FIRST HORIZON CORPFHN

FIRST HORIZON CORP Income Taxes Disclosure

10-KFiled Feb 26, 20266 min read
Income Taxes
The aggregate amount of income taxes included in the Consolidated Statements of Income and the Consolidated Statements of Changes in Equity for the years ended December 31 were as follows.
Table 8.14.1
INCOME TAX EXPENSE
(Dollars in millions)202520242023
Consolidated Statements of Income:   
Income tax expense$282 $211 $212 
Consolidated Statements of Changes in Equity:   
Income tax expense (benefit) related to:   
Net unrealized gains (losses) on securities available for sale88 17 44 
Net unrealized gains (losses) on cash flow hedges17 (5)15 
Net unrealized gains (losses) on pension and other postretirement plans(1)7 (1)
Total$386 $230 $270 
All income (loss) from continuing operations before income tax expense (benefit) is domestic.
Table 8.14.2
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE (BENEFIT)
(Dollars in millions)
202520242023
United States$1,280 $1,005 $1,128 
The components of income tax expense (benefit) for the years ended December 31 were as follows.
Table 8.14.3
INCOME TAX EXPENSE COMPONENTS
(Dollars in millions)202520242023
Current:   
Federal$201 $204 $140 
State32 24 28 
233 228 168 
Deferred:  
Federal44 (14)37 
State5 (3)7 
49 (17)44 
Total:
Federal
245 190 177 
State
37 21 35 
Total income tax expense (benefit)
$282 $211 $212 
A reconciliation of expected income tax expense (benefit) at the federal statutory rate of 21% for 2025, 2024, and 2023, respectively, to total income tax expense follows.
Table 8.14.4
RECONCILIATION FROM STATUTORY RATES
202520242023
(Dollars in millions)AmountPercentAmountPercentAmountPercent
U.S. federal statutory income tax rate$269 21.0 %$211 21.0 %$237 21.0 %
Domestic federal
Tax credits   
LIHTC credits and benefits, net of amortization(17)(1.2)(13)(1.3)(15)(1.3)
Other tax credits(1)(0.1)(1)(0.1)(5)(0.5)
Nontaxable and nondeductible items
Tax-exempt interest(10)(0.8)(12)(1.1)(12)(1.0)
FDIC premium10 0.8 12 1.1 11 1.0 
Other nontaxable and nondeductible items3 0.2 1 0.1 (1)(0.1)
Termination of BOLI policies— — — — 21 1.9 
Other(3)(0.2)(5)(0.5)(8)(0.7)
Domestic state and local income taxes, net of federal effect (a)32 2.5 20 2.0 34 3.0 
Changes in unrecognized tax benefits(1)(0.1)(2)(0.2)(50)(4.5)
Reported income tax (benefit) expense and ETR$282 22.1 %$211 21.0 %$212 18.8 %
(a)In 2025, state and local income taxes in Tennessee, Florida, and California comprise the majority of the tax effect in this category. In 2024 and 2023, state and local income taxes in Tennessee and Florida comprise the majority of the tax effect in this category.
As of December 31, 2025, FHN had net deferred tax asset balances related to federal and state income tax carryforwards of $36 million and $4 million, respectively, which will expire at various dates as follows.
Table 8.14.5
TAX CARRYFORWARD DTA EXPIRATION DATES
(Dollars in millions)Expiration DatesNet Deferred Tax
Asset Balance
Losses - federal2028 - 2035$25 
Credits - federal
204511 
Net operating losses - states2026 - 20352 
Net operating losses - states2036 - 20411 
Credits - states
20301 
We believe it is more likely than not that the benefit from certain state NOL carryforwards will not be realized. In recognition of this risk, we have provided an immaterial valuation allowance on the DTAs related to these state NOL carryforwards. If our assumptions change and we determine that we will be able to realize these NOLs, the tax benefits related to any reversal of the valuation allowance on DTAs will be recognized as a reduction of income tax expense.
A DTA or DTL is recognized for the tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The tax consequence is calculated by applying enacted statutory tax rates, applicable to future years, to these temporary differences. In order to support the recognition of the DTA, FHN’s management must believe
that the realization of the DTA is more likely than not. FHN evaluates the likelihood of realization of the DTA based on both positive and negative evidence available at the time, including (as appropriate) scheduled reversals of DTLs, projected future taxable income, tax planning strategies, and recent financial performance. Realization is dependent on generating sufficient taxable income prior to the expiration of the carryforwards attributable to the DTA. In projecting future taxable income, FHN incorporates assumptions including the estimated amount of future state and federal pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates used to manage the underlying business.
As of December 31, 2025, FHN's net DTA was $92 million compared to $227 million at December 31, 2024. At December 31, 2025, FHN's gross DTA (net of a valuation allowance) and gross DTL were $672 million and $580 million, respectively. Although realization is not assured, FHN believes that it meets the more-likely-than-not requirement with respect to the net DTA after valuation allowance.
On July 4, 2025, President Trump signed into law H.R. 1, the budget reconciliation bill known as the "One Big
Beautiful Bill" ("OBBB" or the "bill"). The bill modified the first-year depreciation deduction to 100% for qualified property acquired and placed in service after January 19, 2025. The bill also allowed for the immediate deduction of domestic research or experimental expenditures and a one-year deduction for unamortized amounts incurred in prior tax years. Due to these provisions in OBBB, FHN recognized a reduction to the DTA as of the enactment date of $34 million. These provisions of OBBB have no impact on FHN's effective tax rate.
Temporary differences which gave rise to deferred tax assets and deferred tax liabilities on December 31, 2025 and 2024 were as follows.
Table 8.14.6
COMPONENTS OF DTAs & DTLs
(Dollars in millions)20252024
Deferred tax assets:  
Securities available for sale and financial instruments (a)$180 $284 
Loan valuations and loss reserves179 152 
Employee benefits121 119 
Lease liability91 82 
Depreciation and amortization19 54 
Federal carryforwards
36 29 
State carryforwards
4 3 
Other42 45 
Gross deferred tax assets$672 $768 
Deferred tax liabilities:  
Leasing$398 $363 
ROU lease asset80 73 
Other intangible assets67 71 
Other35 34 
Gross deferred tax liabilities580 541 
Net deferred tax assets$92 $227 
(a)    Tax effects of unrealized gains and losses are tracked on a portfolio basis.

Total unrecognized tax benefits at December 31, 2025 and 2024 were $12 million and $13 million, respectively. To the extent such unrecognized tax benefits as of December 31, 2025 are subsequently recognized, $12 million of tax benefits could impact tax expense and FHN’s effective tax rate in future periods.
FHN recognizes interest accrued and penalties related to unrecognized tax benefits within income tax expense. FHN had approximately $2 million accrued for the payment of
interest as of both December 31, 2025 and 2024. The total amount of interest and penalties recognized in the Consolidated Statements of Income during 2025 was immaterial. The amount recognized during 2024 was a net benefit of $1 million.
The rollforward of unrecognized tax benefits is shown in the following table.
Table 8.14.7
ROLLFORWARD OF UNRECOGNIZED TAX BENEFITS
(Dollars in millions) 
Balance at December 31, 2023$15 
Increases related to prior year tax positions2 
Increases related to current year tax positions3 
Lapse of statutes(7)
Balance at December 31, 2024$13 
Increases related to prior year tax positions1 
Increases related to current year tax positions4 
Settlements(3)
Lapse of statutes(3)
Balance at December 31, 2025$12 
The following table presents income taxes paid, net of refunds received, by jurisdiction for the years ended December 31, 2025, 2024, and 2023.
Table 8.14.8
INCOME TAXES PAID (NET OF REFUNDS RECEIVED)
(Dollars in millions)202520242023
U.S. federal$31 $74 $56 
U.S. state and local:
California6 **
North Carolina4 **
Tennessee3 *15 
New York State3 **
Florida**6 
Other13 25 27 
Total$60 $99 $104 
*Jurisdiction below the threshold for the period presented.

Historical Timeline

Fiscal YearFiled
2025Feb 26, 2026Showing above
2024Feb 27, 2025
2023Feb 23, 2024

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

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