|12 Months Ended|
Dec. 31, 2017
|Income Tax Disclosure [Abstract]|
On December 22, 2017, the U.S. government enacted the TCJA, a comprehensive tax legislation which, among other things, reduced the federal income tax rate for C corporations from 35% to 21% effective on January 1, 2018. The TCJA makes broad and complex changes to the Internal Revenue Code which will impact the Company, including reduction of the U.S. corporate income tax rate as well as introduction of business-related exclusions, deductions and credits. The effects of the TCJA have been recorded in the fourth quarter 2017 and its impact to the Company’s Consolidated Financial Statements are included and described within this footnote.
The Company’s deferred federal and state income tax and related valuation accounts represents the estimated impact of temporary differences between how we recognize our assets and liabilities under GAAP and how such assets and liabilities are recognized under federal and state tax law. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the TCJA, the Company revalued its ending net deferred tax liabilities at December 31, 2017. The Company recognized a $123 million tax benefit in the Company’s Consolidated Statement of Income for the year ended December 31, 2017 as a result of the TCJA, of which the benefit recorded is primarily attributable to the revaluation of net deferred tax liabilities.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state, city, and foreign jurisdictions. Federal income tax audits have been completed for tax years through 2009. The IRS is currently examining our 2010 and 2011 consolidated federal income tax returns. While the statute of limitations remains open for tax years 2012 through 2016, the IRS has advised that tax years 2012 through 2014 will not be audited, and plans to begin the examination of the 2015 federal income tax return during the 2018 first quarter. Various state and other jurisdictions remain open to examination, including Ohio, Kentucky, Indiana, Michigan, Pennsylvania, West Virginia, Wisconsin, and Illinois.
Huntington accounts for uncertainties in income taxes in accordance with ASC 740, Income Taxes. At December 31, 2017, Huntington had gross unrecognized tax benefits of $50 million in income tax liability related to uncertain tax positions. Due to the complexities of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. It is reasonably possible that the liability for gross unrecognized tax benefits could decrease by $50 million during the next 12 months due to the completion of tax authority examinations.
The following table provides a reconciliation of the beginning and ending amounts of gross unrecognized tax benefits:
Any interest and penalties on income tax assessments or income tax refunds are recognized in the Consolidated Statements of Income as a component of provision for income taxes. Huntington recognized interest expense of less than one million dollars for each of the years ended December 31, 2017, 2016 and 2015. Total interest accrued was less than one million at December 31, 2017 and 2016. All of the gross unrecognized tax benefits would impact the Company’s effective tax rate if recognized.
The following is a summary of the provision (benefit) for income taxes:
The following is a reconciliation for provision for income taxes:
The significant components of deferred tax assets and liabilities at December 31, were as follows:
At December 31, 2017, Huntington’s net deferred tax asset related to loss and other carryforwards was $261 million. This was comprised of federal net operating loss carryforwards of $65 million, which will begin expiring in 2023, $42 million of state net operating loss carryforwards, which will begin expiring in 2018, an alternative minimum tax credit carryforward of $121 million, which will be fully utilized or refunded by 2022, a general business credit carryforward of $32 million, which will begin expiring in 2037, and a charitable contribution carryforward of $1 million, which will begin expiring in 2020.
In prior periods, Huntington established a valuation allowance against deferred tax assets for state deferred tax assets, and state net operating loss carryforwards. The state valuation allowance was based on the uncertainty of forecasted state taxable income expected in applicable jurisdictions in order to utilize the state deferred tax assets and state net operating loss carryforwards. Based on current analysis of both positive and negative evidence and projected forecasted taxable income within applicable jurisdictions, the Company believes that it is more likely than not, portions of the state deferred tax assets and state net operating loss carryforwards will be realized. As a result of this analysis, the state valuation allowance was $6 million at December 31, 2017 compared to $5 million at December 31, 2016.
At December 31, 2017, retained earnings included approximately $12 million of base year reserves of acquired thrift institutions, for which no deferred federal income tax liability has been recognized. Under current law, if these bad debt reserves are used for purposes other than to absorb bad debt losses, they will be subject to federal income tax at the current corporate rate. The amount of unrecognized deferred tax liability relating to the cumulative bad debt deduction was approximately $3 million at December 31, 2017.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef