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INCOME TAXES | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of income tax expense (benefit) applicable to pretax earnings for the years ended December 31 were as follows:
(In millions) | Foreign |  | U.S. |  | Total
2019: |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 737 |  |  |  |  | $ | 69 |  |  |  |  | $ | 806 |  |
Deferred |  | 183 |  |  |  |  | 152 |  |  |  |  | 335 |  |
Total income tax expense |  | $ | 920 |  |  |  |  | $ | 221 |  |  |  |  | $ | 1,141 |  |
2018: |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 771 |  |  |  |  | $ | 608 |  |  |  |  | $ | 1,379 |  |
Deferred |  | 93 |  |  |  |  | (409 | ) |  |  |  | (316 | ) |
Total income tax expense |  | $ | 864 |  |  |  |  | $ | 199 |  |  |  |  | $ | 1,063 |  |
2017: |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 722 |  |  |  |  | $ | (91 | ) |  |  |  | $ | 631 |  |
Deferred |  | (24 | ) |  |  |  | (1,193 | ) |  |  |  | (1,217 | ) |
Total income tax expense |  | $ | 698 |  |  |  |  | $ | (1,284 | ) |  |  |  | $ | (586 | ) |
The Japan income tax rate for the fiscal year 2017 was 28.2%. The rate was reduced to 28.0% for fiscal years 2018 and 2019. For the U.S., the Tax Cuts and Jobs Act (Tax Act) was signed into law on December 22, 2017. Effective January 1, 2018, the Tax Act imposed a broad number of changes in tax law, including permanently reducing the U.S. federal statutory corporate income tax rate from 35% to 21%, eliminating or reducing certain deductions and credits and limiting the deductibility of interest expense and executive compensation. In accordance with Staff Accounting Bulletin 118 (SAB 118) issued by the U.S. Securities and Exchange Commission in December 2017, the Company recorded provisional amounts for certain items for which the income tax accounting was not complete. As of the enactment date, the Company estimated provisional amounts for its deferred taxes, including related valuation allowance, resulting in a reduction of its DTAs by approximately $1.0 billion and its deferred tax liabilities (DTLs) by $2.9 billion, for a net DTL reduction of approximately $1.9 billion. The provisions of ASC 740-10, Income Taxes, require that the effects of changes in tax law on deferred taxes be recognized as a component of the income tax provision in the period the tax rate change was enacted. Therefore, the $1.9 billion provisional amount of net DTL reduction was recorded in the fourth quarter of 2017 as a reduction in the “Income tax expense, Deferred” line item of the Company’s consolidated statement of earnings. In 2018, the Company recorded additional income tax expense of $.4 million resulting from a decrease in the SAB 118 provisional estimate related to Japan deferred tax balances. No further adjustment was made to the SAB 118 provisional estimate related to the valuation allowance. As of December 31, 2018, the Company has completed its accounting for the Tax Act in accordance with SAB 118. Income tax expense in the accompanying statements of earnings varies from the amount computed by applying the expected U.S. tax rate of 21% in both 2019 and 2018 and 35% in 2017 to pretax earnings. The principal reasons for the differences and the related tax effects for the years ended December 31 were as follows:
(In millions) | 2019 |  | 2018 |  | 2017
Income taxes based on U.S. statutory rates |  | $ | 933 |  |  |  |  | $ | 836 |  |  |  |  | $ | 1,406 |  |
Foreign rate differential |  | 229 |  |  |  |  | 220 |  |  |  |  | 0 |  |
Write-down of U.S. deferred tax liabilities for tax reform change |  | 0 |  |  |  |  | 0 |  |  |  |  | (1,933 | ) |
Utilization of foreign tax credit |  | (6 | ) |  |  |  | (3 | ) |  |  |  | (27 | ) |
Nondeductible expenses |  | 10 |  |  |  |  | 21 |  |  |  |  | 10 |  |
Other, net |  | (25 | ) |  |  |  | (11 | ) |  |  |  | (42 | ) |
Income tax expense |  | $ | 1,141 |  |  |  |  | $ | 1,063 |  |  |  |  | $ | (586 | ) |
Total income tax expense for the years ended December 31 was allocated as follows:
(In millions) | 2019 |  | 2018 |  | 2017
Statements of earnings |  | $ | 1,141 |  |  |  |  | $ | 1,063 |  |  |  |  | $ | (586 | ) |
Other comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |
Unrealized foreign currency translation gains (losses) during period |  | 27 |  |  |  |  | 10 |  |  |  |  | 52 |  |
Unrealized gains (losses) on investment securities: |  |  |  |  |  |  |  |  |  |  |
Unrealized holding gains (losses) on investment securities during period |  | 1,532 |  |  |  |  | (787 | ) |  |  |  | 575 |  |
Reclassification adjustment for realized (gains) losses on investment securities included in net earnings |  | 5 |  |  |  |  | (12 | ) |  |  |  | 1 |  |
Unrealized gains (losses) on derivatives during period |  | (3 | ) |  |  |  | 0 |  |  |  |  | 0 |  |
Pension liability adjustment during period |  | (18 | ) |  |  |  | (8 | ) |  |  |  | 3 |  |
Total income tax expense (benefit) related to items of other comprehensive income (loss) |  | 1,543 |  |  |  |  | (797 | ) |  |  |  | 631 |  |
Total income taxes |  | $ | 2,684 |  |  |  |  | $ | 266 |  |  |  |  | $ | 45 |  |
The income tax effects of the temporary differences that gave rise to deferred income tax assets and liabilities as of December 31 were as follows:
(In millions) | 2019 |  | 2018
Deferred income tax liabilities: |  |  |  |  |  |  |
Deferred policy acquisition costs |  | $ | 3,492 |  |  |  |  | $ | 3,404 |  |
Unrealized gains and other basis differences on investments |  | 4,485 |  |  |  |  | 1,307 |  |
Premiums receivable |  | 152 |  |  |  |  | 149 |  |
Policy benefit reserves |  | 3,442 |  |  |  |  | 3,828 |  |
Total deferred income tax liabilities |  | 11,571 |  |  |  |  | 8,688 |  |
Deferred income tax assets: |  |  |  |  |  |  |
Unfunded retirement benefits |  | 8 |  |  |  |  | 8 |  |
Other accrued expenses |  | 36 |  |  |  |  | 40 |  |
Policy and contract claims |  | 781 |  |  |  |  | 775 |  |
Foreign currency loss on Aflac Japan |  | 16 |  |  |  |  | 38 |  |
Deferred compensation |  | 162 |  |  |  |  | 163 |  |
Capital loss carryforwards |  | 34 |  |  |  |  | 5 |  |
Depreciation |  | 164 |  |  |  |  | 119 |  |
Anticipatory foreign tax credit |  | 5,487 |  |  |  |  | 4,040 |  |
Deferred foreign tax credit |  | 605 |  |  |  |  | 591 |  |
Other |  | 204 |  |  |  |  | 150 |  |
Total deferred income tax assets before valuation allowance |  | 7,497 |  |  |  |  | 5,929 |  |
Valuation allowance |  | (1,340 | ) |  |  |  | (738 | ) |
Total deferred income tax assets after valuation allowance |  | 6,157 |  |  |  |  | 5,191 |  |
Net deferred income tax liability |  | 5,414 |  |  |  |  | 3,497 |  |
Current income tax (asset) liability |  | (44 | ) |  |  |  | 523 |  |
Total income tax liability |  | $ | 5,370 |  |  |  |  | $ | 4,020 |  |
The application of U.S. GAAP requires the Company to evaluate the recoverability of deferred tax assets and establish a valuation allowance if necessary to reduce the deferred tax asset to an amount that is more likely than not expected to be realized. The Company has determined a $1,022 million valuation allowance against its anticipatory foreign tax credit is necessary. The anticipatory foreign tax credit represents the foreign tax credit the Company will generate from the reversal of Japan deferred tax liabilities in the future. The increase in the valuation allowance on the anticipatory foreign tax credit is due to an increase Japan's local country deferred tax inventory relative to the deferred tax inventory for Japan's U.S. tax obligation. The Company has also determined a $318 million valuation allowance against its deferred foreign tax credits is necessary. Deferred foreign tax credits are foreign tax credits generated in the current tax year by the Japanese life company, but are unable to be utilized until 2020 due to Japan's current tax year not closing until March 31, 2020. The valuation allowance on the deferred foreign tax credit has increased due to the utilization of prior year credits as well as the recognition of the current year deferred foreign tax credit. Based upon a review of the Company's anticipated future taxable income, and including all other available evidence, both positive and negative, the Company's management has concluded that, notwithstanding the items noted above, it is more likely than not that all other deferred tax assets will be realized. Under U.S. income tax rules, only 35% of non-life operating losses can be offset against life insurance taxable income each year. For current U.S. income tax purposes, as of December 31, 2019, there were non-life operating loss carryforwards of $99 million available to offset against future taxable income, of which $31 million expires in 2039, and $68 million does not expire. The Company has capital loss carryforwards of $161 million available to offset capital gains, of which $65 million expires in 2023 and $96 million expires in 2024. The Company files federal income tax returns in the U.S. and Japan as well as state or prefecture income tax returns in various jurisdictions in the two countries. The Company is currently under audit by the IRS for the 2013-2016 amended federal income tax returns. There are currently no other open Federal, State, or local U.S. income tax audits. U.S. federal income tax returns for years before 2016 are no longer subject to examination. Japan corporate income tax returns for years before 2016 are no longer subject to examination. Management believes it has established adequate tax liabilities and final resolution of all open audits is not expected to have a material impact on the Company's consolidated financial statements. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended December 31:
(In millions) |  | 2019 |  |  | 2018 |
Balance, beginning of year |  | $ | 15 |  |  |  | $ | 14 |  |
Additions for tax positions of prior years |  | 2 |  |  |  | 1 |  |
Balance, end of year |  | $ | 17 |  |  |  | $ | 15 |  |
Included in the balance of the liability for unrecognized tax benefits at December 31, 2019, are $15 million of tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility, compared with $14 million at December 31, 2018. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate, but would accelerate the payment of cash to the taxing authority to an earlier period. The Company has accrued approximately $2 million as of December 31, 2019, for permanent uncertainties, which if reversed would not have a material effect on the annual effective rate. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company recognized approximately $1 million in interest and penalties in 2019, 2018 and 2017, respectively. The Company has accrued approximately $2 million for the payment of interest and penalties as of December 31, 2019, compared with $2 million at December 31, 2018. As of December 31, 2019, there were no material uncertain tax positions for which the total amounts of unrecognized tax benefits will significantly increase or decrease within the next 12 months.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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