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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income Tax Provision The components of our consolidated income tax provision from continuing operations are as follows.
Income tax provision |  |  |  |  |  |
|  | Years Ended December 31,
(In thousands) |  | 2022 |  | 2021 |  | 2020
Current provision (benefit) |  | $ | 2,920 |  |  | $ | 2,368 |  |  | $ | (16,264) |
Deferred provision |  | 206,925 |  |  | 161,793 |  |  | 102,079 |
Total income tax provision |  | $ | 209,845 |  |  | $ | 164,161 |  |  | $ | 85,815 |
The reconciliation of taxes computed at the statutory tax rate of 21% in 2022, 2021 and 2020 to the provision for income taxes is as follows.
Reconciliation of provision for income taxes |  |  |  |  |  |
|  | Years Ended December 31,
(In thousands) |  | 2022 |  | 2021 |  | 2020
Provision for income taxes computed at the statutory tax rate |  | $ | 200,084 |  |  | $ | 160,615 |  |  | $ | 100,683 |
Change in tax resulting from: |  |  |  |  |  |
State tax provision (benefit), net of federal impact |  | 20,869 |  |  | (1,714) |  |  | (9,062) |
Valuation allowance |  | (13,791) |  |  | 5,700 |  |  | 11,290 |
Uncertain tax positions |  | (1,076) |  |  | 853 |  |  | (14,784) |
Other, net |  | 3,759 |  |  | (1,293) |  |  | (2,312) |
Provision for income taxes |  | $ | 209,845 |  |  | $ | 164,161 |  |  | $ | 85,815 |
Deferred Tax Assets and Liabilities The significant components of our net deferred tax assets and liabilities from continuing operations are summarized as follows.
Deferred tax assets and liabilities |  |  |  |
|  | December 31,
(In thousands) |  | 2022 |  | 2021
Deferred tax assets |  |  |  |
Net unrealized loss on investments |  | $ | 121,497 |  |  | $ | — |
State income taxes, net of federal impact |  | 58,031 |  |  | 77,637 |
Goodwill and intangibles |  | 30,782 |  |  | 29,723 |
Unearned premiums |  | 26,108 |  |  | 23,699 |
Accrued expenses |  | 11,913 |  |  | 16,584 |
Lease liability |  | 10,371 |  |  | 11,240 |
Differences in fair value of financial instruments |  | 5,998 |  |  | — |
Loss reserves |  | 3,102 |  |  | 6,286 |
Other |  | 32,328 |  |  | 27,932 |
Total deferred tax assets |  | $ | 300,130 |  |  | $ | 193,101 |
Deferred tax liabilities |  |  |  |
Contingency reserve |  | $ | 587,722 |  |  | $ | 368,000 |
Depreciation |  | 10,031 |  |  | 12,775 |
Net unrealized gain on investments |  | — |  |  | 31,876 |
Differences in fair value of financial instruments |  | — |  |  | 7,763 |
Other |  | 23,823 |  |  | 26,768 |
Total deferred tax liabilities |  | 621,576 |  |  | 447,182 |
Less: Valuation allowance |  | 69,637 |  |  | 83,428 |
Net deferred tax asset (liability) |  | $ | (391,083) |  |  | $ | (337,509) |
Current and Deferred Taxes As of December 31, 2022 and 2021, our current federal income tax liability was $21.4 million and $19.9 million, respectively, which primarily relates to applying the standards of accounting for uncertainty in income taxes, and is included as a component of other liabilities in our consolidated balance sheets. We are required to establish a valuation allowance against our deferred tax assets when it is more likely than not that all or some portion of our deferred tax assets will not be realized. At each balance sheet date, we assess our need for a valuation allowance, and this assessment is based on all available evidence, both positive and negative. This requires management to exercise judgment and make assumptions regarding whether our deferred tax assets will be realized in future periods. Certain entities within our consolidated group have generated net deferred tax assets relating primarily to state and local NOL carryforwards which, if unutilized, will expire during various future tax periods. We have determined that certain of these entities may continue to generate taxable losses on a separate company basis in the near term and may not be able to fully utilize certain of their state and local NOLs on their state and local tax returns. Therefore, we have concluded a valuation allowance is required with respect to deferred tax assets relating to these state and local NOLs and other state timing adjustments. As of December 31, 2022 and 2021, this valuation allowance was $69.6 million and $83.4 million, respectively. In addition, as of December 31, 2022, we have generated deferred tax assets related to unrealized capital losses, and we consider it more likely than not that these assets will be realized. We will continue to monitor the level of these losses and our overall ability to realize the related deferred tax assets in the coming quarters. As a mortgage guaranty insurer, we are eligible for a tax deduction, subject to certain limitations, under Internal Revenue Code Section 832(e) for amounts required by state law or regulation to be set aside in statutory contingency reserves. The deduction is allowed only to the extent that, in conjunction with quarterly federal tax payment due dates, we purchase non-interest-bearing U.S. Mortgage Guaranty Tax and Loss Bonds issued by the U.S. Department of the Treasury in an amount equal to the tax benefit derived from deducting any portion of our statutory contingency reserves. As of December 31, 2022 and 2021, we held $596.4 million and $354.1 million, respectively, of these bonds, which are included as prepaid federal income taxes in our consolidated balance sheets. The corresponding deduction of our statutory contingency reserves resulted in the recognition of a net deferred tax liability. See Note 16 for additional information about our U.S. Mortgage Guaranty Tax and Loss Bonds. On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (the “IRA”), which, among other things, implemented a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases that occur after December 31, 2022, and several tax incentives to promote clean energy. Currently, we do not believe that this new minimum tax or the other income tax provisions of the IRA will have a material impact on our consolidated financial statements. Unrecognized Tax Benefits As of December 31, 2022, we have $2.8 million of net unrecognized tax benefits, including $2.1 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, of which $0.2 million of benefit and $0.7 million of expense were recorded for the years ended December 31, 2022 and 2021, respectively. A reconciliation of the beginning and ending gross unrecognized tax benefits is as follows.
Reconciliation of gross unrecognized tax benefits |  |  |  |
|  | Years Ended December 31,
(In thousands) |  | 2022 |  | 2021
Balance at beginning of period |  | $ | 19,888 |  |  | $ | 20,249 |
Tax positions related to the current year: |  |  |  |
Increases |  | 1,791 |  |  | 267 |
Decreases |  | — |  |  | (858) |
Tax positions related to prior years: |  |  |  |
Increases |  | 17,666 |  |  | 230 |
Decreases |  | (17) |  |  | — |
Lapses of applicable statute of limitation |  | (18,518) |  |  | — |
Balance at end of period |  | $ | 20,810 |  |  | $ | 19,888 |
Our gross unrecognized tax benefits increased by $0.9 million from December 31, 2021, to December 31, 2022, primarily due to the impact of unrecognized tax benefits associated with our recognition of certain premium income, partially offset by reductions related to lapses of the statute of limitations. Although unrecognized tax benefits decreased due to statute expirations, certain amounts for premium income recognition continued to impact subsequent years, resulting in a corresponding increase in unrecognized tax benefits related to premium income recognition. Over the next 12 months, our unrecognized tax benefits may decrease by approximately $0.4 million due to the expiration of the applicable statute of limitations relating to the 2019 tax year. The statute of limitations related to our federal consolidated income tax return remains open for tax years 2019-2022. Additionally, among the entities within our consolidated group, various tax years remain open to potential examination by state and local taxing authorities.

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