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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES The components of income tax expense from continuing operations are as follows:
Table 109: Components of Income Tax Expense                         
Year ended December 31
In millions		202220212020
Current
Federal$782 $894 $669 
State227 191 158 
Total current$1,009 $1,085 $827 
Deferred
Federal307 123 (373)
State44 55 (28)
Total deferred$351 $178 $(401)
Total $1,360 $1,263 $426 
Significant components of deferred tax assets and liabilities are as follows:

Table 110: Deferred Tax Assets and Liabilities                    
December 31 – in millions20222021
Deferred tax assets
Net unrealized losses on securities and financial instruments$3,107 
Allowance for loan and lease losses1,152 $1,170 
Lease obligations548 563 
Compensation and benefits369 290 
Allowance for unfunded lending related commitments170 161 
Loss and credit carryforward98 140 
Accrued expenses78 151 
Other252 311 
Total gross deferred tax assets5,774 2,786 
Valuation allowance(27)(33)
Total deferred tax assets5,747 2,753 
Deferred tax liabilities
Leasing1,034 1,023 
Fixed assets589 704 
Right of Use Assets472 488 
Mortgage servicing rights325 89 
Goodwill and intangibles270 278 
Net unrealized gains on securities and financial instruments120 
Other405 254 
Total deferred tax liabilities3,095 2,956 
Net deferred tax asset (liability)$2,652 $(203)
A reconciliation between the statutory and effective tax rates from continuing operations follows:
Table 111: Reconciliation of Statutory and Effective Tax Rates
Year ended December 31202220212020
Statutory tax rate21.0 %21.0 %21.0 %
Increases (decreases) resulting from:
State taxes net of federal benefit2.7 2.6 2.0 
Tax-exempt interest(1.2)(0.9)(1.7)
Life insurance(0.8)(0.8)(1.6)
Tax credits(3.2)(4.4)(6.0)
Unrecognized tax benefits0.1 0.3 (1.6)
Subsidiary liquidation(1.2)
Other(0.4)0.3 1.5 
Effective tax rate18.2 %18.1 %12.4 %

The net operating loss carryforwards at December 31, 2022 and 2021 follow:
Table 112: Net Operating Loss Carryforwards
Dollars in millionsDecember 31, 2022December 31, 2021Expiration
Net Operating Loss Carryforwards:
Federal$45 $166 2030-2032
State$698 $872 2023-2039

The majority of the tax credit carryforwards expire in 2023-2040 and were $45 million at December 31, 2022 and $51 million at December 31, 2021. Some federal and state net operating loss and credit carryforwards are from acquired entities and utilization is subject to various statutory limitations. We anticipate that we will be able to fully utilize our carryforwards for federal tax purposes. However, we have recorded an insignificant valuation allowance against our carryforwards for state tax purposes as of December 31, 2022.

Retained earnings included $0.1 billion at both December 31, 2022 and 2021 in allocations for bad debt deductions of former thrift subsidiaries for which no income tax has been provided. Under current law, if certain subsidiaries use these bad debt reserves for purposes other than to absorb bad debt losses, they will be subject to Federal income tax at the current corporate tax rate.
A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:
Table 113: Change in Unrecognized Tax Benefits
In millions202220212020
Balance of gross unrecognized tax benefits at January 1$275 $265 $130 
Increases:
Positions taken during a current period265 
Acquired unrecognized tax benefits8 
Positions taken during a prior period467 
Decreases:
Positions taken during a prior period(2)
Settlements with taxing authorities(3)(3)(130)
Balance of gross unrecognized tax benefits at December 31$318 $275 $265 
Favorable impact if recognized$258 $217 $209 
We do not expect that the balance of unrecognized tax benefits will significantly increase or decrease in the next twelve months.

We are subject to U.S. federal income tax as well as income tax in most states and some foreign jurisdictions. Table 114 summarizes the status of significant IRS examinations.
Table 114: IRS Tax Examination Status
  
Year(s) Status at December 31, 2022 
PNC Financial Services Group, Inc.BBVA USA Bancshares, Inc.
Federal2020-20212018 Under Exam 

In addition, we are under continuous examinations by various state taxing authorities. With few exceptions, we are no longer subject to state and local and foreign income tax examinations by taxing authorities for periods before 2014. For all open audits, any potential adjustments have been considered in establishing our unrecognized tax benefits as of December 31, 2022.

Our policy is to classify interest and penalties associated with income taxes as income tax expense. For 2022 and 2021, the amount of gross interest and penalties was insignificant. At December 31, 2022 and 2021, the related amounts of accrued interest and penalties were also insignificant.