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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
Note 10.  Income Taxes

Income tax expense attributable to continuing operations for each of the years ended December 31 is as follows (in thousands):
 202220212020
Current tax expense :   
Federal$104,141 $125,016 $98,082 
State12,870 11,798 19,270 
Total current tax expense117,011 136,814 117,352 
Deferred tax expense (benefit):  
Federal15,082 (12,149)(45,450)
State4,658 (83)(12,865)
Total deferred tax (benefit) expense19,740 (12,232)(58,315)
Total income tax expense$136,751 $124,582 $59,037 

Pinnacle Financial's income tax expense differs from the amounts computed by applying the Federal income tax statutory rate of 21% to income before income taxes. A reconciliation of the differences for each of the years in the three-year period ended December 31, 2022 is as follows (in thousands):
 202220212020
Income tax expense at statutory rate$146,474 $136,900 $77,985 
State excise tax expense, net of federal tax effect13,847 9,255 5,059 
Non-deductible executive compensation5,481 2,149 1,297 
Tax-exempt securities(18,730)(15,243)(13,706)
Federal tax credits(5,019)(4,712)(3,717)
Bank owned life insurance(4,599)(4,413)(4,759)
Insurance premiums(36)(273)(272)
Excess tax benefits associated with equity compensation(3,027)(2,475)(417)
Other items2,360 3,394 (2,433)
Income tax expense$136,751 $124,582 $59,037 

Pinnacle Financial's effective tax rate differs from the Federal income tax rates primarily due to state excise tax expense, investments in bank-qualified tax-exempt municipal securities, tax benefits from Pinnacle Bank's real estate investment trust and municipal investment subsidiaries, and tax benefits associated with share-based compensation, bank owned life insurance, and Pinnacle Financial's captive insurance subsidiary, offset in part by the limitation on deductibility of meals and entertainment expense, non-deductible FDIC insurance premiums and non-deductible executive compensation.

The components of deferred income taxes included in other assets in the accompanying consolidated balance sheets at December 31, 2022 and 2021 are as follows (in thousands):
 20222021
Deferred tax assets:  
Allowance for credit losses$77,015 $66,785 
Loans10,576 14,778 
Insurance817 759 
Accrued liability for supplemental retirement agreements7,595 7,612 
Restricted stock and stock options7,795 9,148 
Securities67,286 — 
Lease liability35,589 26,476 
Other real estate owned1,526 1,540 
Net federal operating loss carryforward and credits1,168 1,271 
Annual incentive compensation21,322 23,095 
Partnership interests31,559 27,653 
Allowance for off balance sheet credit exposures6,527 5,873 
Tax credit investments8,282 — 
Other deferred tax assets3,267 1,941 
Total deferred tax assets280,324 186,931 
 20222021
Deferred tax liabilities:  
Depreciation and amortization17,723 14,520 
Core deposit and other intangible assets9,070 8,787 
Securities— 21,680 
Cash flow hedge6,854 9,890 
REIT dividends2,338 1,222 
FHLB related liabilities328 1,600 
Equity method investment76 23 
Right-of-use assets and other leasing transactions33,157 24,315 
Leases35,547 — 
Subordinated debt1,662 1,791 
Other deferred tax liabilities2,054 1,831 
Total deferred tax liabilities108,809 85,659 
Net deferred tax assets$171,515 $101,272 
 
At December 31, 2022, the Company had federal and state loss carryforwards resulting from acquisitions of approximately $5.3 million that expire at various dates from 2028 to 2034.

ASC 740, Income Taxes, defines the threshold for recognizing the benefits of tax return positions in the financial statements as "more-likely-than-not" to be sustained by the taxing authority. This section also provides guidance on the derecognition, measurement and classification of income tax uncertainties, along with any related interest and penalties, and includes guidance concerning accounting for income tax uncertainties in interim periods.

A reconciliation of the beginning and ending unrecognized tax benefit related to state uncertain tax positions for each of the years in the three-year period ended December 31, 2022 is as follows (in thousands):
 202220212020
Balance at January 1,$12,737 $9,658 $6,910 
Increases due to tax positions taken during the current year3,721 3,647 2,748 
Increases due to tax positions taken during a prior year— — — 
Decreases due to the lapse of the statute of limitations during the current year(706)(568)— 
Decreases due to settlements with the taxing authorities during the current year— — — 
Balance at December 31,$15,752 $12,737 $9,658 

Pinnacle Financial's policy is to recognize interest and/or penalties related to income tax matters in income tax expense. Pinnacle Financial recognized $264,000 in interest and penalties for the year ended December 31, 2022. No interest and penalties were recorded for the year ended December 31, 2021. Pinnacle Financial recognized $571,000 in interest and penalties for the year ended December 31, 2020.