Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The following is a summary of the provision for income taxes:
  Year Ended December 31,
(dollar amounts in millions) 2021 2020 2019
Current tax provision (benefit)
Federal $ 356  $ 236  $ 209 
State 13  12  16 
Foreign 1  —  — 
Total current tax provision 370  248  225 
Deferred tax provision (benefit)
Federal (104) (103) 24 
State 28  10  (1)
Total deferred tax provision (76) (93) 23 
Provision for income taxes $ 294  $ 155  $ 248 
The following is a reconciliation for provision for income taxes:
 
Year Ended December 31,
(dollar amounts in millions) 2021 2020 2019
Provision for income taxes computed at the statutory rate $ 334  $ 204  $ 348 
Increases (decreases):
General business credits (126) (99) (88)
Capital loss (32) (25) (62)
Tax-exempt income (18) (17) (21)
Tax-exempt bank owned life insurance income (14) (13) (14)
Affordable housing investment amortization, net of tax benefits 102  78  70 
State income taxes, net 32  17  11 
Other 16  10  4 
Provision for income taxes $ 294  $ 155  $ 248 
The significant components of deferred tax assets and liabilities at December 31, 2021 and 2020 were as follows:
  At December 31,
(dollar amounts in millions) 2021 2020
Deferred tax assets:
Allowances for credit losses $ 518  $ 448 
Tax credit carryforward 194  — 
Net operating and other loss carryforward 143  128 
Lease liability 143  54 
Purchase accounting and other intangibles 107  30 
Fair value adjustments 65  — 
Pension and other employee benefits 46  10 
Other assets 14  5 
Total deferred tax assets 1,230  675 
Deferred tax liabilities:
Lease financing 712  409 
Operating assets 116  85 
Loan origination costs 115  137 
Right-of-use asset 113  46 
Mortgage servicing rights 84  43 
Securities adjustments 40  20 
Fair value adjustments —  55 
Other liabilities 14  3 
Total deferred tax liabilities 1,194  798 
Net deferred tax asset (liability) before valuation allowance 36  (123)
Valuation allowance (35) (11)
Net deferred tax asset (liability) $ 1  $ (134)
At December 31, 2021, Huntington’s net deferred tax asset related to net operating loss and other carryforwards was $337 million. This was comprised of federal net operating loss carryforwards of $61 million, which will begin expiring in 2025, state net operating loss carryforwards of $50 million, which will begin expiring in 2022, a federal capital loss carryforward of $26 million, which will begin expiring in 2025, state capital loss carryforwards of $6 million, which will begin expiring in 2022, and general business credits of $194 million, which will expire in 2041.
The Company has established a valuation allowance on its state deferred tax assets as it believes it is more likely than not, portions will not be realized.
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 2010-2017
tax years remain open as Huntington is currently appealing certain IRS positions related to these years. The 2018-
2020 tax years remain open under the standard statute of limitations. Also, with few exceptions, the Company is no longer subject to state, local and foreign income tax examinations for tax years before 2017.
The following table provides a reconciliation of the beginning and ending amounts of gross unrecognized tax benefits:
(dollar amounts in millions) 2021 2020
Unrecognized tax benefits at beginning of year $ 46  $ — 
Gross increases for tax positions taken during prior years 47  46 
Unrecognized tax benefits at end of year $ 93  $ 46 
Due to the complexities of some of these uncertainties, the ultimate resolution may result in a liability that is materially different from the current estimate of the tax liabilities. We do not currently anticipate that the amount of unrecognized tax benefits will significantly change over the next 12 months.
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. The amounts of accrued tax-related interest and penalties were immaterial at December 31, 2021 and 2020. Further, the amount of net interest and penalties related to unrecognized tax benefits was immaterial for all periods presented. All of the gross unrecognized tax benefits would impact the Company’s effective tax rate if recognized.
At December 31, 2021, retained earnings included approximately $182 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 corporate tax rate enacted at the time. The amount of unrecognized deferred tax liability relating to the cumulative bad debt deduction was approximately $38 million at December 31, 2021.