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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Taxes [Abstract]  
Income Taxes
NOTE 19. INCOME TAXES
The components of income tax expense for the years ended December 31 were as follows:
202320222021
 (In millions)
Current income tax expense:
Federal$417 $493 $456 
State84 116 73 
Total current expense$501 $609 $529 
Deferred income tax expense (benefit):
Federal$25 $26 $132 
State7 (4)33 
Total deferred expense $32 $22 $165 
Total income tax expense$533 $631 $694 
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 $94 million, $67 million and $64 million for 2023, 2022, and 2021, 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:
202320222021
 (Dollars in millions)
Tax on income computed at statutory federal income tax rate$547 $604 $675 
Increase (decrease) in taxes resulting from:
State income tax, net of federal tax effect72 88 83 
Non-deductible expenses 33 34 18 
Tax-exempt interest(38)(33)(30)
Affordable housing credits, net of amortization(42)(32)(25)
Bank-owned life insurance(19)(16)(20)
Other, net(20)(14)(7)
Income tax expense(1)
$533 $631 $694 
Effective tax rate20.5 %22.0 %21.6 %
__________
(1) Income tax expense includes gross amortization of affordable housing investments of $166 million, $149 million, and $139 million for 2023, 2022 and 2021, respectively.
Significant components of the Company’s net deferred tax asset at December 31 are listed below:
20232022
 (In millions)
Deferred tax assets:
Unrealized losses included in shareholders' equity$961 $1,138 
Allowance for credit losses430 401 
Right of use liability129 136 
Accrued expenses87 61 
Other20 47 
Federal and state net operating losses, net of federal tax effect31 40 
Total deferred tax assets1,658 1,823 
Less: valuation allowance(21)(21)
Total deferred tax assets less valuation allowance1,637 1,802 
Deferred tax liabilities:
Lease financing439 403 
Right of use asset121 128 
Mortgage servicing rights95 122 
Goodwill and intangibles112 103 
Fixed assets30 52 
Employee benefits and deferred compensation37 29 
Other62 22 
Total deferred tax liabilities896 859 
Net deferred tax asset $741 $943 
The following table provides details of the Company’s net operating loss carryforwards at December 31, 2023, 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-federalNone9 — 9 
Net operating losses-states2024-202813 13 — 
Net operating losses-states2029-20353 2 1 
Net operating losses-states2036-20433 2 1 
Net operating losses-statesNone3 2 1 
$31 $19 $12 

The Company believes that a portion of the state net operating loss carryforwards will not be realized due to certain state statutory limitations. Accordingly, a valuation allowance has been established in the amount of $19 million against such benefits at December 31, 2023 compared to $21 million at December 31, 2022.
A reconciliation of the beginning and ending amount of UTB is as follows:
202320222021
 (In millions)
Balance at beginning of year$8 $9 $12 
Additions based on tax positions taken in a prior period3 — — 
Settlements— — (2)
Expiration of statute of limitations— (1)(1)
Balance at end of year$11 $8 $9 
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 2021 have been completed. With limited exceptions, the Company is no longer subject to state and local tax examinations for tax years prior to 2019. 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.
As of December 31, 2023, 2022 and 2021, the balances of the Company’s UTBs that would reduce the effective tax rates, if recognized, were $11 million, $8 million and $7 million, respectively.
Interest and penalties related to UTBs are recorded in the provision for income taxes. During the years ended December 31, 2023, 2022 and 2021, the Company recognized an immaterial expense (benefit) for gross interest and penalties. As of December 31, 2023 and 2022, the Company had an immaterial gross liability for interest and penalties related to UTBs.