Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

v3.22.4
Income Taxes (Tables)
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Schedule of Components of Income Tax Expense (Benefit)
The components of income tax expense for 2022, 2021 and 2020 are presented in the table below.
Income Tax Expense
(Dollars in millions) 2022 2021 2020
Current income tax expense      
U.S. federal $ 1,157  $ 1,076  $ 1,092 
U.S. state and local 389  775  1,076 
Non-U.S.  1,156  985  670 
Total current expense 2,702  2,836  2,838 
Deferred income tax expense      
U.S. federal 110  962  (799)
U.S. state and local 254  491  (233)
Non-U.S.  375  (2,291) (705)
Total deferred expense 739  (838) (1,737)
Total income tax expense $ 3,441  $ 1,998  $ 1,101 
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 2022, 2021 and 2020 are presented in the following table.
Reconciliation of Income Tax Expense
  Amount Percent Amount Percent Amount Percent
(Dollars in millions) 2022 2021 2020
Expected U.S. federal income tax expense $ 6,504  21.0  % $ 7,135  21.0  % $ 3,989  21.0  %
Increase (decrease) in taxes resulting from:
State tax expense, net of federal benefit 756  2.4  1,087  3.2  728  3.8 
Affordable housing/energy/other credits (3,698) (11.9) (3,795) (11.2) (2,869) (15.1)
Tax-exempt income, including dividends (273) (0.9) (352) (1.0) (346) (1.8)
Changes in prior-period UTBs, including interest (273) (0.9) (155) (0.5) (41) (0.2)
Rate differential on non-U.S. earnings 368  1.2  45  0.1  218  1.1 
Nondeductible expenses 352  1.1  206  0.6  324  1.7 
Tax law changes 186  0.6  (2,050) (6.0) (699) (3.7)
Other (481) (1.5) (123) (0.3) (203) (1.0)
Total income tax expense $ 3,441  11.1  % $ 1,998  5.9  % $ 1,101  5.8  %
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) 2022 2021 2020
Balance, January 1 $ 1,322  $ 1,340  $ 1,175 
Increases related to positions taken during the current year
 121  208  238 
Increases related to positions taken during prior years (1)
167  265  99 
Decreases related to positions taken during prior years (1)
(289) (413) (172)
Settlements (99) (23) — 
Expiration of statute of limitations (166) (55) — 
Balance, December 31 $ 1,056  $ 1,322  $ 1,340 
(1)    The sum of the positions taken during prior years differs from the $(273) million, $(155) million and $(41) 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, 2022.
Tax Examination Status
Years under
Examination (1)
Status at December 31 2022
United States 2017-2021 Field Examination
California 2012-2014 Appeals
California 2015-2017 Field Examination
California 2018-2020 To begin in 2023
New York 2019-2021 To begin in 2023
United Kingdom (2)
2019-2020 Field Examination
(1)    All tax years subsequent to the years shown remain subject to examination.
(2) Field examination for tax year 2021 to begin in 2023.
Schedule of Deferred Tax Assets and Liabilities Significant components of the Corporation’s net deferred tax assets and liabilities at December 31, 2022 and 2021 are presented in the following table.
Deferred Tax Assets and Liabilities
  December 31
(Dollars in millions) 2022 2021
Deferred tax assets    
Net operating loss carryforwards $ 9,029  $ 9,360 
Security, loan and debt valuations 4,788  2,746 
Allowance for credit losses 3,503  3,097 
Lease liability 2,443  2,508 
Employee compensation and retirement benefits 1,625  1,392 
Accrued expenses 1,143  1,626 
Available-for-sale securities 960  — 
Credit carryforwards 769  705 
Other 1,371  1,160 
Gross deferred tax assets 25,631  22,594 
Valuation allowance (2,133) (1,988)
Total deferred tax assets, net of valuation
   allowance		 23,498  20,606 
   
Deferred tax liabilities
Equipment lease financing 2,432  3,083 
Right-of-use asset 2,303  2,358 
ESG-related tax credit investments 1,759  1,387 
Fixed Assets 1,200  2,082 
Available-for-sale securities
 —  1,016 
Other 2,459  1,527 
Gross deferred tax liabilities 10,153  11,453 
Net deferred tax assets $ 13,345  $ 9,153 
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, 2022.
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)
$ 7,661  $ —  $ 7,661  None
Net operating losses - other non-U.S. 
 331  (147) 184  Various
Net operating losses - U.S. states (2)
1,036  (627) 409  Various
Foreign tax credits 769  (769) —  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 $1.3 billion and $794 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, 2022.
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)
$ 7,661  $ —  $ 7,661  None
Net operating losses - other non-U.S. 
 331  (147) 184  Various
Net operating losses - U.S. states (2)
1,036  (627) 409  Various
Foreign tax credits 769  (769) —  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 $1.3 billion and $794 million.