PNC FINANCIAL SERVICES GROUP, INC.PNC

PNC FINANCIAL SERVICES GROUP, INC. Income Taxes Disclosure

10-KFiled Feb 20, 20265 min read
INCOME TAXES
The following disclosures reflect the adoption of ASU 2023-09. Refer to Note 1 Accounting Policies for additional information related to our adoption of this ASU.

The income from continuing operations before income tax expense, disaggregated between domestic and foreign sources, along with the components of income tax expense are as follows:
Table 106: Income from Continuing Operations Before Income Tax Expense and Components of Income Tax Expense             
Year ended December 31
In millions		202520242023
Income from continuing operations before income tax expense
Domestic$8,378 $7,033 $6,624 
Foreign108 209 112 
Total$8,486 $7,242 $6,736 
Components of income tax expense
Current
Federal$1,346 $1,046 $992 
State173 221 320 
Foreign10 52 29 
Total current1,529 1,319 1,341 
Deferred
Federal(6)— (145)
State(36)(29)(103)
Foreign2 (1)(4)
Total deferred(40)(30)(252)
Total $1,489 $1,289 $1,089 
Significant components of deferred tax assets and liabilities are as follows:

Table 107: Deferred Tax Assets and Liabilities                    
In millionsDecember 31, 2025December 31, 2024
Deferred tax assets
Net unrealized losses on securities and financial instruments$1,137 $2,098 
Allowance for loan and lease losses1,072 1,105 
Lease obligations494 475 
Compensation and benefits312 312 
Allowance for unfunded lending related commitments201 177 
Accrued expenses65 188 
Other238 340 
Total gross deferred tax assets3,519 4,695 
Valuation allowance(24)(23)
Total deferred tax assets$3,495 $4,672 
Deferred tax liabilities
Leasing798 919 
Fixed assets324 397 
Right of use assets434 412 
Mortgage servicing rights424 434 
Goodwill and intangibles246 249 
Other455 472 
Total deferred tax liabilities$2,681 $2,883 
Net deferred tax asset$814 $1,789 
A reconciliation between the statutory and effective tax rates follows:
Table 108: Reconciliation of Statutory and Effective Tax Rates
Year ended December 31
Dollars in millions		202520242023
AmountPercentAmountPercentAmountPercent
Statutory tax rate$1,782 21.0 %$1,521 21.0 %$1,415 21.0 %
State and local income tax, net of federal (national) income tax effect (a)198 2.3 200 2.8 162 2.4 
Foreign tax effects(12)(0.1)12 0.2 (1)— 
Tax credits
LIHTC(138)(1.6)(102)(1.4)(97)(1.4)
NMTC(35)(0.4)(76)(1.1)(130)(1.9)
Other(84)(1.0)(92)(1.3)(65)(1.0)
Nontaxable or nondeductible items
Tax-exempt interest(93)(1.1)(103)(1.4)(117)(1.7)
Other(39)(0.5)(77)(1.1)1 — 
Changes in unrecognized tax benefits(69)(0.8)11 0.2 51 0.8 
Other (b)(21)(0.3)(5)(0.1)(51)(0.8)
Tax claims and adjustments— — — — (79)(1.2)
Income tax expense/effective tax rate$1,489 17.5 %$1,289 17.8 %$1,089 16.2 %
(a)The states and local jurisdictions accounting for the majority of total state and local income tax expense include California, New Jersey, Illinois, New York and New York City for all periods presented.
(b)Includes an insignificant amount related to the effect of cross-border tax laws for all periods presented.

The net operating loss carryforwards at December 31, 2025 and 2024 follow:
Table 109: Net Operating Loss Carryforwards
Dollars in millionsDecember 31, 2025December 31, 2024Expiration
Net Operating Loss Carryforwards (a):
State$582 $585 
2026-2039
(a)There were no federal net operating loss carryforwards at December 31, 2025 or 2024.
The majority of tax credit carryforwards expire in 2030-2045 and were insignificant at both December 31, 2025 and 2024. We anticipate that we will be able to fully utilize our tax credit carryforwards. Some state net operating loss carryforwards are from acquired entities and utilization is subject to various statutory limitations.

Retained earnings included $0.1 billion at both December 31, 2025 and 2024 in allocations for bad debt deductions of former thrift subsidiaries for which no income tax has been provided. Under current law, if certain subsidiaries use these bad debt reserves for purposes other than to absorb bad debt losses, they will be subject to Federal income tax at the current corporate tax rate.
A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:
Table 110: Change in Unrecognized Tax Benefits
In millions202520242023
Balance of gross unrecognized tax benefits at January 1$365 $368 $318 
Increases:
Positions taken during a current period7 23 20 
Positions taken during a prior period2 35 35 
Decreases:
Settlements with taxing authorities(40)(1)(4)
Reductions resulting from lapse of statute of limitations(64)(60)(1)
Balance of gross unrecognized tax benefits at December 31270 365 368 
Favorable impact if recognized$243 $314 $306 

We are subject to U.S. federal income tax as well as income tax in most states and some foreign jurisdictions. Table 111 summarizes the status of significant IRS examinations.
Table 111: IRS Tax Examination Status
  
Year(s) Status at December 31, 2025 
Federal2020-2021 Under exam 

In addition, we are under continuous examinations by various state taxing authorities. With few exceptions, we are no longer subject to state and local and foreign income tax examinations by taxing authorities for periods before 2019. For all open audits, any potential adjustments have been considered in establishing our unrecognized tax benefits as of December 31, 2025.

Our policy is to classify interest and penalties associated with income taxes as income tax expense. For 2025 and 2024, the amount of gross interest and penalties recorded on our Consolidated Income Statement was insignificant. The amount of accrued interest and penalties recorded on our Consolidated Balance Sheet was insignificant at December 31, 2025 and $0.1 billion at December 31, 2024.
The income taxes paid (refunded), disaggregated between federal, state and foreign sources are as follows:

Table 112: Income Taxes Paid, Net of Refunds
Year ended December 31
In millions		202520242023
U.S. federal income taxes paid (refunded)$385 $132 $(185)
U.S. state and local income taxes paid
New York City$45 $48 $25 
California46 42 29 
New Jersey*28 44 
Illinois*20 36 
Florida**22 
New York**32 
Maryland**20 
Massachusetts**12 
Oregon**10 
Indiana**9 
Kentucky**8 
All other states171 86 67 
Total$262 $224 $314 
Foreign income taxes paid
United Kingdom*$28 $27 
Canada**9 
Other57 5 *
Total$57 $33 $36 
Total income taxes paid, net of refunds$704 $389 $165 
* Amounts are below the 5% threshold for disaggregation.

Historical Timeline

Fiscal YearFiled
2025Feb 20, 2026Showing above
2024Feb 21, 2025
2023Feb 21, 2024
2022Feb 22, 2023
2021Feb 25, 2022
2020Feb 26, 2021
2019Mar 2, 2020
2018Mar 1, 2019
2017Feb 28, 2018
2016Feb 28, 2017
2015Feb 29, 2016

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.

Other Available Disclosures

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