STI 2018 Annual Report

Notes to Consolidated Financial Statements, continued 131 The significant DTAs and DTLs at December 31, net of the federal impact for state taxes, are presented in the following table: (Dollars in millions) 2018 2017 DTAs: ALLL $376 $412 Net unrealized losses in AOCI 438 302 State NOLs and other carryforwards 111 227 Accruals and reserves 145 180 Other 21 17 Total gross DTAs 1,091 1,138 Valuation allowance (85) (143) Total DTAs 1,006 995 DTLs: Leasing 475 459 Servicing rights 270 290 Employee compensation and benefits 140 210 Deferred income 29 193 Goodwill and other intangible assets 156 155 Premises, property, and equipment 149 111 Loans 96 104 Other 38 41 Total DTLs 1,353 1,563 Net DTL ($347) ($568) The DTAs include state NOLs and other state carryforwards that will expire, if not utilized, in varying amounts from2019 to 2038. At December 31, 2018 and 2017, the Company had a valuation allowance recorded against its state carryforwards and certain state DTAs of $85 million and $143 million, respectively. The decrease in the valuation allowance was due primarily to the reversal of the valuation allowance that was recorded against certain of STM's pre-merger state NOL carryforwards that could not be carried forward by the Bank after the merger. The reversal of the valuation allowance was offset by the write-off of the related state NOL carryforwards. See Note 22, “Business Segment Reporting,” for additional information regarding the merger of STM and the Bank. The following table provides a rollforward of theCompany's gross federal and state UTBs, excluding interest and penalties, during the years ended December 31: (Dollars in millions) 2018 2017 Balance at January 1 $141 $111 Increases in UTBs related to prior years 2 22 Decreases in UTBs related to prior years (6) (5) Increases in UTBs related to the current year 20 13 Decreases in UTBs related to settlements (2) — Decreases in UTBs related to lapse of the applicable statutes of limitations (10) — Balance at December 31 $145 $141 The amount of UTBs that would favorably affect the Company's effective tax rate, if recognized, was $113 million at December 31, 2018. Interest and penalties related to UTBs are recorded in the Provision for income taxes in the Consolidated Statements of Income. The Company had a gross liability of $22 million and $17 million for interest and penalties related to its UTBs at December 31, 2018 and 2017, respectively. During the years ended December 31, 2018 and 2017, the Company recognized gross expenses of $5 million and $10 million, respectively, related to interest and penalties on the UTBs. The Company files U.S. federal, state, and local income tax returns. The Company's federal income tax returns are no longer subject to examination by the IRS for taxable years prior to 2015. With limited exceptions, the Company is no longer subject to examination by state and local taxing authorities for taxable years prior to 2012. It is reasonably possible that the liability for UTBs could decrease by as much as $50 million during the next 12 months due to completion of tax authority examinations and the expiration of statutes of limitations. It is uncertain how much, if any, of this potential decrease will impact the Company’s effective tax rate.