Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.22.4
INCOME TAXES
 12 Months Ended
Dec. 31, 2022
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) 2022 2021 2020
Current tax provision (benefit)
Federal $ 129  $ 356  $ 236 
State 62  13  12 
Foreign 5  1  — 
Total current tax provision 196  370  248 
Deferred tax provision (benefit)
Federal 319  (104) (103)
State —  28  10 
Total deferred tax provision (benefit) 319  (76) (93)
Provision for income taxes $ 515  $ 294  $ 155 
The following is a reconciliation for provision for income taxes:
 
Year Ended December 31,
(dollar amounts in millions) 2022 2021 2020
Provision for income taxes computed at the statutory rate $ 580  $ 334  $ 204 
Increases (decreases):
General business credits (164) (126) (99)
Capital loss (60) (32) (25)
Tax-exempt income (21) (18) (17)
Tax-exempt bank owned life insurance income (11) (14) (13)
Affordable housing investment amortization, net of tax benefits 129  102  78 
State income taxes, net 49  32  17 
Other 13  16  10 
Provision for income taxes $ 515  $ 294  $ 155 
The significant components of deferred tax assets and liabilities were as follows:
  At December 31,
(dollar amounts in millions) 2022 2021
Deferred tax assets:
Fair value adjustments $ 917  $ 65 
Allowances for credit losses 526  518 
Purchase accounting and other intangibles 167  107 
Net operating and other loss carryforward 136  143 
Lease liability 96  143 
Pension and other employee benefits 68  46 
Tax credit carryforward 59  194 
Other assets 13  14 
Total deferred tax assets 1,982  1,230 
Deferred tax liabilities:
Lease financing 955  712 
Operating assets 133  116 
Mortgage servicing rights 112  84 
Loan origination costs 97  115 
Right-of-use asset 67  113 
Securities adjustments 42  40 
Other liabilities 10  14 
Total deferred tax liabilities 1,416  1,194 
Net deferred tax asset (liability) before valuation allowance 566  36 
Valuation allowance (32) (35)
Net deferred tax asset $ 534  $ 1 
At December 31, 2022, Huntington’s net deferred tax asset related to loss and other carryforwards was $195 million. This was comprised of federal net operating loss carryforwards of $60 million, which will begin expiring in 2025, state net operating loss carryforwards of $48 million, which will begin expiring in 2023, a federal capital loss carryforward of $22 million, which will expire in 2025, state capital loss carryforwards of $6 million, which will begin expiring in 2023, and general business credits of $59 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 2009. The 2010-2017
tax years remain open as Huntington is currently appealing certain IRS positions related to these years. The 2018-
2021 tax years remain open under the standard 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 2018.
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) 2022 2021
Unrecognized tax benefits at beginning of year $ 93  $ 46 
Gross increases for tax positions taken during prior years 1  47 
Unrecognized tax benefits at end of year $ 94  $ 93 
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 have received approval by the Joint Committee on Taxation of the U.S. Congress. The Company is currently working with the IRS to finalize settlement calculations and anticipate all unrecognized tax benefits associated with the exam will be settled within the next twelve 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, 2022 and 2021. 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, 2022, 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, 2022.