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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Taxes [Abstract]  
Income Taxes
NOTE 19. INCOME TAXES
The components of income tax expense for the years ended December 31 were as follows:
202120202019
 (In millions)
Current income tax expense:
Federal$456 $312 $279 
State73 66 62 
Total current expense$529 $378 $341 
Deferred income tax expense (benefit):
Federal$132 $(142)$29 
State33 (16)33 
Total deferred expense (benefit)$165 $(158)$62 
Total income tax expense$694 $220 $403 
Income tax expense does not reflect the tax effects of unrealized losses on securities transferred to held to maturity, unrealized gains and losses on securities available for sale, unrealized gains and losses on derivative instruments and the net change from defined benefit pension plans and other postretirement benefits. Refer to Note 14 for additional information on shareholders' equity and accumulated other comprehensive income (loss).
The Company accounts for investment tax credits using the deferral method. Investment tax credits generated totaled $64 million, $94 million and $59 million for 2021, 2020, and 2019, respectively.
Income taxes for financial reporting purposes differs from the amount computed by applying the statutory federal income tax rate of 21 percent as shown in the following table:
202120202019
 (Dollars in millions)
Tax on income computed at statutory federal income tax rate$675 $276 $417 
Increase (decrease) in taxes resulting from:
State income tax, net of federal tax effect83 42 71 
Tax-exempt interest(30)(34)(39)
Affordable housing credits, net of amortization(25)(31)(34)
Bank-owned life insurance(20)(22)(19)
Non-deductible expenses18 22 19 
Impact of change in unrecognized tax benefits— (23)24 
Other, net(7)(10)(36)
Income tax expense(1)
$694 $220 $403 
Effective tax rate21.6 %16.8 %20.3 %
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(1) Income tax expense includes gross amortization of affordable housing investments of $139 million, $133 million, and $131 million for 2021, 2020 and 2019, respectively.
Significant components of the Company’s net deferred tax liability at December 31 are listed below:
20212020
 (In millions)
Deferred tax assets:
Allowance for credit losses(1)
$400 $573 
Right of use liability132 137 
Federal and State net operating losses, net of federal tax effect53 58 
Accrued expenses32 35 
Other15 13 
Total deferred tax assets632 816 
Less: valuation allowance(29)(31)
Total deferred tax assets less valuation allowance603 785 
Deferred tax liabilities:
Lease financing369 413 
Right of use asset123 128 
Goodwill and intangibles100 106 
Unrealized gains included in shareholders' equity98 444 
Mortgage servicing rights78 45 
Fixed assets67 54 
Employee benefits and deferred compensation31 54 
Other43 46 
Total deferred tax liabilities909 1,290 
Net deferred tax liability$(306)$(505)
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(1)Regions adopted CECL on January 1, 2020 and the impact resulted in an increase of $126 million in deferred tax assets. Prior to adoption, the deferred tax assets impact is for the allowance for loan losses.
The following table provides details of the Company’s tax carryforwards at December 31, 2021, including the expiration dates and related valuation allowance:
Expiration DatesDeferred Tax Asset Balance (1)Valuation
Allowance		Net Deferred Tax
Asset Balance
(In millions)
Net operating losses-federal2037$10 $— $10 
Net operating losses-federalNone11 — 11 
Net operating losses-states2022-202619 19 — 
Net operating losses-states2027-20338 7 1 
Net operating losses-states2034-20414 2 2 
Net operating losses-statesNone1 1 — 
$53 $29 $24 
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(1) Federal and state deferred tax assets of $21 million and $1 million, respectively, related to net operating losses were acquired as part of the Company’s April 2020 equipment finance acquisition and the December 2021 commercial real estate lender acquisition. While the federal and certain state net operating losses may be subject to certain annual utilization limits, the Company has determined that a valuation allowance is not necessary based on projected annual limitation and the length of the net operating loss carryover period.
The Company believes that a portion of the state net operating loss carryforwards will not be realized due to the length of certain state carryforward periods. Accordingly, a valuation allowance has been established in the amount of $29 million against such benefits at December 31, 2021 compared to $31 million at December 31, 2020.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
202120202019
 (In millions)
Balance at beginning of year$12 $37 $13 
Additions based on tax positions taken in a prior period— 2 25 
Reductions based on tax positions taken in a prior period— (25)— 
Settlements(2)(1)— 
Expiration of statute of limitations(1)(1)(1)
Balance at end of year$9 $12 $37 
The Company files U.S. federal, state, and local income tax returns. The Company is in the IRS’s Compliance Assurance Process program. Pursuant to this program, examinations for tax years through 2019 have been completed. Also, with some exceptions for non-footprint states, the Company is no longer subject to state and local tax examinations for tax years before 2017. The completion of tax examinations was the primary reason for the reduction in unrecognized tax benefits in 2020. Currently, there are no material disputed tax positions with federal or state taxing authorities. Accordingly, the Company does not anticipate that any adjustments relating to federal or state tax examinations will result in material changes to its business, financial position, results of operations or cash flows.
It is reasonably possible that the liability for UTBs could decrease by approximately $1 million during the next twelve months due to completion of tax authority examinations and expirations of statutes of limitations. It is uncertain how much, if any, of this potential decrease will impact the Company's effective tax rate.
As of December 31, 2021, 2020 and 2019, the balances of the Company’s UTBs that would reduce the effective tax rates, if recognized, were $7 million, $9 million and $34 million, respectively.
Interest and penalties related to UTBs are recorded in the provision for income taxes. During the years ended December 31, 2021, 2020 and 2019, the Company recognized an immaterial expense (benefit) for gross interest and penalties. As of December 31, 2021 and 2020, the Company had an immaterial gross liability for interest and penalties related to UTBs.