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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 17. Income Taxes The components of income tax (benefit) expense were as follows:
| Successor |  |  | Predecessor
Year Ended December 31, 2019 |  | Five Months Ended December 31, 2018 |  |  | Seven Months Ended July 31, 2018 |  | Year Ended December 31, 2017
Current Income Taxes |  |  |  |  |  |  |  |
Federal | $ | 19 |  |  | $ | — |  |  |  | $ | (14 | ) |  | $ | 52 |
State | 74 |  |  | — |  |  |  | (1 | ) |  | 7 |
Total current income taxes | 93 |  |  | — |  |  |  | (15 | ) |  | 59 |
Deferred Income Taxes |  |  |  |  |  |  |  |
Federal | (298 | ) |  | (1,015 | ) |  |  | 54 |  |  | (43 | )
State | (68 | ) |  | (6 | ) |  |  | 9 |  |  | (3 | )
Total deferred income taxes | (366 | ) |  | (1,021 | ) |  |  | 63 |  |  | (46 | )
Total provision for income taxes | $ | (273 | ) |  | $ | (1,021 | ) |  |  | $ | 48 |  |  | $ | 13 |
The following table presents a reconciliation of the income tax provision computed at the U.S. federal statutory tax rate to the actual effective tax rate:
| Successor |  |  | Predecessor
| Year Ended December 31, 2019 |  | Five Months Ended December 31, 2018 |  |  | Seven Months Ended July 31, 2018 |  | Year Ended December 31, 2017
Tax (Benefit) Expense at Federal Statutory Rate | $ | (1 | ) |  | 21.0 | % |  | $ | (29 | ) |  | 21.0 | % |  |  | $ | 42 |  |  | 21.0 | % |  | $ | 15 |  |  | 35.0 | %
Effect of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State taxes, net of federal benefit | 5 |  |  | (141.2 | )% |  | (6 | ) |  | 4.2 | % |  |  | 8 |  |  | 3.8 | % |  | 1 |  |  | 1.9 | %
Non-controlling interests | 1 |  |  | (21.1 | )% |  | — |  |  | — | % |  |  | — |  |  | — | % |  | — |  |  | (0.3 | )%
Change in valuation allowance | (285 | ) |  | 8066.4 | % |  | (990 | ) |  | 720.0 | % |  |  | — |  |  | — | % |  | (1 | ) |  | (1.2 | )%
Deferred adjustments | 2 |  |  | (64.1 | )% |  | 3 |  |  | (1.8 | )% |  |  | (1 | ) |  | (0.5 | )% |  | — |  |  | — | %
Nondeductible items | 4 |  |  | (136.5 | )% |  | 1 |  |  | (1.0 | )% |  |  | 7 |  |  | 3.3 | % |  | 1 |  |  | 3.2 | %
Federal tax reform impact | — |  |  | — | % |  | — |  |  | — | % |  |  | — |  |  | — | % |  | (5 | ) |  | (12.6 | )%
Current payable adjustments | — |  |  | — | % |  | — |  |  | — | % |  |  | (1 | ) |  | (0.5 | )% |  | — |  |  | — | %
Adjustments related to uncertain tax positions | — |  |  | — | % |  | — |  |  | — | % |  |  | — |  |  | — | % |  | 1 |  |  | 2.4 | %
Other, net | 1 |  |  | (5.7 | )% |  | — |  |  | — | % |  |  | (7 | ) |  | (3.3 | )% |  | 1 |  |  | 0.5 | %
Total income tax (benefit) expense | $ | (273 | ) |  | 7718.8 | % |  | $ | (1,021 | ) |  | 742.4 | % |  |  | $ | 48 |  |  | 23.8 | % |  | $ | 13 |  |  | 28.9 | %
In 2019, the effective tax rate differed from the statutory tax rate primarily due to the release of the valuation allowance, as well as state tax adjustments and permanent differences. The effective tax rate for the five months ended December 31, 2018 differed from the statutory tax rate primarily due to the reversal of the valuation allowance associated with the NOL carryforwards of WMIH, permanent differences including executive compensation disallowed under Internal Revenue Code Section 162(m), penalties and nondeductible meals and entertainment expenses. In 2017, the effective tax rate differed from the statutory tax rate primarily as a result of changes made by the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”), including deferred adjustments related to the remeasurement of deferred tax assets and liabilities as a result of the reduction of the U.S. corporate tax rate to 21%. In the assessment of whether a valuation allowance was required as of December 31, 2019, the Company considered the four sources of taxable income, as follows, under ASC 740-10-30-18:
1. | Taxable income in prior carryback year(s) if carryback is permitted under the tax law;
2. | Future reversals of existing taxable temporary differences;
3. | Tax-planning strategies; and
4. | Future taxable income exclusive of reversing temporary differences and carryforwards.
The Company noted that the NOL carryback period of taxable income is no longer available to offset taxable income in prior years as modified as part of the Tax Reform Act. In determining the appropriate deferred tax asset valuation allowance as of December 31, 2019, the Company considered and evaluated the remaining three sources of income. The Company considered the future reversals of existing taxable temporary differences and identified tax-planning strategies that were considered prudent and feasible. In addition, the Company considered:
1. | Internal forecasts of future pre-tax income exclusive of reversing temporary differences and carryforwards;
2. | The nature and timing of future reversals of existing deferred tax assets;
3. | Future originating temporary and permanent differences; and
4. | NOL carryforward expiration dates.
Consistent with the prior year analysis, the Company based its projection of future taxable income on historical pre-tax income and assumed a steady state of operations that would generate cash flows and liquidity sufficient to maintain current operations and pay down corporate debt, which results in a reduction in interest expense in future periods. The Company considered other factors in its determination of future taxable income that was demonstrated by historical performance. As a result, the Company believes it is more likely than not that its deferred tax assets will be realized prior to its expiration and released an additional $285 of the valuation allowance during the fourth quarter of 2019. A valuation allowance of $9 remains for the deferred tax asset associated with NOL carryforwards that are subject to limitation under Section 382 as of December 31, 2019. The Company does not expect any future tax loss limitations under Sections 382 and 384 that would impact its utilization of remaining federal NOL carryforwards. Accordingly, the Company has federal NOL carryforwards (pre-tax) of approximately $4.7 billion and $6.3 billion as of December 31, 2019 and 2018, respectively. It is expected that the federal NOL carryforwards will begin to expire beginning with the 2026 tax year, if unused. The Company also has immaterial state NOL carryforwards that will begin to expire beginning with the 2019 tax year, if unused. Temporary differences and carryforwards that give rise to deferred tax assets and liabilities are comprised of the following:
| Successor
| December 31, 2019 |  | December 31, 2018
Deferred Tax Assets |  |  |
Effect of: |  |  |
Loss carryforwards (federal, state & capital) | $ | 998 |  |  | $ | 1,334 |
Goodwill and intangible assets | 364 |  |  | 4 |
Loss reserves | 108 |  |  | 69 |
Reverse mortgage interests | 44 |  |  | 70 |
Lease liability | 32 |  |  | 1 |
Accruals | 16 |  |  | 14 |
Restricted share-based compensation | 3 |  |  | 1 |
Partnership interests | 1 |  |  | 7 |
Excess interest expense | — |  |  | 10 |
Other, net | 12 |  |  | 5 |
Total deferred tax assets | 1,578 |  |  | 1,515 |
Deferred Tax Liabilities |  |  |
MSR amortization and mark-to-market, net | (181 | ) |  | (243 | )
Right-of-use assets | (29 | ) |  | — |
Depreciation and amortization, net | (12 | ) |  | (12 | )
Prepaid assets | (2 | ) |  | (1 | )
Total deferred tax liabilities | (224 | ) |  | (256 | )
Valuation allowance | (9 | ) |  | (295 | )
Net deferred tax assets | $ | 1,345 |  |  | $ | 964 |
The Company elected to account for the Global Intangible Low-Taxed Income (“GILTI”) tax expense in the period in which it is incurred. As a result, no deferred tax impact of GILTI has been provided in the consolidated financial statements. The Company files income tax returns in the U.S. federal jurisdiction and numerous U.S. state jurisdictions. With few exceptions, as of December 31, 2019, the Company is no longer subject to U.S. federal and state income tax examinations for tax years prior to 2015. As of December 31, 2019 and 2018, the Company had no unrecognized tax benefits recorded related to uncertain tax positions. The following is a tabular reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits, excluding interest and penalties, for the Predecessor:
| Predecessor
Unrecognized Tax Benefits | Seven Months Ended July 31, 2018 |  | Year Ended December 31, 2017
Balance - beginning of period | $ | 17 |  |  | $ | — |
Increases in tax positions of current year | — |  |  | 1 |
(Decreases)/Increases in tax positions of prior years | (17 | ) |  | 20 |
Settlements | — |  |  | (4 | )
Balance - end of period | $ | — |  |  | $ | 17 |
As of December 31, 2017, the Predecessor recorded $19 of unrecognized tax benefits related to uncertain tax positions, including $2 in interest and penalties. In the period ended March 31, 2018 the Predecessor took certain actions to remediate the uncertain tax position that existed as of the prior period. As a result, the Predecessor recognized all of the unrecognized tax benefits and recorded an income tax benefit of approximately $6, exclusive of any benefits related to interest and penalties in the period ended March 31, 2018.

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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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