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Note 13 - Income Taxes Level 1 (Notes) | 12 Months Ended
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Dec. 31, 2015
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] | Income Taxes The components of our consolidated income tax provision (benefit) from continuing operations are as follows:
| Year Ended December 31,
(In thousands) | 2015 |  | 2014 |  | 2013
Current provision (benefit) | $ | 120 |  |  | $ | (26,575 | ) |  | $ | 352 |
Deferred provision (benefit) | 156,170 |  |  | (825,843 | ) |  | (31,847 | )
Total income tax provision (benefit) | $ | 156,290 |  |  | $ | (852,418 | ) |  | $ | (31,495 | )
The reconciliation of taxes computed at the statutory tax rate of 35% to the provision (benefit) for income taxes on continuing operations is as follows:
| Year Ended December 31,
(In thousands) | 2015 |  | 2014 |  | 2013
Provision (benefit) for income taxes computed at the statutory tax rate | $ | 153,240 |  |  | $ | 142,504 |  |  | $ | (60,671 | )
Change in tax resulting from: |  |  |  |  |  |  |  |
Tax-exempt municipal bond interest and dividends received deduction (net of proration) | (1,085 | ) |  | (1,286 | ) |  | (1,494 | )
Repurchase premium on convertible notes | (6,674 | ) |  | — |  |  | — |
Foreign tax expense (benefit) | 357 |  |  | 270 |  |  | (1 | )
State tax (benefit) expense | (7,619 | ) |  | (451 | ) |  | 949 |
Unrecognized tax expense | 5,233 |  |  | 407 |  |  | 1,696 |
Valuation allowance | 11,931 |  |  | (995,008 | ) |  | 24,546 |
Other, net | 907 |  |  | 1,146 |  |  | 3,480 |
Provision (benefit) for income taxes | $ | 156,290 |  |  | $ | (852,418 | ) |  | $ | (31,495 | )
The significant components of our net deferred tax assets and liabilities from continuing operations are summarized as follows:
| December 31,
(In thousands) | 2015 |  | 2014
DTAs: |  |  |
Accrued expenses | $ | 38,456 |  |  | $ | 60,858 |
Unearned premiums | 87,609 |  |  | 82,800 |
NOL | 342,002 |  |  | 475,095 |
Differences in fair value of financial instruments | 7,767 |  |  | — |
Net unrealized loss on investments | 9,801 |  |  | — |
State and Local NOL Carryforwards | 46,914 |  |  | 34,851 |
Partnership investments | 74,309 |  |  | 74,179 |
Loss reserves | 4,720 |  |  | 6,362 |
Outside basis difference of investment in subsidiary | — |  |  | 14,084 |
Alternative minimum tax credit carryforward | 5,923 |  |  | 2,286 |
Other | 34,241 |  |  | 47,991 |
Total DTAs | 651,742 |  |  | 798,506 |
DTLs: |  |  |  |  |
Convertible and other long-term debt | 16,654 |  |  | 38,750 |
Net unrealized gain on investments | — |  |  | 26,145 |
Depreciation | 6,397 |  |  | — |
Other | 14,516 |  |  | 15,536 |
Total DTLs | 37,567 |  |  | 80,431 |
Less: Valuation allowance | 36,230 |  |  | 17,874 |
Net DTA | $ | 577,945 |  |  | $ | 700,201 |
As of December 31, 2015, we recorded a net current income tax payable of approximately $124.0 million, which primarily consists of liabilities related to applying the standards of accounting for uncertainty in income taxes and a current federal income tax recoverable of approximately $9.7 million. Before consideration of uncertain tax positions, we have approximately $1.1 billion of U.S. NOL carryforwards, $0.9 million of foreign tax credit carryforwards and approximately $5.9 million of alternative minimum tax credit carryforwards as of December 31, 2015. To the extent not utilized, the U.S. NOL carryforwards will expire during tax years 2029 through 2032 and the foreign tax credit carryforwards will expire during tax years 2019 and 2020. The alternative minimum tax credit carryforwards have no expiration date. Certain entities within our consolidated group have also generated DTAs of approximately $46.9 million relating to state and local NOL carryforwards, which if unutilized, will expire during various future tax periods. At each balance sheet date, we assess our need for a valuation allowance against our DTA, based on whether it is more likely than not that all or some portion of our DTA will not be realized. We weigh the potential effect of positive and negative evidence, with the weight given to the evidence commensurate with the extent to which it can be objectively verified. In the fourth quarter of 2014, we released substantially all of our previously established DTA valuation allowance based on our analysis of significant positive, objectively verifiable evidence that outweighed all negative evidence and supported a conclusion that it was more-likely-than-not that substantially all of the Company’s DTAs will be realized. In evaluating the weight of evidence, we considered the concept of “core earnings” and the potential profitability of such earnings. Forecasts related to our core business were significantly more positive than in prior years, absent the degree of uncertainty existing in previous years and given the ability to generate profits based on our improved book of business. In evaluating negative evidence, consideration was given to the extensive U.S. NOL Carryforward period. Based on management’s projections, including adverse scenarios considered in our sensitivity analysis, we expect to fully utilize our U.S. NOL Carryforward of approximately $1.1 billion within several years. Additionally, we currently have no Internal Revenue Code Section 382 (“Section 382”) or other limitations on our ability to utilize our existing NOL. We have determined that certain non-insurance entities within Radian may continue to generate taxable losses on a separate company basis in the near term and may not be able to fully utilize certain state and local NOLs on their state and local tax returns. Therefore, with respect to DTAs relating to these state and local NOLs, we retained a valuation allowance of approximately $17.9 million at December 31, 2014 and $36.2 million at December 31, 2015. Our ability to fully use our tax assets such as NOLs and tax credit Carryforwards would be substantially limited if we experience an “ownership change” within the meaning of Section 382. Section 382 rules governing when a change in ownership occurs are complex and subject to interpretation; however, in general, an ownership change would occur if any five percent shareholders, as defined under Section 382, collectively increase their ownership by more than 50 percentage points over a rolling three-year period. As of December 31, 2015, we have not experienced an ownership change under Section 382. However, if we were to experience a change in ownership under Section 382 in a future period, then we may be limited in our ability to fully utilize our NOL and tax credit Carryforwards in future periods. On October 8, 2009, we adopted the Plan, which, as amended, was approved by our stockholders at our 2010 and 2013 annual meetings. We also adopted the Bylaw Amendment and at our 2010 annual meeting, our stockholders approved the Charter Amendment, which our stockholders reapproved at our 2013 annual meeting. The Plan, the Bylaw Amendment and the Charter Amendment were implemented in order to protect our ability to utilize our NOLs and other tax assets and prevent an “ownership change” under U.S. federal income tax rules by restricting or discouraging certain transfers of our common stock that would: (i) create or result in a person becoming a five-percent shareholder under Section 382; or (ii) increase the stock ownership of any existing five-percent shareholder under Section 382. We expect to present the Plan and the Charter Amendment to our stockholders for re-approval at the 2016 annual meeting of stockholders. If our stockholders do not re-approve these measures at our 2016 annual meeting of stockholders, neither the Charter Amendment nor the Bylaw Amendment will remain effective and the transfer restrictions they impose, as well as the Plan, would terminate on the close of business on the second business day following adjournment of the annual meeting. As previously disclosed, we are contesting adjustments resulting from the examination by the IRS of our 2000 through 2007 consolidated federal income tax returns. The IRS opposes the recognition of certain tax losses and deductions that were generated through our investment in a portfolio of non-economic REMIC residual interests and has proposed denying the associated tax benefits of these items. We appealed these proposed adjustments to Appeals and made “qualified deposits” with the U.S. Treasury of approximately $85 million in June 2008 relating to the 2000 through 2004 tax years and approximately $4 million in May 2010 relating to the 2005 through 2007 tax years in order to avoid the accrual of incremental above-market-rate interest with respect to the proposed adjustments. We attempted to reach a compromised settlement with Appeals, but in September 2014 we received Notices of Deficiency covering the 2000 through 2007 tax years that assert unpaid taxes and penalties of approximately $157 million. The Deficiency Amount has not been reduced to reflect our NOL carryback ability. As of December 31, 2015, there also would be interest of approximately $125 million related to these matters. Depending on the outcome, additional state income taxes, penalties and interest (estimated in the aggregate to be approximately $32 million as of December 31, 2015) also may become due when a final resolution is reached. The Notices of Deficiency also reflected additional amounts due of approximately $105 million, which are primarily associated with the disallowance of the previously filed carryback of our 2008 NOL to the 2006 and 2007 tax years. We currently believe that the disallowance of our 2008 NOL carryback is a precautionary position by the IRS and that we will ultimately maintain the benefit of this NOL carryback claim. On December 3, 2014, we petitioned the U.S. Tax Court to litigate the Deficiency Amount. On September 1, 2015, we received a notice that the case had been scheduled for trial. However, the parties jointly filed, and the U.S. Tax Court approved, motions for continuance in this matter to postpone the trial date. The litigation could take several years to resolve and may result in substantial legal expenses. We can provide no assurance regarding the outcome of any such litigation or whether a compromised settlement with the IRS will ultimately be reached. We believe that an adequate provision for income taxes has been made for the potential liabilities that may result from this matter. However, if the ultimate resolution of this matter produces a result that differs materially from our current expectations, there could be a material impact on our effective tax rate, results of operations and cash flows. As of December 31, 2015, we have approximately $66.3 million of unrecognized tax benefits, including approximately $61.7 million of interest and penalties, that would affect the effective tax rate, if recognized. Our policy for the recognition of interest and penalties associated with uncertain tax positions is to record such items as a component of our income tax provision (benefit), of which approximately $0.8 million, $2.5 million and $5.4 million were recorded for the years ended December 31, 2015, 2014 and 2013, respectively. A reconciliation of the beginning and ending unrecognized tax benefits is as follows:
| Year Ended December 31,
(In thousands) | 2015 |  | 2014
Balance at beginning of period | $ | 120,223 |  |  | $ | 119,236 |
Tax positions related to the current year: |  |  |  |  |
Increases | 6,461 |  |  | 2,352 |
Decreases | (336 | ) |  | — |
Tax positions related to prior years: |  |  |  |  |
Increases | 22,734 |  |  | 24,361 |
Decreases | (2,102 | ) |  | (1,546 | )
Lapses of applicable statute of limitation | (22,734 | ) |  | (24,180 | )
Balance at end of period | $ | 124,246 |  |  | $ | 120,223 |
In previous years, we took a return position in various jurisdictions that we are not required to remit taxes with regard to the income generated from our investment in certain partnership interests. Although we believe that these tax positions are more likely than not to succeed if adjudicated, measurement of the potential amount of liability for state and local taxes and the potential for penalty and interest thereon is performed on a quarterly basis. Our net unrecognized tax benefits related to prior years increased by approximately $20.6 million during 2015. This net increase primarily reflects the impact of unrecognized tax benefits associated with our recognition of certain premium income. Although unrecognized tax benefits for this item decreased by approximately $22.7 million due to the expiration of the applicable statute of limitations for the taxable period ended December 31, 2011, the related amounts continued to impact subsequent years resulting in a corresponding increase to the unrecognized tax benefits related primarily to the 2012 taxable year. As discussed above, in December 2014, we petitioned the U.S. Tax Court to litigate the IRS Notices of Deficiency received on September 4, 2014 and the parties have filed motions for continuance, which may postpone the trial date. Over the next 12 months, if we determine that a compromised settlement cannot be reached with the IRS, then it is estimated that approximately $73.5 million of unrecognized tax benefits in the above tabular reconciliation may be reversed pursuant to the accounting standard for uncertain tax positions. In the event we are not successful in defense of our tax positions taken for U.S. federal income tax purposes, and for which we have recorded unrecognized tax benefits, then such adjustments originating in NOL or NOL carryback years may serve as a reduction to our existing NOL. The following calendar tax years, listed by major jurisdiction, remain subject to examination:
U.S. Federal Corporation Income Tax (1) | 2000 - 2007, 2012 - 2014
Significant State and Local Jurisdictions (2) | 1999 - 2014
_________________________
(1) | For the 2000 through 2007 calendar tax years, we petitioned the U.S. Tax Court to litigate the IRS Notices of Deficiency resulting from the examination of our 2000 through 2007 consolidated federal income tax returns. This litigation relates to the recognition of certain tax benefits associated with our investment in a portfolio of non-economic REMIC residual interests.
(2) | Arizona, California, Florida, Georgia, New York, Ohio, Pennsylvania and New York City.

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