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Federal Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Federal Income Taxes | Federal Income Taxes The federal income tax expense (benefit) on continuing operations (in millions) was as follows:
| For the Years Ended December 31,
| 2024 |  | 2023 |  | 2022
Current | $ | 6 |  |  | $ | (3) |  |  | $ | 3 |
Deferred | 741 |  |  | (393) |  |  | 364 |
Federal income tax expense (benefit) | $ | 747 |  |  | $ | (396) |  |  | $ | 367 |
A reconciliation of the effective tax rate differences (in millions) was as follows:
| For the Years Ended December 31,
| 2024 |  | 2023 |  | 2022
Income (loss) before taxes | $ | 4,022 |  |  | $ | (1,148) |  |  | $ | 1,725 |
Federal statutory rate | 21 | % |  | 21 | % |  | 21 | %
Federal income tax expense (benefit) at federal statutory rate | 845 |  |  | (241) |  |  | 362 |
Effect of: |  |  |  |  |
Tax-preferred investment income (1) | (32) |  |  | (126) |  |  | (90) |
Tax credits | (39) |  |  | (40) |  |  | (42) |
Excess tax expense (benefit) from stock-based |  |  |  |  |
compensation | 3 |  |  | 4 |  |  | (1) |
Goodwill impairment | – |  |  | – |  |  | 133 |
Release of uncertain tax positions | (41) |  |  | – |  |  | – |
Other items | 11 |  |  | 7 |  |  | 5 |
Federal income tax expense (benefit) | $ | 747 |  |  | $ | (396) |  |  | $ | 367 |
Effective tax rate | 19 | % |  | 34 | % |  | 21 | %
(1) Relates primarily to separate account dividends eligible for the dividends-received deduction. The federal income tax asset (liability) (in millions) was as follows:
| As of December 31,
| 2024 |  | 2023
Current | $ | 107 |  |  | $ | 112 |
Deferred | 604 |  |  | 929 |
Total federal income tax asset (liability) | $ | 711 |  |  | $ | 1,041 |
Significant components of our deferred tax assets and liabilities (in millions) were as follows:
| As of December 31,
| 2024 |  | 2023
Deferred Tax Assets |  |  |
Insurance liabilities and reinsurance-related balances | $ | 1,856 |  |  | $ | 1,900 |
Net unrealized loss on fixed maturity AFS securities | 2,164 |  |  | 1,826 |
Reinsurance-related embedded derivative liabilities | 6 |  |  | 116 |
Compensation and benefit plans | 206 |  |  | 184 |
Intangibles | 17 |  |  | 18 |
Net unrealized loss on trading securities | 30 |  |  | 33 |
Tax credits | 169 |  |  | 131 |
Net operating losses | 478 |  |  | 87 |
Capital losses | 56 |  |  | 93 |
Total deferred tax assets | $ | 4,982 |  |  | $ | 4,388 |
Deferred Tax Liabilities |  |  |
DAC and VOBA | $ | 1,638 |  |  | $ | 1,744 |
Investment activity | 1,486 |  |  | 617 |
Deferred loss on reinsurance | 474 |  |  | 465 |
MRB-related activity | 743 |  |  | 429 |
Other | 37 |  |  | 204 |
Total deferred tax liabilities | $ | 4,378 |  |  | $ | 3,459 |
Net deferred tax asset (liability) | $ | 604 |  |  | $ | 929 |
As of December 31, 2024, we have $169 million of federal income tax credits that can be carried forward to 2030 through 2034. As of December 31, 2024, we have $2.3 billion of net operating losses to carry forward to future years. As of December 31, 2024, we have $267 million of capital losses to carry forward to future years. The net operating losses arose in tax years 2018, 2021 and 2024 and, under the Tax Cuts and Jobs Act changes, have an unlimited carryforward period. The capital losses arose in tax year 2023 and can be carried back three years and forward five years. As a result, management believes that it is more likely than not that the deferred tax asset associated with the loss carryforwards will be realized. Inclusive of the tax attribute for the net operating losses, although realization is not assured, management believes that it is more likely than not that we will realize the benefits of all our deferred tax assets, and, accordingly, no valuation allowance has been recorded. We are subject to examination by U.S. federal, state, local and non-U.S. income authorities. With few exceptions for limited scope review, we are no longer subject to U.S. federal examinations for years before 2020. In the first quarter of 2021, the Internal Revenue Service commenced an examination of our 2014, 2015, 2016 and 2017 refund claims. We are currently under examination by several state and local taxing jurisdictions; however, we do not expect these examinations will materially impact us. A reconciliation of the gross unrecognized federal tax benefits (in millions) was as follows:
| For the Years Ended December 31,
| 2024 |  | 2023
Balance as of beginning-of-year | $ | 87 |  |  | $ | 68 |
Decreases for prior year tax positions | (48) |  |  | (6) |
Increases for prior year tax positions | – |  |  | 25 |
Balance as of end-of-year | $ | 39 |  |  | $ | 87 |
As of December 31, 2024 and 2023, $33 million and $75 million, respectively, of our gross unrecognized federal tax benefits presented above, if recognized, would have affected our federal income tax expense (benefit) and our effective tax rate. We anticipate that it is reasonably possible that unrecognized tax benefits will decrease by $2 million by the end of 2025. We recognize interest and penalties accrued, if any, related to unrecognized tax benefits as a component of tax expense. For the years ended December 31, 2024, 2023 and 2022, we recognized no interest and penalty expense (benefit), and there was no accrued interest and penalty expense related to the unrecognized tax benefits as of December 31, 2024 and 2023. In August 2022, the Inflation Reduction Act of 2022 was passed by the U.S. Congress and signed into law by President Biden. The Inflation Reduction Act of 2022 established a new 15% corporate alternative minimum tax for corporations whose average adjusted net income for any consecutive three-year period beginning after December 31, 2022, exceeds $1.0 billion. The Inflation Reduction Act of 2022 also established a 1% excise tax on stock repurchases made by publicly traded corporations. Both provisions became effective for tax years beginning after December 31, 2022. We determined that we were not within the scope of the corporate alternative minimum tax for 2024.

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