Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

v3.22.0.1
Income Taxes (Tables)
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Schedule of Components of Income Tax Expense (Benefit)
The components of income tax expense for 2021, 2020 and 2019 are presented in the table below.
Income Tax Expense
(Dollars in millions) 2021 2020 2019
Current income tax expense      
U.S. federal $ 1,076  $ 1,092  $ 1,136 
U.S. state and local 775  1,076  901 
Non-U.S.  985  670  852 
Total current expense 2,836  2,838  2,889 
Deferred income tax expense      
U.S. federal 962  (799) 2,001 
U.S. state and local 491  (233) 223 
Non-U.S.  (2,291) (705) 211 
Total deferred expense (838) (1,737) 2,435 
Total income tax expense $ 1,998  $ 1,101  $ 5,324 
Schedule of Effective Income Tax Rate Reconciliation A reconciliation of the expected U.S. federal income tax expense, calculated by applying the federal statutory tax rate, to the Corporation’s actual income tax expense, and the effective tax rates for 2021, 2020 and 2019 are presented in the following table.
Reconciliation of Income Tax Expense
  Amount Percent Amount Percent Amount Percent
(Dollars in millions) 2021 2020 2019
Expected U.S. federal income tax expense $ 7,135  21.0  % $ 3,989  21.0  % $ 6,878  21.0  %
Increase (decrease) in taxes resulting from:
State tax expense, net of federal benefit 1,087  3.2  728  3.8  1,283  3.9 
Affordable housing/energy/other credits (3,795) (11.2) (2,869) (15.1) (2,365) (7.2)
Tax law changes (2,050) (6.0) (699) (3.7) —  — 
Tax-exempt income, including dividends (352) (1.0) (346) (1.8) (433) (1.3)
Changes in prior-period UTBs, including interest (155) (0.5) (41) (0.2) (613) (1.9)
Nondeductible expenses 206  0.6  324  1.7  290  0.9 
Rate differential on non-U.S. earnings 45  0.1  218  1.1  504  1.5 
Other (123) (0.3) (203) (1.0) (220) (0.6)
Total income tax expense $ 1,998  5.9  % $ 1,101  5.8  % $ 5,324  16.3  %
Reconciliation of Change in Unrecognized Tax Benefits
The reconciliation of the beginning unrecognized tax benefits (UTB) balance to the ending balance is presented in the table below.
Reconciliation of the Change in Unrecognized Tax Benefits
(Dollars in millions) 2021 2020 2019
Balance, January 1 $ 1,340  $ 1,175  $ 2,197 
Increases related to positions taken during the current year
 208  238  238 
Increases related to positions taken during prior years (1)
265  99  401 
Decreases related to positions taken during prior years (1)
(413) (172) (1,102)
Settlements (23) —  (541)
Expiration of statute of limitations (55) —  (18)
Balance, December 31 $ 1,322  $ 1,340  $ 1,175 
(1)    The sum of the positions taken during prior years differs from the $(155) million, $(41) million and $(613) million in the Reconciliation of Income Tax Expense table due to temporary items, state items and jurisdictional offsets, as well as the inclusion of interest in the Reconciliation of Income Tax Expense table.
Summary of Income Tax Examinations The table below summarizes the status of examinations by major jurisdiction for the Corporation and various subsidiaries at December 31, 2021.
Tax Examination Status
Years under
Examination (1)
Status at December 31 2021
United States 2017-2021 Field Examination
California 2012-2014 Appeals
California 2015-2017 Field Examination
New York 2016-2018 Field Examination
United Kingdom (2)
2019 Field Examination
(1)    All tax years subsequent to the years shown remain subject to examination.
(2) Field examination for tax year 2020 to begin in 2022.
Schedule of Deferred Tax Assets and Liabilities
Significant components of the Corporation’s net deferred tax assets and liabilities at December 31, 2021 and 2020 are presented in the table below.
Deferred Tax Assets and Liabilities
  December 31
(Dollars in millions) 2021 2020
Deferred tax assets    
Net operating loss carryforwards $ 9,360  $ 7,717 
Allowance for credit losses 3,097  4,701 
Security, loan and debt valuations 2,746  2,571 
Lease liability 2,508  2,400 
Accrued expenses 1,626  1,481 
Employee compensation and retirement benefits 1,392  1,582 
Credit carryforwards 705  484 
Other 1,160  1,412 
Gross deferred tax assets 22,594  22,348 
Valuation allowance (1,988) (2,346)
Total deferred tax assets, net of valuation
   allowance		 20,606  20,002 
   
Deferred tax liabilities
Equipment lease financing 3,083  3,101 
Right-to-use asset 2,358  2,296 
Fixed assets 2,082  1,957 
ESG-related tax credit investments 1,387  1,930 
Available-for-sale securities
 1,016  1,701 
Other 1,527  1,570 
Gross deferred tax liabilities 11,453  12,555 
Net deferred tax assets $ 9,153  $ 7,447 
Schedule of Operating Loss Carryforwards
The table below summarizes the deferred tax assets and related valuation allowances recognized for the net operating loss (NOL) and tax credit carryforwards at December 31, 2021.
Net Operating Loss and Tax Credit Carryforward Deferred Tax Assets
(Dollars in millions) Deferred
Tax Asset		 Valuation
Allowance		 Net
Deferred
Tax Asset		 First Year
Expiring
Net operating losses - U.K. (1)
$ 7,713  $ —  $ 7,713  None
Net operating losses - other non-U.S. 
 494  (253) 241  Various
Net operating losses - U.S. states (2)
1,153  (610) 543  Various
Foreign tax credits 705  (705) —  After 2028
(1)Represents U.K. broker-dealer net operating losses that may be carried forward indefinitely.
(2)The net operating losses and related valuation allowances for U.S. states before considering the benefit of federal deductions were $1.5 billion and $772 million.
Summary of Tax Credit Carryforwards
The table below summarizes the deferred tax assets and related valuation allowances recognized for the net operating loss (NOL) and tax credit carryforwards at December 31, 2021.
Net Operating Loss and Tax Credit Carryforward Deferred Tax Assets
(Dollars in millions) Deferred
Tax Asset		 Valuation
Allowance		 Net
Deferred
Tax Asset		 First Year
Expiring
Net operating losses - U.K. (1)
$ 7,713  $ —  $ 7,713  None
Net operating losses - other non-U.S. 
 494  (253) 241  Various
Net operating losses - U.S. states (2)
1,153  (610) 543  Various
Foreign tax credits 705  (705) —  After 2028
(1)Represents U.K. broker-dealer net operating losses that may be carried forward indefinitely.
(2)The net operating losses and related valuation allowances for U.S. states before considering the benefit of federal deductions were $1.5 billion and $772 million.