XML 49 R24.htm IDEA: XBRL DOCUMENT
v3.22.4

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes |
NOTE 15—INCOME TAXES
We recognize the current and deferred tax consequences of all transactions that have been recognized in the financial statements using the provisions of the enacted tax laws. Current income tax expense represents our estimated taxes to be paid or refunded for the current period and includes income tax expense related to our uncertain tax positions, as well as tax-related interest and penalties. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We record valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. We record the effect of remeasuring deferred tax assets and liabilities due to a change in tax rates or laws as a component of income tax expense related to continuing operations for the period in which the change is enacted. We subsequently release income tax effects stranded in AOCI using a portfolio approach. Income tax benefits are recognized when, based on their technical merits, they are more likely than not to be sustained upon examination. The amount recognized is the largest amount of benefit that is more likely than not to be realized upon settlement. The following table presents significant components of the provision for income taxes attributable to continuing operations for the years ended December 31, 2022, 2021 and 2020. Table 15.1: Significant Components of the Provision for Income Taxes Attributable to Continuing Operations
|  | Year Ended December 31,
(Dollars in millions) |  | 2022 |  | 2021 |  | 2020
Current income tax provision: |  |  |  |  |  |
Federal taxes |  | $ | 2,125 |  |  | $ | 2,173 |  |  | $ | 1,676 |
State taxes |  | 423 |  |  | 485 |  |  | 370 |
International taxes |  | 104 |  |  | 152 |  |  | 67 |
Total current provision |  | $ | 2,652 |  |  | $ | 2,810 |  |  | $ | 2,113 |
Deferred income tax provision (benefit): |  |  |  |  |  |
Federal taxes |  | $ | (662) |  |  | $ | 490 |  |  | $ | (1,357) |
State taxes |  | (112) |  |  | 91 |  |  | (266) |
International taxes |  | 2 |  |  | 24 |  |  | (4) |
Total deferred provision (benefit) |  | (772) |  |  | 605 |  |  | (1,627) |
Total income tax provision |  | $ | 1,880 |  |  | $ | 3,415 |  |  | $ | 486 |
The international income tax provision is related to pre-tax earnings from foreign operations of approximately $462 million, $677 million and $293 million in 2022, 2021 and 2020, respectively. Total income tax provision does not reflect the tax effects of items that are included in AOCI, which include a tax benefit of $3.2 billion and $985 million in 2022 and 2021, respectively, and tax provision of $702 million in 2020. See “Note 10—Stockholders’ Equity” for additional information. The following table presents the reconciliation of the U.S. federal statutory income tax rate to the effective income tax rate applicable to income from continuing operations for the years ended December 31, 2022, 2021 and 2020. Table 15.2: Effective Income Tax Rate
|  | Year Ended December 31,
|  | 2022 |  | 2021 |  | 2020
Income tax at U.S. federal statutory tax rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State taxes, net of federal benefit |  | 3.1 |  |  | 3.1 |  |  | 3.5 |
Non-deductible expenses |  | 0.6 |  |  | 0.4 |  |  | 3.2 |
Affordable housing, new markets and other tax credits |  | (4.2) |  |  | (2.3) |  |  | (11.4) |
Tax-exempt interest and other nontaxable income |  | (0.4) |  |  | (0.3) |  |  | (1.7) |
Changes in valuation allowance |  | 1.0 |  |  | 0.4 |  |  | 2.3 |
Other, net |  | (0.8) |  |  | (0.7) |  |  | (1.7) |
Effective income tax rate |  | 20.3 | % |  | 21.6 | % |  | 15.2 | %
The following table presents significant components of our deferred tax assets and liabilities as of December 31, 2022 and 2021. The valuation allowance below represents the adjustment of our foreign tax credit carryforward, certain state deferred tax assets and net operating loss carryforwards to the amount we have determined is more likely than not to be realized. Table 15.3: Significant Components of Deferred Tax Assets and Liabilities
(Dollars in millions) |  | December 31, 2022 |  | December 31, 2021
Deferred tax assets: |  |  |  |
Allowance for credit losses |  | $ | 3,025 |  |  | $ | 2,657 |
Security and loan valuations |  | 2,497 |  |  | 0 |
Rewards programs |  | 790 |  |  | 825 |
Net unrealized loss on derivatives |  | 689 |  |  | 0 |
Net operating loss and tax credit carryforwards |  | 437 |  |  | 367 |
Compensation and employee benefits |  | 411 |  |  | 337 |
Lease liabilities |  | 346 |  |  | 345 |
Partnership investments |  | 253 |  |  | 238 |
Other assets |  | 507 |  |  | 359 |
Subtotal |  | 8,955 |  |  | 5,128 |
Valuation allowance |  | (446) |  |  | (355) |
Total deferred tax assets |  | 8,509 |  |  | 4,773 |
Deferred tax liabilities: |  |  |  |
Right-of-use assets |  | 284 |  |  | 284 |
Original issue discount |  | 241 |  |  | 361 |
Partnership investments |  | 119 |  |  | 128 |
Mortgage servicing rights |  | 95 |  |  | 88 |
Security and loan valuations |  | 0 |  |  | 49 |
Net unrealized gains on derivatives |  | 0 |  |  | 32 |
Other liabilities |  | 111 |  |  | 123 |
Total deferred tax liabilities |  | 850 |  |  | 1,065 |
Net deferred tax assets |  | $ | 7,659 |  |  | $ | 3,708 |
_________ . Our gross federal net operating loss carryforwards were $13 million and $25 million as of December 31, 2022 and 2021, respectively. These operating loss carryforwards were attributable to acquisitions, and none of the $13 million of operating loss carryforwards are subject to expiration. Under IRS rules, our ability to utilize these losses against future income is limited. The net tax values of our state net operating loss carryforwards were $267 million and $258 million as of December 31, 2022 and 2021, respectively, and they will expire from 2023 to 2041. Our foreign tax credit carryforwards were $166 million and $91 million as of December 31, 2022 and 2021, respectively, and they will expire from 2028 to 2032. Our valuation allowance increased by $91 million to $446 million as of December 31, 2022 compared to $355 million as of December 31, 2021. Of the total increase, $75 million is related to the current year increase in our foreign tax credit carryforwards that will not be realized prior to expiration and $15 million is related to reducing state net operating losses and interest carryforwards to the amount we have determined is more likely than not to be realized. We recognize accrued interest and penalties related to income taxes as a component of income tax expense. We recognized a $1 million and $30 million tax benefit in 2022 and 2021, respectively, and $16 million of such expense in 2020. The following table presents the accrued balance of tax, interest and penalties related to unrecognized tax benefits. Table 15.4: Reconciliation of the Change in Unrecognized Tax Benefits
(Dollars in millions) |  | Gross Unrecognized Tax Benefits |  | Accrued Interest and Penalties |  | Gross Tax, Interest and Penalties
Balance as of January 1, 2020 |  | $ | 431 |  |  | $ | 31 |  |  | $ | 462 |
Additions for tax positions related to the current year |  | 33 |  |  | 0 |  |  | 33 |
Additions for tax positions related to prior years |  | 3 |  |  | 21 |  |  | 24 |
Reductions for tax positions related to prior years due to IRS and other settlements |  | (16) |  |  | (6) |  |  | (22) |
Balance as of December 31, 2020 |  | 451 |  |  | 46 |  |  | 497 |
Additions for tax positions related to prior years |  | 1 |  |  | 4 |  |  | 5 |
Reductions for tax positions related to prior years due to IRS and other settlements |  | (47) |  |  | (36) |  |  | (83) |
Balance as of December 31, 2021 |  | 405 |  |  | 14 |  |  | 419 |
Additions for tax positions related to the current year |  | 3 |  |  | 0 |  |  | 3 |
Additions for tax positions related to prior years |  | 14 |  |  | 6 |  |  | 20 |
Reductions for tax positions related to prior years due to IRS and other settlements |  | (381) |  |  | (10) |  |  | (391) |
Balance as of December 31, 2022 |  | $ | 41 |  |  | $ | 10 |  |  | $ | 51 |
Portion of balance at December 31, 2022 that, if recognized, would impact the effective income tax rate |  | $ | 32 |  |  | $ | 8 |  |  | $ | 40 |
We are subject to examination by the IRS and other tax authorities in certain countries and states in which we operate. The tax years subject to examination vary by jurisdiction. During 2022, we continued to participate in the IRS Compliance Assurance Process (“CAP”) for our open federal income tax return years and have been accepted into CAP for 2023. During 2022, the IRS review of our 2017, 2018, 2019, and 2020 federal income tax returns was completed, with the Company due a net refund of tax and interest and these years are now closed. We expect that the IRS review of our 2021 federal income tax return will be completed in 2023, as only one issue remains under review post-filing. We also expect that the IRS review of our 2022 federal income tax return will be substantially completed in 2023 prior to its filing. It is reasonably possible that further adjustments to the Company’s unrecognized tax benefits may be made within 12 months of the reporting date as a result of future judicial or regulatory interpretations of existing tax laws. At this time, an estimate of the potential changes to the amount of unrecognized tax benefits cannot be made. As of December 31, 2022, the Company had approximately $1.7 billion of unremitted earnings of subsidiaries operating outside the U.S. that upon repatriation would have no additional U.S. income taxes. In accordance with the guidance for accounting for income taxes in special areas, nearly all these earnings are considered by management to be invested indefinitely. As of December 31, 2022, U.S. income taxes of $69 million have not been provided for approximately $287 million of previously acquired thrift bad debt reserves created for tax purposes as of December 31, 1987. These amounts, acquired as a result of previous mergers and acquisitions, are subject to recapture in the unlikely event that CONA, as the successor to the merged and acquired entities, makes distributions in excess of earnings and profits, redeems its stock or liquidates.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration