Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.3.1.900
INCOME TAXES
12 Months Ended
Dec. 31, 2015
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES
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 through 2009. The IRS is currently examining our 2010 and 2011 consolidated federal income tax returns. Various state and other jurisdictions remain open to examination, including Ohio, Kentucky, Indiana, Michigan, Pennsylvania, West Virginia, and Illinois.
Huntington accounts for uncertainties in income taxes in accordance with ASC 740, Income Taxes. At December 31, 2015, Huntington had gross unrecognized tax benefits of $23 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. Huntington does not anticipate the total amount of gross unrecognized tax benefits to significantly change within the next 12 months.
The following table provides a reconciliation of the beginning and ending amounts of gross unrecognized tax benefits:
 
(dollar amounts in thousands)
2015
 
2014
Unrecognized tax benefits at beginning of year
$
1,172

 
$
704

Gross increases for tax positions taken during current period
23,104

 

Gross increases for tax positions taken during prior years

 
468

Gross decreases for tax positions taken during prior years
(1,172
)
 

Unrecognized tax benefits at end of year
$
23,104

 
$
1,172


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, $0.1 million of interest benefit, $0.1 million of interest expense, and $0.2 million of interest benefit for the years ended December 31, 2015, 2014 and 2013, respectively. Total interest accrued was $0.1 million and $0.2 million at December 31, 2015 and 2014, respectively. 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:
 
 
Year Ended December 31,
(dollar amounts in thousands)
2015
 
2014
 
2013
Current tax provision (benefit)
 
 
 
 
 
Federal
$
146,195

 
$
186,436

 
$
117,174

State
5,677

 
(1,017
)
 
4,278

Total current tax provision (benefit)
151,872

 
185,419

 
121,452

Deferred tax provision (benefit)
 
 
 
 
 
Federal
66,823

 
41,167

 
112,681

State
1,953

 
(5,993
)
 
(6,659
)
Total deferred tax provision (benefit)
68,776

 
35,174

 
106,022

Provision for income taxes
$
220,648

 
$
220,593

 
$
227,474


The following is a reconcilement of provision for income taxes:
 
 
Year Ended December 31,
(dollar amounts in thousands)
2015
 
2014
 
2013
Provision for income taxes computed at the statutory rate
$
319,762

 
$
298,545

 
$
304,065

Increases (decreases):
 
 
 
 
 
Tax-exempt income
(20,839
)
 
(17,971
)
 
(34,378
)
Tax-exempt bank owned life insurance income
(18,340
)
 
(19,967
)
 
(19,747
)
General business credits
(47,894
)
 
(46,047
)
 
(39,868
)
State deferred tax asset valuation allowance adjustment, net

 
(7,430
)
 
(6,020
)
Capital loss
(46,288
)
 
(26,948
)
 
(961
)
Affordable housing investment amortization, net of tax benefits
31,741

 
33,752

 
16,851

State income taxes, net
4,960

 
2,873

 
4,472

Other
(2,454
)
 
3,786

 
3,060

Provision for income taxes
$
220,648

 
$
220,593

 
$
227,474


The significant components of deferred tax assets and liabilities at December 31, were as follows:
 
 
At December 31,
(dollar amounts in thousands)
2015
 
2014
Deferred tax assets:
 
 
 
Allowances for credit losses
$
238,415

 
$
233,656

Fair value adjustments
121,642

 
119,512

Net operating and other loss carryforward
61,492

 
161,548

Accrued expense/prepaid
44,733

 
48,656

Purchase accounting adjustments
41,917

 
13,839

Partnership investments
21,614

 
24,123

Market discount
11,781

 
12,215

Pension and other employee benefits
2,405

 

Tax credit carryforward
1,823

 
30,825

Other
11,645

 
9,477

Total deferred tax assets
557,467

 
653,851

Deferred tax liabilities:
 
 
 
Lease financing
261,078

 
202,298

Loan origination costs
114,488

 
103,025

Mortgage servicing rights
48,514

 
47,748

Operating assets
46,685

 
50,266

Securities adjustments
19,952

 
27,856

Purchase accounting adjustments
6,944

 
17,299

Pension and other employee benefits

 
9,677

Other
5,463

 
5,178

Total deferred tax liabilities
503,124

 
463,347

Net deferred tax asset before valuation allowance
54,343

 
190,504

Valuation allowance
(3,620
)
 
(73,057
)
Net deferred tax asset
$
50,723

 
$
117,447


At December 31, 2015, Huntington’s net deferred tax asset related to loss and other carryforwards was $63 million. This was comprised of federal net operating loss carryforwards of $3 million, which will begin expiring in 2023, $45 million of state net operating loss carryforwards, which will begin expiring in 2016, an alternative minimum tax credit carryforward of $1 million, which may be carried forward indefinitely, a general business credit carryforward of $1 million, which will begin expiring in 2031, and a capital loss carryforward of $13 million, which expires in 2018.
In prior periods, Huntington established a valuation allowance against deferred tax assets for federal capital loss carryforwards, state deferred tax assets, and state net operating loss carryforwards. The federal valuation allowance was based on the uncertainty of forecasted federal taxable income expected of the required character in order to utilize the capital loss carryforward. 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 of the appropriate character and/or within applicable jurisdictions, the Company believes that it is more likely than not the federal capital loss carryforward, and portions of the state deferred tax assets and state net operating loss carryforwards will be realized. As a result of this analysis, there is no federal capital loss carryforward valuation allowance remaining at December 31, 2015 compared to $69 million at December 31, 2014, and the state valuation allowance of $4 million at December 31, 2015 was essentially unchanged compared to $4 million at December 31, 2014.
At December 31, 2015 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 $4 million at December 31, 2015.