v3.24.4
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax expense consisted of the following (dollars in millions):
 For the Years Ended December 31,
 202320222021
(As Restated)
(As Restated)
(As Restated)
Current
U.S. federal$1,254 $1,465 $1,084 
U.S. state and local258 312 204 
Total1,512 1,777 1,288 
Deferred
U.S. federal(595)(398)271 
U.S. state and local(76)(54)37 
Total(671)(452)308 
Income tax expense$841 $1,325 $1,596 
The following table reconciles the Company’s effective tax rate to the U.S. federal statutory income tax rate:
 For the Years Ended December 31,
 202320222021
(As Restated)
(As Restated)
(As Restated)
U.S. federal statutory income tax rate21.0 %21.0 %21.0 %
U.S. state, local and other income taxes, net of U.S. federal income tax benefits3.5 3.4 3.2 
Tax credits(2.1)(1.3)(1.2)
Other0.7 0.4 (0.1)
Effective income tax rate23.1 %23.5 %22.9 %
Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. Valuation allowances are provided to reduce deferred tax assets to an amount that is more likely than not to be realized. The Company evaluates the likelihood of realizing its deferred tax assets by estimating sources of future taxable income and the impact of tax planning strategies.
Significant components of the Company’s net deferred income taxes, which are included in other assets in the Company’s consolidated statements of financial condition, were as follows (dollars in millions):
December 31,
20232022
(As Restated)
(As Restated)
Deferred tax assets
Allowance for credit losses$2,245 $1,791 
Card product misclassification liability282 229 
Customer fees and rewards236 166 
Depreciation and software amortization60 — 
Other112 186 
Total deferred tax assets before valuation allowance2,935 2,372 
Valuation allowance(1)(1)
Total deferred tax assets, net of valuation allowance2,934 2,371 
Deferred tax liabilities
Depreciation and software amortization— (71)
Deferred loan origination costs(40)(48)
Other(47)(26)
Total deferred tax liabilities(87)(145)
Net deferred tax assets$2,847 $2,226 
A reconciliation of beginning and ending unrecognized tax benefits is as follows (dollars in millions):
For the Years Ended December 31,
202320222021
Balance at beginning of period$19 $39 $56 
Additions
Current year tax positions4 4 13 
Prior year tax positions— 1 8 
Reductions
Prior year tax positions(1)(20)(14)
Settlements with taxing authorities(1)— (14)
Expired statute of limitations(3)(5)(10)
Balance at end of period(1)
$18 $19 $39 
(1)For the years ended December 31, 2023, 2022 and 2021, amounts included $18 million, $18 million and $37 million, respectively, of unrecognized tax benefits, which, if recognized, would favorably affect the effective tax rate.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. Interest and penalties related to unrecognized tax benefits were $2 million for the years ended December 31, 2023 and 2022.
The Company is subject to examination by the Internal Revenue Service and tax authorities in various state, local and foreign tax jurisdictions. The Company's federal income tax filings are open to examinations for the tax years ended December 31, 2020 and forward. The Company regularly assesses the likelihood of additional assessments or settlements in each of the taxing jurisdictions. At this time, the potential change in unrecognized tax benefits is expected to be immaterial over the next 12 months. The Company believes that its reserves are sufficient to cover any tax, penalties and interest that would result from such examinations.
The Company has an immaterial amount of state net operating loss carryforwards that are subject to a partial valuation allowance as of December 31, 2023 and 2022.