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Income Taxes
 12 Months Ended
Dec. 31, 2023
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):
 202320222021
Current tax expense :   
Federal$67,711 $104,141 $125,016 
State11,775 12,870 11,798 
Total current tax expense79,486 117,011 136,814 
Deferred tax expense (benefit):  
Federal67,446 15,082 (12,149)
State4,922 4,658 (83)
Total deferred tax (benefit) expense72,368 19,740 (12,232)
Total income tax expense$151,854 $136,751 $124,582 
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, 2023 is as follows (in thousands):
 202320222021
Income tax expense at statutory rate$149,941 $146,474 $136,900 
State excise tax expense, net of federal tax effect13,191 13,847 9,255 
Non-deductible executive compensation5,186 5,481 2,149 
Tax-exempt securities(21,663)(18,730)(15,243)
Federal tax credits(5,238)(5,019)(4,712)
Bank owned life insurance income(4,324)(4,599)(4,413)
Bank owned life insurance surrender8,572 — — 
Non-deductible FDIC assessment5,361 2,331 1,697 
Insurance premiums— (36)(273)
Excess tax benefits associated with equity compensation(208)(3,027)(2,475)
Other items1,036 29 1,697 
Income tax expense$151,854 $136,751 $124,582 

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 and bank owned life insurance offset in part by the limitation on deductibility of meals and entertainment expense, non-deductible FDIC insurance premiums and non-deductible executive compensation. The increase in the effective income tax rate in 2023 as compared to 2022 is primarily due to the restructuring of BOLI contracts resulting in restructuring charges totaling $7.2 million and surrender penalties totaling $9.1 million offset in part by the tax impact of the $29.0 million charge related to the FDIC special assessment to recover losses incurred by the Deposit Insurance Fund associated with the multiple high-profile bank failures which occurred in the first half of 2023.

The components of deferred income taxes included in other assets in the accompanying consolidated balance sheets at December 31, 2023 and 2022 are as follows (in thousands):
 20232022
Deferred tax assets:  
Allowance for credit losses$86,911 $77,015 
Loans4,659 10,576 
Insurance784 817 
Accrued liability for supplemental retirement agreements7,005 7,595 
Restricted stock and stock options6,251 7,795 
Securities49,331 67,286 
Lease liability76,918 35,589 
Other real estate owned750 1,526 
Net federal operating loss carryforward and credits1,064 1,168 
Annual incentive compensation11,842 21,322 
Partnership interests13,541 31,559 
Allowance for off balance sheet credit exposures4,367 6,527 
Tax credit investments— 8,282 
FDIC special assessment7,250 — 
Other deferred tax assets2,532 3,267 
Total deferred tax assets273,205 280,324 
 20232022
Deferred tax liabilities:  
Depreciation and amortization23,140 17,723 
Core deposit and other intangible assets6,087 9,070 
Cash flow hedge836 6,854 
REIT dividends2,604 2,338 
FHLB related liabilities125 328 
Equity method investment42 76 
Right-of-use assets and other leasing transactions74,068 33,157 
Leases67,711 35,547 
Subordinated debt1,412 1,662 
Tax credit investments7,614 — 
Other deferred tax liabilities2,356 2,054 
Total deferred tax liabilities185,995 108,809 
Net deferred tax assets$87,210 $171,515 
 
At December 31, 2023, the Company had federal and state loss carryforwards resulting from acquisitions of approximately $4.8 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, 2023 is as follows (in thousands):
 202320222021
Balance at January 1,$15,752 $12,737 $9,658 
Increases due to tax positions taken during the current year642 3,721 3,647 
Increases due to tax positions taken during a prior year— — — 
Decreases due to the lapse of the statute of limitations during the current year(1,340)(706)(568)
Decreases due to settlements with the taxing authorities during the current year(6,248)— — 
Balance at December 31,$8,806 $15,752 $12,737 

Pinnacle Financial's policy is to recognize interest and/or penalties related to income tax matters in income tax expense. Pinnacle Financial recognized $80,000 and $264,000 in interest and penalties related to income tax matters for the years ended December 31, 2023 and 2022, respectively. Pinnacle Financial recognized no interest and penalties for the year ended December 31, 2021.