Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Income Taxes Included in Income Statement

Income taxes included in the income statement are summarized below. We file a consolidated federal income tax return.



Year ended December 31, in millions	2018			2017		2016
Currently payable:
Federal	$	184		$	334	$	149
State	62			—		19
Total currently payable	246			334		168
Deferred:
Federal	117			274		13
State	(19		)	29		(2		)
Total deferred	98			303		11
Total income tax (benefit) expense ^(a)	$	344		$	637	$	179

(a)

There was no income tax (benefit) expense on securities transactions in 2018, 2017, and 2016. Income tax expense excludes equity- and gross receipts-based taxes, which are assessed in lieu of an income tax in certain states in which we operate. These taxes, which are recorded in “noninterest expense” on the income statement, totaled $15 million in 2018, $22 million in 2017, and $18 million in 2016.

Significant Components of Deferred Tax Assets and Liabilities Included in "Accrued Income and Other Assets" and "Accrued Expense and Other Liabilities"

Significant components of our deferred tax assets and liabilities included in “accrued income and other assets” and “accrued expense and other liabilities,” respectively, on the balance sheet, are as follows:



December 31, in millions	2018		2017
Allowance for loan and lease losses	$	232	$	233
Employee benefits	170		147
Net unrealized securities losses	144		138
Federal net operating losses and credits	34		205
Fair value adjustments	41		63
Non-tax accruals	80		89
State net operating losses and credits	3		7
Other	221		223
Gross deferred tax assets	925		1,105
Less: Valuation Allowance	11		15
Total deferred tax assets	914		1,090
Leasing transactions	531		588
Other	161		182
Total deferred tax liabilities	692		770
Net deferred tax assets (liabilities) ^(a)	$	222	$	320

(a)

From continuing operations.

Total Income Tax Expense (Benefit) and Resulting Effective Tax Rate

The following table shows how our total income tax expense (benefit) and the resulting effective tax rate were derived:



Year ended December 31, dollars in millions	2018					2017					2016
Year ended December 31, dollars in millions	Amount			Rate		Amount			Rate		Amount			Rate
Income (loss) before income taxes times 21% (35% for 2017 and 2016) statutory federal tax rate	$	463		21.0	%	$	675		35.0	%	$	339		35.0	%
Amortization of tax-advantaged investments	127			5.8		104			5.4		88			9.0
Foreign tax adjustments	2			.1		1			.1		1			.1
Tax-exempt interest income	(30		)	(1.4	)	(37		)	(1.9	)	(25		)	(2.6	)
Corporate-owned life insurance income	(29		)	(1.3	)	(46		)	(2.4	)	(44		)	(4.5	)
State income tax, net of federal tax benefit	34			1.5		19			1.0		11			1.1
Tax credits	(234		)	(10.6	)	(218		)	(11.3	)	(208		)	(21.3	)
Tax Cuts and Jobs Act	7			.3		147			7.6		—			—
Other	4			.2		(8		)	(.5	)	17			1.7
Total income tax expense (benefit)	$	344		15.6	%	$	637		33.0	%	$	179		18.5	%

Change in Liability for Unrecognized Tax Benefits

The change in our liability for unrecognized tax benefits is as follows:



Year ended December 31, in millions	2018			2017
Balance at beginning of year	$	39		$	53
Increase for other tax positions of prior years	15			3
Increase from Acquisitions	—			3
Decrease for payments and settlements	—			(4		)
Decrease related to tax positions taken in prior years	(19		)	(16		)
Balance at end of year	$	35		$	39