Income Taxes (Tables)

12 Months Ended

Dec. 31, 2023

Income tax expense consisted of the following (dollars in millions):


	For the Years Ended December 31,
	2023		2022		2021
	(As Restated)		(As Restated)		(As Restated)
Current
U.S. federal	$	1,254	$	1,465	$	1,084
U.S. state and local	258		312		204
Total	1,512		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

Schedule of Reconciliation the Effective Tax Rate to the U.S. Federal Statutory Income Tax Rate

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,
	2023		2022		2021
	(As Restated)		(As Restated)		(As Restated)
U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%
U.S. state, local and other income taxes, net of U.S. federal income tax benefits	3.5		3.4		3.2

Tax credits	(2.1)		(1.3)		(1.2)
Other	0.7		0.4		(0.1)
Effective income tax rate	23.1	%	23.5	%	22.9	%

Schedule of Deferred Tax Assets and Liabilities

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,
	2023		2022
	(As Restated)		(As Restated)
Deferred tax assets
Allowance for credit losses	$	2,245	$	1,791
Card product misclassification liability	282		229
Customer fees and rewards	236		166
Depreciation and software amortization	60		—
Other	112		186
Total deferred tax assets before valuation allowance	2,935		2,372
Valuation allowance	(1)		(1)
Total deferred tax assets, net of valuation allowance	2,934		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

Schedule of Reconciliation of Beginning and Ending Unrecognized Tax Benefits

A reconciliation of beginning and ending unrecognized tax benefits is as follows (dollars in millions):


	For the Years Ended December 31,
	2023		2022		2021
Balance at beginning of period	$	19	$	39	$	56
Additions
Current year tax positions	4		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.