Entity information:
Income Taxes

Tax Reform was enacted on December 22, 2017, resulting in changes in U.S. corporate tax rates, business-related exclusions, deductions and credits. Enactment of Tax Reform requires TCF to reflect the changes associated with the law's provisions in its consolidated financial statements as of and for the year ended December 31, 2017. The law is complex and has extensive implications for TCF's federal, state and foreign current and deferred income taxes.

As a result of Tax Reform, TCF has recorded a reasonable estimate of a net tax benefit of $130.7 million in its consolidated financial statements for the year ended December 31, 2017, primarily resulting from the re-measurement of the Company's estimated net deferred tax liability. Certain of these amounts are provisional in nature, as all the information necessary to record more precise amounts is not yet available, prepared or analyzed. Examples include information associated with TCF’s deemed repatriation tax; like-kind-exchange program; the timing of payments associated with certain liabilities; reports, tax forms and forecasts from various partnership investments; grantor letters and tax forms from various trusts; and the results of detailed analyses of information associated with several deferred tax items. TCF will obtain, prepare and analyze this information during the measurement period, up to and including the period in which it files its 2017 consolidated federal income tax return. TCF may adjust these provisional amounts during the measurement period as it obtains, prepares or analyzes this additional information.
 
Applicable income taxes in the Consolidated Statements of Income were as follows:
(In thousands)
Current
 
Deferred
 
Total
Year ended December 31, 2017:
 
 
 
 
 
Federal
$
14,384

 
$
(62,913
)
 
$
(48,529
)
State
237

 
9,340

 
9,577

Foreign
5,484

 
(156
)
 
5,328

Total
$
20,105

 
$
(53,729
)
 
$
(33,624
)
Year ended December 31, 2016:
 
 
 
 
 
Federal
$
66,810

 
$
28,629

 
$
95,439

State
11,402

 
4,425

 
15,827

Foreign
5,350

 
(88
)
 
5,262

Total
$
83,562

 
$
32,966

 
$
116,528

Year ended December 31, 2015:
 
 
 
 
 
Federal
$
73,579

 
$
16,141

 
$
89,720

State
9,255

 
4,637

 
13,892

Foreign
5,252

 
8

 
5,260

Total
$
88,086

 
$
20,786

 
$
108,872



Reconciliations to TCF's effective income tax rate from the statutory federal income tax rate of 35.00% were as follows:
 
Year Ended December 31,
 
2017
 
2016
 
2015
Federal income tax rate
35.00
 %
 
35.00
 %
 
35.00
 %
Increase (decrease) resulting from:
 
 
 
 
 
Tax Reform effects, net
(53.29
)
—
—

 
—

Nondeductible goodwill impairment effect
10.43

 
—

 
—

State income tax, net of federal tax
3.92

 
3.04

 
2.87

Tax-exempt income
(3.86
)
 
(2.07
)
 
(0.93
)
Non-controlling interest tax effect
(1.45
)
 
(0.99
)
 
(0.97
)
State tax settlements, net of federal tax
(1.38
)
 
0.19

 
(0.12
)
Stock compensation
(1.15
)
 
—

 
—

Investments in affordable housing limited liability entities
(0.89
)
 
(0.24
)
 
(0.18
)
Foreign tax effects
(0.67
)
 
(0.50
)
 
(0.53
)
Other, net
(0.38
)
 
0.02

 
(0.54
)
Effective income tax rate
(13.72
)%
 
34.45
 %
 
34.60
 %


TCF considers its undistributed foreign earnings to be reinvested indefinitely. This position is based on management's determination that cash held in TCF's foreign jurisdictions is not needed to fund its U.S. operations and that it either has reinvested or has intentions to reinvest these earnings. While management currently intends to indefinitely reinvest all of TCF's foreign earnings, should circumstances or tax laws change, TCF may need to record additional income tax expense in the period in which such determination or tax law change occurs.

As a result of Tax Reform, TCF recognized a $2.0 million charge related to U.S. federal income tax on the deemed repatriation of undistributed foreign earnings as of December 31, 2017. Due to the shift to a worldwide territorial tax regime as part of Tax Reform, future repatriations of foreign earnings will no longer be subject to U.S. federal income tax. However, these foreign earnings may be subject to foreign withholding taxes should they be distributed in the form of dividends. As of December 31, 2017, the estimated withholding taxes that could be due on these earnings was $3.6 million.

Reconciliations of the changes in unrecognized tax benefits were as follows:
 
At or For the Year Ended December 31,
(In thousands)
2017
 
2016
 
2015
Balance, beginning of period
$
4,690

 
$
4,249

 
$
4,649

Increases for tax positions related to the current year
200

 
546

 
323

Increases for tax positions related to prior years
86

 
627

 
—

Decreases for tax positions related to prior years
(331
)
 
(84
)
 
(157
)
Settlements with taxing authorities
—

 
(525
)
 
(425
)
Decreases related to lapses of applicable statutes of limitation
—

 
(123
)
 
(141
)
Balance, end of period
$
4,645

 
$
4,690

 
$
4,249



The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $2.2 million and $1.6 million at December 31, 2017 and 2016, respectively. TCF recognizes increases and decreases for interest and penalties related to unrecognized tax benefits, where applicable, in income tax expense. TCF recognized approximately $0.6 million of tax benefit, $0.9 million of tax expense and $0.2 million of tax benefit in 2017, 2016 and 2015, respectively, related to interest and penalties. Interest and penalties of approximately $0.6 million and $1.2 million were accrued at December 31, 2017 and 2016, respectively.

TCF's federal income tax returns are open and subject to examination for 2014 and later tax return years. TCF's various state income tax returns are generally open for 2013 and later tax return years based on individual state statutes of limitation. TCF's various foreign income tax returns are open and subject to examination for 2013 and later tax return years. Changes in the amount of unrecognized tax benefits within the next 12 months from normal expirations of statutes of limitation are not expected to be material.

TCF's deferred tax assets and deferred tax liabilities were as follows:
 
At December 31,
(In thousands)
2017
 
2016
Deferred tax assets:
 
 
 
Allowance for loan and lease losses
$
41,339

 
$
75,976

Stock compensation and deferred compensation plans
21,150

 
41,105

Net operating losses
16,452

 
11,924

Securities available for sale
5,345

 
17,606

Accrued expense
2,507

 
3,730

Other
3,603

 
5,548

Deferred tax assets
90,396

 
155,889

Valuation allowance
(14,267
)
 
(10,377
)
Total deferred tax assets, net of valuation allowance
76,129

 
145,512

Deferred tax liabilities:
 
 
 
Lease financing
246,221

 
348,933

Premises and equipment
30,109

 
32,430

Loan fees and discounts
12,489

 
17,017

Prepaid expenses
8,047

 
11,245

Goodwill and other intangibles
2,475

 
3,870

Other
4,715

 
7,375

Total deferred tax liabilities
304,056

 
420,870

Net deferred tax liabilities
$
227,927

 
$
275,358



The net operating losses at December 31, 2017 consisted of state net operating losses that expire in 2018 through 2037. The valuation allowance at December 31, 2017 and 2016 principally applies to net operating losses that, in the opinion of management, are more likely than not to expire unutilized. However, to the extent that tax benefits related to these carryforwards are realized in the future, the reduction in the valuation allowance will reduce income tax expense.