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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | 13. Income Taxes Reconciliations of the statutory U.S. federal income tax rates to our effective tax rate for continuing operations follow:
|  | Years Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
Non-deductible regulatory-related expenses (1) |  |  | — |  |  |  | — |  |  |  | 1.4 |
Unrecognized tax benefits, state, net of federal benefit |  |  | .8 |  |  |  | (1.3 | ) |  |  | .2 |
Valuation allowance on disallowed interest expense carryovers, state, net of federal benefit |  |  | 6.6 |  |  |  | 1.0 |  |  |  | .7 |
State tax, net of federal benefit |  |  | (1.9 | ) |  |  | 1.2 |  |  |  | .2 |
Other, net |  |  | .6 |  |  |  | .1 |  |  |  | (.1 | )
Effective tax rate |  |  | 27.1 | % |  |  | 22.0 | % |  |  | 23.4 | %
(1) Regulatory expenses for 2021 include $205 million related to the resolution of State Attorneys General litigation and investigations, of which approximately $50.7 million is non-deductible for income tax purposes. See "Note 12 — Commitments, Contingencies and Guarantees" for further discussion. Income tax expense consists of:
|  | December 31, |
(Dollars in millions) |  | 2023 |  |  | 2022 |  |  | 2021 |
Current provision/(benefit): |  |  |  |  |  |  |  |  |
Federal |  | $ | 63 |  |  | $ | (2 | ) |  | $ | 147 |
State |  |  | 24 |  |  |  | (25 | ) |  |  | 19 |
Foreign |  |  | — |  |  |  | 1 |  |  |  | — |
Total current provision/(benefit) |  |  | 87 |  |  |  | (26 | ) |  |  | 166 |
Deferred provision/(benefit): |  |  |  |  |  |  |  |  |
Federal |  |  | — |  |  |  | 173 |  |  |  | 56 |
State |  |  | (2 | ) |  |  | 35 |  |  |  | (3 | )
Foreign |  |  | — |  |  |  | — |  |  |  | — |
Total deferred provision/(benefit) |  |  | (2 | ) |  |  | 208 |  |  |  | 53 |
Provision for income tax expense/(benefit) |  | $ | 85 |  |  | $ | 182 |  |  | $ | 219 |
13. Income Taxes (Continued) The tax effect of temporary differences that give rise to deferred tax assets and liabilities include the following:
|  | December 31, |
(Dollars in millions) |  | 2023 |  |  | 2022 |
Deferred tax assets: |  |  |  |  |  |
Loan reserves |  | $ | 237 |  |  | $ | 297 |
Accrued expenses not currently deductible |  |  | 39 |  |  |  | 33 |
Education loan premiums and discounts, net |  |  | 32 |  |  |  | 41 |
Operating loss and credit carryovers |  |  | 11 |  |  |  | 12 |
Stock-based compensation plans |  |  | 5 |  |  |  | 5 |
Other |  |  | 18 |  |  |  | 19 |
Total deferred tax assets |  |  | 342 |  |  |  | 407 |
Deferred tax liabilities: |  |  |  |  |  |
Market value adjustments on education loans, investments and derivatives |  |  | 114 |  |  |  | 201 |
Acquired intangible assets |  |  | 23 |  |  |  | 22 |
Original issue discount on borrowings |  |  | 13 |  |  |  | 13 |
Other |  |  | 7 |  |  |  | 11 |
Total deferred tax liabilities |  |  | 157 |  |  |  | 247 |
Net deferred tax assets |  | $ | 185 |  |  | $ | 160 |
Included in operating loss and credit carryovers is a valuation allowance of $98 million and $79 million as of December 31, 2023 and 2022, respectively, against a portion of the Company’s federal and state deferred tax assets. The valuation allowance is primarily attributable to deferred tax assets for federal and state net operating loss carryovers and state IRC § 163(j) disallowed interest expense carryovers that management believes it is more likely than not will expire prior to being realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income of the appropriate character (i.e. capital or ordinary) during the period in which the temporary differences become deductible. Factors generally considered by management include (but are not limited to): any changes in economic conditions, the scheduled reversals of deferred tax liabilities, and the history of positive taxable income in evaluating the realizability of the deferred tax assets. The operating loss and credit carryovers consist of:
|  | December 31, 2023 |
(Dollars in millions) |  | Gross |  | Tax-Effected |  | Expiration | Corresponding Valuation Allowance(1) |  | Operating Loss and Credit Carryovers |
Federal operating loss carryovers |  | $ | 34 |  | $ | 7 |  | Begins in 2032 | $ | 1 |  | $ | 6 |
State operating loss carryovers |  |  | 559 |  |  | 37 |  | Began in 2023 |  | 32 |  |  | 5 |
State IRC § 163(j) disallowed interest expense carryovers |  |  | 4,173 |  |  | 65 |  | Indefinite |  | 65 |  |  | — |
|  |  |  | $ | 109 |  |  | $ | 98 |  | $ | 11 |
(1) The valuation allowance attributable to deferred tax assets for federal and state net operating loss carryovers, and state IRC § 163(j) disallowed interest expense carryovers, are amounts that management believes more likely than not will expire prior to being realized. 13. Income Taxes (Continued) Accounting for Uncertainty in Income Taxes The following table summarizes changes in unrecognized tax benefits:
|  | December 31, |
(Dollars in millions) |  | 2023 |  |  | 2022 |  |  | 2021 |
Unrecognized tax benefits at beginning of year |  | $ | 50.7 |  |  | $ | 58.8 |  |  | $ | 57.9 |
Increases resulting from tax positions taken during a prior period |  |  | 3.8 |  |  |  | 10.8 |  |  |  | 6.4 |
Decreases resulting from tax positions taken during a prior period |  |  | (4.5 | ) |  |  | (18.6 | ) |  |  | (4.2 | )
Increases resulting from tax positions taken during the current period |  |  | 7.4 |  |  |  | 6.7 |  |  |  | 6.4 |
Decreases related to settlements with taxing authorities |  |  | (3.8 | ) |  |  | (1.0 | ) |  |  | (.3 | )
Increases related to settlements with taxing authorities |  |  | — |  |  |  | — |  |  |  | — |
Reductions related to the lapse of statute of limitations |  |  | (5.1 | ) |  |  | (6.0 | ) |  |  | (7.4 | )
Unrecognized tax benefits at end of year (1) |  | $ | 48.5 |  |  | $ | 50.7 |  |  | $ | 58.8 |
(1) Included in the $48.5 million of gross unrecognized tax benefits at December 31, 2023 are $38.3 million of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate. The Company or one of its subsidiaries files income tax returns at the U.S. federal level, in most U.S. states, and various foreign jurisdictions. All periods prior to 2020 are closed for federal examinations purposes. Various combinations of subsidiaries, tax years, and jurisdictions remain open for review, subject to statute of limitations periods (typically 3 to 4 prior years). We do not expect the resolution of open audits to have a material impact on our unrecognized tax benefits.

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