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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Taxes [Abstract]  
Income Taxes
NOTE 19. INCOME TAXES
The components of income tax expense for the years ended December 31 were as follows:
202220212020
 (In millions)
Current income tax expense:
Federal$493 $456 $312 
State116 73 66 
Total current expense$609 $529 $378 
Deferred income tax expense (benefit):
Federal$26 $132 $(142)
State(4)33 (16)
Total deferred expense (benefit)$22 $165 $(158)
Total income tax expense$631 $694 $220 
Income tax expense does not reflect the tax effects of unrealized losses on securities transferred to held to maturity, unrealized gains and losses on securities available for sale, unrealized gains and losses on derivative instruments and the net change from defined benefit pension plans and other postretirement benefits. Refer to Note 14 for additional information on shareholders' equity and accumulated other comprehensive income (loss).
The Company accounts for investment tax credits using the deferral method. Investment tax credits generated totaled $67 million, $64 million and $94 million for 2022, 2021, and 2020, respectively.
Income taxes for financial reporting purposes differs from the amount computed by applying the statutory federal income tax rate of 21 percent as shown in the following table:
202220212020
 (Dollars in millions)
Tax on income computed at statutory federal income tax rate$604 $675 $276 
Increase (decrease) in taxes resulting from:
State income tax, net of federal tax effect88 83 42 
Non-deductible expenses 34 18 22 
Tax-exempt interest(33)(30)(34)
Affordable housing credits, net of amortization(32)(25)(31)
Bank-owned life insurance(16)(20)(22)
Impact of change in unrecognized tax benefits— — (23)
Other, net(14)(7)(10)
Income tax expense(1)
$631 $694 $220 
Effective tax rate22.0 %21.6 %16.8 %
__________
(1) Income tax expense includes gross amortization of affordable housing investments of $149 million, $139 million, and $133 million for 2022, 2021 and 2020, respectively.
Significant components of the Company’s net deferred tax asset (liability) at December 31 are listed below:
20222021
 (In millions)
Deferred tax assets:
Unrealized losses included in shareholders' equity$1,138 $— 
Allowance for credit losses401 400 
Right of use liability136 132 
Accrued expenses61 32 
Other47 15 
Federal and state net operating losses, net of federal tax effect40 53 
Total deferred tax assets1,823 632 
Less: valuation allowance(21)(29)
Total deferred tax assets less valuation allowance1,802 603 
Deferred tax liabilities:
Lease financing403 369 
Right of use asset128 123 
Mortgage servicing rights122 78 
Unrealized gains included in shareholders' equity— 98 
Goodwill and intangibles103 100 
Fixed assets52 67 
Employee benefits and deferred compensation29 31 
Other22 43 
Total deferred tax liabilities859 909 
Net deferred tax asset (liability)$943 $(306)
The following table provides details of the Company’s tax carryforwards at December 31, 2022, including the expiration dates and related valuation allowance:
Expiration DatesDeferred Tax Asset Balance Valuation
Allowance		Net Deferred Tax
Asset Balance
(In millions)
Net operating losses-federal2037$5 $— $5 
Net operating losses-federalNone11 — 11 
Net operating losses-states2023-202716 15 1 
Net operating losses-states2028-20343 2 1 
Net operating losses-states2035-20423 2 1 
Net operating losses-statesNone2 2 — 
$40 $21 $19 

The Company believes that a portion of the state net operating loss carryforwards will not be realized due to the length of certain state carryforward periods. Accordingly, a valuation allowance has been established in the amount of $21 million against such benefits at December 31, 2022 compared to $29 million at December 31, 2021.
A reconciliation of the beginning and ending amount of UTB is as follows:
202220212020
 (In millions)
Balance at beginning of year$9 $12 $37 
Additions based on tax positions taken in a prior period— — 2 
Reductions based on tax positions taken in a prior period— — (25)
Settlements— (2)(1)
Expiration of statute of limitations(1)(1)(1)
Balance at end of year$8 $9 $12 
The Company files U.S. federal, state, and local income tax returns. The Company is in the IRS’s Compliance Assurance Process program and examinations of the U.S federal consolidated income tax return for tax years through 2020 have been completed. With some exceptions for non-footprint states, the Company is no longer subject to state and local tax examinations for tax years prior to 2018. Currently, there are no material disputed tax positions with federal or state taxing authorities. Accordingly, the Company does not anticipate that any adjustments relating to federal or state tax examinations will result in material changes to its business, financial position, results of operations or cash flows.
There are no expected decreases to the potential liability for UTBs during the next twelve months due to completion of tax authority examinations and/or expirations of statutes of limitations.
As of December 31, 2022, 2021 and 2020, the balances of the Company’s UTBs that would reduce the effective tax rates, if recognized, were $8 million, $7 million and $9 million, respectively.
Interest and penalties related to UTBs are recorded in the provision for income taxes. During the years ended December 31, 2022, 2021 and 2020, the Company recognized an immaterial expense (benefit) for gross interest and penalties. As of December 31, 2022 and 2021, the Company had an immaterial gross liability for interest and penalties related to UTBs