Income Taxes (Tables)

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Components of income tax expense (benefit)

Total income taxes was as follows:

Year Ended December 31,	2023		2022		2021
	(in millions)
Provision for income taxes	$	95	$	177	$	224
Income tax expense (benefit) included in common equity related to:
Unrealized gains (losses) on investment securities	166		(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 hedges	43		(84)		(19)
Employer accounting for post-retirement plans	1		2		1
Total income taxes	$	297	$	(605)	$	(48)

The components of the provision for income taxes were as follows:

Year Ended December 31,	2023		2022		2021
	(in millions)
Current:
Federal	$	11	$	(109)	$	(111)
State and local	35		—		(7)
Foreign	(2)		2		2
Total current	44		(107)		(116)
Deferred	51		284		340
Provision for income taxes	$	95	$	177	$	224

Effective Tax Rates

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,	2023				2022				2021
	(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 benefit	21		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 fees	17		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.

Components of net deferred tax position

The components of the net deferred tax asset are presented in the following table:

At December 31,	2023		2022
	(in millions)
Deferred tax assets:
Allowance for credit losses	$	175	$	172
Unrealized losses on cash flow hedges	86		129
Accrued expenses	127		66
Interests in real estate mortgage investment conduits(1)	104		109
Unrealized losses on investment securities	574		740
Capitalized costs(2)	299		310
Lease liabilities	123		55
Other	154		172
Total deferred tax assets	1,642		1,753
Deferred tax liabilities:
Lease ROU assets	109		34
Amortization of intangible assets	24		23
Fair value adjustments	28		32
Other	29		51
Total deferred tax liabilities	190		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.

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:

	2023		2022		2021
	(in millions)
Balance at January 1,	$	25	$	26	$	20
Additions based on tax positions related to the current year	1		—		—
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