Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

v3.20.4
Income Taxes (Tables)
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Schedule of Components of Income Tax Expense (Benefit)
The components of income tax expense for 2020, 2019 and 2018 are presented in the table below.
Income Tax Expense
(Dollars in millions) 2020 2019 2018
Current income tax expense      
U.S. federal $ 1,092  $ 1,136  $ 816 
U.S. state and local 1,076  901  1,377 
Non-U.S.  670  852  1,203 
Total current expense 2,838  2,889  3,396 
Deferred income tax expense      
U.S. federal (799) 2,001  2,579 
U.S. state and local (233) 223  240 
Non-U.S.  (705) 211  222 
Total deferred expense (1,737) 2,435  3,041 
Total income tax expense $ 1,101  $ 5,324  $ 6,437 
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 2020, 2019 and 2018 are presented in the table below.
Reconciliation of Income Tax Expense
  Amount Percent Amount Percent Amount Percent
(Dollars in millions) 2020 2019 2018
Expected U.S. federal income tax expense $ 3,989  21.0  % $ 6,878  21.0  % $ 7,263  21.0  %
Increase (decrease) in taxes resulting from:
State tax expense, net of federal benefit 728  3.8  1,283  3.9  1,367  4.0 
Affordable housing/energy/other credits (2,869) (15.1) (2,365) (7.2) (1,888) (5.5)
Tax law changes (699) (3.7) —  —  —  — 
Tax-exempt income, including dividends (346) (1.8) (433) (1.3) (413) (1.2)
Share-based compensation (129) (0.7) (225) (0.7) (257) (0.7)
Changes in prior-period UTBs, including interest (41) (0.2) (613) (1.9) 144  0.4 
Nondeductible expenses 324  1.7  290  0.9  302  0.9 
Rate differential on non-U.S. earnings 218  1.1  504  1.5  98  0.3 
Other (74) (0.3) 5  0.1  (179) (0.6)
Total income tax expense (benefit) $ 1,101  5.8  % $ 5,324  16.3  % $ 6,437  18.6  %
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 following table.
Reconciliation of the Change in Unrecognized Tax Benefits
(Dollars in millions) 2020 2019 2018
Balance, January 1 $ 1,175  $ 2,197  $ 1,773 
Increases related to positions taken during the current year
 238  238  395 
Increases related to positions taken during prior years (1)
99  401  406 
Decreases related to positions taken during prior years (1)
(172) (1,102) (371)
Settlements —  (541) (6)
Expiration of statute of limitations —  (18) — 
Balance, December 31 $ 1,340  $ 1,175  $ 2,197 
(1)    The sum of the positions taken during prior years differs from the $(41) million, $(613) million and $144 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 following table summarizes the status of examinations by major jurisdiction for the Corporation and various subsidiaries at December 31, 2020.
Tax Examination Status
Years under
Examination (1)
Status at December 31 2020
United States 2017-2020 Field Examination
California 2012-2017 Field Examination
New York 2016-2018 Field Examination
United Kingdom (2)
2018 Field Examination
(1)    All tax years subsequent to the years shown remain subject to examination.
(2) Field examination for tax year 2019 to begin in 2021.
Schedule of Deferred Tax Assets and Liabilities Significant components of the Corporation’s net deferred tax assets and liabilities at December 31, 2020 and 2019 are presented in the following table.
Deferred Tax Assets and Liabilities
  December 31
(Dollars in millions) 2020 2019
Deferred tax assets    
Net operating loss carryforwards $ 7,717  $ 7,417 
Allowance for credit losses 4,701  2,354 
Security, loan and debt valuations 2,571  1,860 
Lease liability 2,400  2,321 
Employee compensation and retirement benefits 1,582  1,622 
Accrued expenses 1,481  1,719 
Credit carryforwards 484  183 
Other 1,412  1,203 
Gross deferred tax assets 22,348  18,679 
Valuation allowance (2,346) (1,989)
Total deferred tax assets, net of valuation
allowance		 20,002  16,690 
   
Deferred tax liabilities
Equipment lease financing 3,101  2,933 
Right-to-use asset 2,296  2,246 
Fixed assets 1,957  1,505 
ESG-related tax credit investments 1,930  1,577 
Available-for-sale securities
 1,701  100 
Other 1,570  1,885 
Gross deferred tax liabilities 12,555  10,246 
Net deferred tax assets $ 7,447  $ 6,444 
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, 2020.
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.S. 
 $ 36  $ —  $ 36  After 2028
Net operating losses - U.K. (1)
5,896  —  5,896  None
Net operating losses - other non-U.S. 
 506  (441) 65  Various
Net operating losses - U.S. states (2)
1,279  (579) 700  Various
Foreign tax credits 484  (484) —  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 $1.6 billion and $733 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, 2020.
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.S. 
 $ 36  $ —  $ 36  After 2028
Net operating losses - U.K. (1)
5,896  —  5,896  None
Net operating losses - other non-U.S. 
 506  (441) 65  Various
Net operating losses - U.S. states (2)
1,279  (579) 700  Various
Foreign tax credits 484  (484) —  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 $1.6 billion and $733 million.