Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
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) 2023 2022 2021
Current tax provision (benefit)
Federal $ 644  $ 129  $ 356 
State 63  62  13 
Foreign 8  5  1 
Total current tax provision 715  196  370 
Deferred tax provision (benefit)
Federal (291) 319  (104)
State (11) —  28 
Total deferred tax provision (benefit) (302) 319  (76)
Provision for income taxes $ 413  $ 515  $ 294 
The following is a reconciliation for provision for income taxes:
 
Year Ended December 31,
(dollar amounts in millions) 2023 2022 2021
Provision for income taxes computed at the statutory rate $ 501  $ 580  $ 334 
Increases (decreases):
General business credits (253) (164) (126)
Tax-exempt income (28) (21) (18)
Capital loss —  (60) (32)
Affordable housing investment amortization, net of tax benefits 148  129  102 
State income taxes, net 41  49  32 
Other 4  2  2 
Provision for income taxes $ 413  $ 515  $ 294 
The significant components of deferred tax assets and liabilities were as follows:
  At December 31,
(dollar amounts in millions) 2023 2022
Deferred tax assets:
Fair value adjustments $ 791  $ 917 
Allowances for credit losses 564  526 
Tax credit carryforward 240  59 
Net operating and other loss carryforward 101  136 
Research and development expenses 91  — 
Lease liability 89  96 
Purchase accounting and other intangibles 82  167 
Pension and other employee benefits 70  68 
Accrued expense/prepaid 61  8 
Other assets 4  5 
Total deferred tax assets 2,093  1,982 
Deferred tax liabilities:
Lease financing 873  955 
Loan origination costs 155  97 
Mortgage servicing rights 124  112 
Operating assets 96  133 
Right-of-use asset 62  67 
Securities adjustments 40  42 
Other liabilities 3  10 
Total deferred tax liabilities 1,353  1,416 
Net deferred tax asset (liability) before valuation allowance 740  566 
Valuation allowance (30) (32)
Net deferred tax asset $ 710  $ 534 
At December 31, 2023, Huntington’s net deferred tax asset related to loss and other carryforwards was $341 million. This was comprised of federal net operating loss carryforwards of $43 million, which will begin expiring in 2025, state net operating loss carryforwards of $42 million, which will begin expiring in 2024, a federal capital loss carryforward of $13 million, which will expire in 2025, state capital loss carryforwards of $4 million, which will begin expiring in 2024, and general business credits of $240 million, which will expire in 2042.
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 2016. The 2017-2022
tax years remain open under the statute of limitations. Also, with few exceptions, the Company is no longer subject to state, city, or foreign income tax examinations for tax years before 2019.
The following table provides a reconciliation of the beginning and ending amounts of gross unrecognized tax benefits:
Year Ended December 31,
(dollar amounts in millions) 2023 2022
Unrecognized tax benefits at beginning of year $ 94  $ 93 
Gross increases for tax positions taken during prior years 8  1 
Settlements with taxing authorities (94) — 
Unrecognized tax benefits at end of year $ 8  $ 94 
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. Certain proposed adjustments resulting from the IRS examination of our 2010 through 2011 tax returns were effectively settled in 2023.
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, 2023 and 2022. 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, 2023, 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 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, 2023.