for U.S. Federal tax purposes. It is reasonably possible that there could be a change in the amount of our unrecognized tax benefits within the next 12 months due to settlements or statutory expirations in various State and local tax jurisdictions.
It is our policy to recognize accrued interest related to uncertain tax positions in interest expense in the consolidated statement of income and to recognize penalties, if any, related to uncertain tax positions as a component of other expenses in the consolidated statement of income. Accruals for the payment of interest associated with uncertain tax positions totaled $7 million, $6 million and $6 million at December 31, 2023, 2022 and 2021, respectively. Our accrual for the payment of interest associated with uncertain tax positions increased by $1 million during 2023 and was flat during 2022.
Deferred tax assets and liabilities are recognized for the future tax consequences related to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, for State net operating losses and for State tax credits. Our net deferred tax assets, including deferred tax liabilities, totaled $1,452 million and $1,613 million at December 31, 2023 and 2022, respectively.
See Note 2, "Summary of Significant Accounting Policies and New Accounting Pronouncements," for further discussion regarding our accounting policy relating to the evaluation, recognition and measurement of both the HNAH Group's and HSBC USA's deferred tax assets and liabilities. In evaluating the need for a valuation allowance at December 31, 2023, it has been determined that HNAH Group projections of future taxable income from U.S. operations based on objective and verifiable management forecasts provide sufficient and appropriate support for the recognition of our net deferred tax assets.
Federal income tax returns for 2017 and forward remain open to examination by the Internal Revenue Service.
We remain subject to State and local income tax examinations for years 2010 and forward. We are currently under audit by various State and local tax jurisdictions. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law and the closing of statute of limitations. Such adjustments are reflected in the tax provision.
 At December 31, 2023, for State tax purposes, we had apportioned and pre-tax effected net operating loss carryforwards of $32 million which expire as follows: $1 million in 2028 and $31 million in 2030 and beyond.