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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes |
Note 15 | Income Taxes
The Company and its domestic subsidiaries file a consolidated federal income tax return. Tax liabilities and benefits realized by the consolidated group are allocated as generated by the respective entities. The Internal Revenue Service (“IRS”) is currently examining the Company’s 2013 and 2014 federal income tax returns and the exam is expected to be complete in the first quarter of 2018. The IRS has also begun their examination of the Company’s 2015 and 2016 federal income tax returns. The Company’s tax years prior to 2013 have been examined by the IRS and the statute of limitations has expired on those years. Any adjustments that may result from IRS examinations of the Company’s tax returns are not expected to have a material effect on the results of operations, cash flows or financial position of the Company. Tax Reform On December 22, 2017, Public Law 115-97, known as the Tax Cuts and Jobs Act of 2017 (“Tax Legislation”) became effective. The Tax Legislation impacts the Company generally in four areas:
1. | Amends the U.S. Internal Revenue Code of 1986, as amended, which among other items, permanently reduces the corporate income tax rate from a maximum of 35% to 21% beginning January 1, 2018.
2. | Changes international taxation to a modified territorial tax system whereby profits from non-U.S. subsidiaries will generally be taxed only in their local jurisdictions.
3. | Contains several other provisions, such as limitations of deductibility of executive compensation, meals and entertainment and lobbying expenses and changes to the dividends received deduction.
4. | Affects the timing of certain tax deductions for reserves and deferred acquisition costs, but does not impact the Company’s overall income tax expense.
Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities are adjusted through income tax expense as changes in tax laws or rates are enacted. The Company revalued its deferred tax assets and liabilities at the new corporate income tax rate. The transition to the modified territorial system for international taxation required the Company to recognize a liability in 2017 based on non-U.S. income from international subsidiaries that had not been repatriated to their U.S. parent company (the “Transition Tax”). The Company recorded a net tax benefit of $506 million, recognized as a reduction to income tax expense in the Company’s Consolidated Statements of Operations for the year ended December 31, 2017. The net benefit was primarily due to re-measurement of the Company’s deferred tax assets and liabilities, partially offset by the impact of the transition tax on deemed repatriation of deferred non-U.S. income. The Company’s effective income tax rate for 2017 was 20.1% and included this one-time benefit of 12.7%. The impact of the Tax Legislation may differ from the Company’s preliminary estimates due to, among other things, changes in interpretations and assumptions the Company has made, guidance that may be issued and actions the Company may take as a result of the Tax Legislation. The transition tax calculation and the tax expense related to the rate differential on the deferred tax assets and liabilities of the foreign subsidiaries are based on estimated amounts. Any potential adjustments made could be material in relation to the preliminary estimates recorded.
Reconciliation of the change in the amount of unrecognized tax benefits
|  | For the years ended December 31,
($ in millions) |  | 2017 |  | 2016 |  | 2015
Balance – beginning of year |  | $ | 10 |  |  | $ | 7 |  |  | $ | — |
Increase for tax positions taken in a prior year |  | 34 |  |  | — |  |  | 4 |
Increase for tax positions taken in the current year |  | 11 |  |  | 3 |  |  | 3 |
Balance – end of year |  | $ | 55 |  |  | $ | 10 |  |  | $ | 7 |
The Company believes it is reasonably possible that the liability balance will not significantly increase within the next twelve months. The Company recognizes interest accrued related to unrecognized tax benefits in income tax expense. The Company did not record interest income or expense relating to unrecognized tax benefits in income tax expense in 2017, 2016 or 2015. As of December 31, 2017 and 2016, there was no interest accrued with respect to unrecognized tax benefits. No amounts have been accrued for penalties.
Components of the deferred income tax assets and liabilities (1)
|  | As of December 31,
($ in millions) |  | 2017 |  | 2016
Deferred assets |  |  |  |
Unearned premium reserves |  | $ | 545 |  |  | $ | 819 |
Accrued compensation |  | 137 |  |  | 203 |
Pension |  | 86 |  |  | 294 |
Discount on loss reserves |  | 53 |  |  | 188 |
Net operating loss carryover |  | 50 |  |  | 15 |
Other assets |  | 49 |  |  | 103 |
Other postretirement benefits |  | 48 |  |  | 64 |
Difference in tax bases of invested assets |  | — |  |  | 78 |
Total deferred assets |  | 968 |  |  | 1,764 |
Deferred liabilities |  |  |  |
DAC |  | (770 | ) |  | (1,211 | )
Unrealized net capital gains |  | (422 | ) |  | (529 | )
Life and annuity reserves |  | (241 | ) |  | (324 | )
Intangible assets |  | (113 | ) |  | (29 | )
Difference in tax bases of invested assets |  | (106 | ) |  | — |
Other liabilities |  | (98 | ) |  | (158 | )
Total deferred liabilities |  | (1,750 | ) |  | (2,251 | )
Net deferred liability |  | $ | (782 | ) |  | $ | (487 | )
(1) | Changes in deferred tax assets and liabilities primarily relate to the Tax Legislation.
Although realization is not assured, management believes it is more likely than not that the deferred tax assets will be realized based on the Company’s assessment that the deductions ultimately recognized for tax purposes will be fully utilized. As of December 31, 2017, the Company has net operating loss carryforwards of $238 million. The Tax Legislation eliminated the 20-year limitation on carryforwards and made the carryforward period indefinite.
Components of income tax expense
|  | For the years ended December 31,
($ in millions) |  | 2017 |  | 2016 |  | 2015
Current |  | $ | 1,018 |  |  | $ | 654 |  |  | $ | 1,033 |
Deferred |  | (216 | ) |  | 223 |  |  | 78 |
Total income tax expense |  | $ | 802 |  |  | $ | 877 |  |  | $ | 1,111 |
The Company paid income taxes of $968 million, $359 million and $1.07 billion in 2017, 2016 and 2015, respectively. The Company had current income tax payable of $44 million and $135 million as of December 31, 2017 and 2016, respectively.
Reconciliation of the statutory federal income tax rate to the effective income tax rate
|  | For the years ended December 31,
|  | 2017 |  | 2016 |  | 2015
Statutory federal income tax rate on income from operations |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Tax Legislation benefit |  | (12.7 | ) |  | — |  |  | — |
Share-based payments (1) |  | (1.6 | ) |  | — |  |  | — |
Tax-exempt income |  | (0.8 | ) |  | (1.2 | ) |  | (1.0 | )
Tax credits |  | (0.9 | ) |  | (1.2 | ) |  | (0.9 | )
Non-deductible goodwill impairment |  | 1.1 |  |  | — |  |  | — |
Other (2) |  | — |  |  | (0.7 | ) |  | 0.8 |
Effective income tax rate on income from operations |  | 20.1 | % |  | 31.9 | % |  | 33.9 | %
(1) | Includes a tax benefit of $63 million related to the 2017 adoption of the new accounting standard for share-based payments.
(2) | Includes $45 million of income tax expense related to the change in accounting guidance for investments in qualified affordable housing projects adopted in 2015.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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