XML 121 R21.htm IDEA: XBRL DOCUMENT
v2.4.0.6

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2012
Income Taxes |
13. | INCOME TAXES
Ambac files a consolidated Federal income tax return with its subsidiaries. Ambac and its subsidiaries also file separate or combined income tax returns in various states, local and foreign jurisdictions. The following are the major jurisdictions in which Ambac and its affiliates operate and the earliest tax years subject to examination:
Jurisdiction |  | Tax Year |
United States |  |  | 2005 |
New York State |  |  | 2008 |
New York City |  |  | 2011 |
United Kingdom |  |  | 2006 |
Italy |  |  | 2007 |
On February 24, 2012, Ambac, the Creditors’ Committee, Ambac Assurance, the Segregated Account, OCI, and the Rehabilitator submitted to the IRS and the Department of Justice a proposal (the “Offer Letter”) to settle the IRS dispute and related proceedings which includes the following terms: (i) a payment by Ambac Assurance and/or the Segregated Account of $100,000; (ii) a payment by Ambac of $1,900; (iii) the Ambac Consolidated Group will relinquish its claim to all loss carry-forwards resulting from losses on credit default swap contracts and arising on or before December 31, 2010 to the extent such loss carry-forwards exceed $3,400,000; and (iv) the IRS will be paid 12.5% and 17.5% of certain payments to Ambac by Ambac Assurance under the Amended TSA. Finality of the settlement will require the satisfaction of certain conditions and the approval of the United States and the Bankruptcy Court. On June 14, 2012, the Rehabilitation Court entered an order authorizing the Rehabilitator and the Segregated Account to proceed with the settlement. In December 2012 Ambac was informed that the Congressional Joint Committee on Taxation (the “Joint Committee”) completed its review of the terms of the settlement as set forth in the Offer Letter and that the Joint Committee has no objection to the offer and will issue a response of “no adverse criticism” subject to the satisfaction of certain conditions, including (a) execution of closing documentation acceptable to the United States, Ambac and the other parties to the settlement, and (b) execution of a supplemental Offer Letter relating to the timing of payments by Ambac and Ambac Assurance and/or the Segregated Account of the settlement consideration discussed above. There can be no assurance that the settlement will be finalized on the terms described above, if at all, or as to the timing of any such settlement. Nevertheless, this possible settlement has been provided for in accordance with ASC Topic 740, Income Taxes. Ambac’s provision for income taxes charged to income from continuing operations is comprised of the following:
|  | 2012 |  |  | 2011 |
Current taxes |  | $ | 1,263 |  |  | $ | 77,422 |
Deferred taxes |  |  | 1,586 |  |  |  | — |
|  | $ | 2,849 |  |  | $ | 77,422 |
The total effect of income taxes on net income and stockholders’ equity for the years ended December 31, 2012 and 2011 is as follows:
|  | 2012 |  |  | 2011 |
Total income taxes charged to net income |  | $ | 2,849 |  |  | $ | 77,422 |
Income taxes charged (credited) to stockholders’ equity: |  |  |  |  |  |  |  |
Unrealized gains (losses) on investment securities |  |  | 18,448 |  |  |  | 58,597 |
Valuation Allowance to Equity |  |  | (18,448 | ) |  |  | (58,597 | )
Other |  |  | — |  |  |  | — |
Total charged to stockholders’ equity: |  |  | — |  |  |  | — |
Total effect of income taxes |  | $ | 2,849 |  |  | $ | 77,422 |
The tax provisions in the accompanying Consolidated Statements of Total Comprehensive Loss reflect effective tax rates differing from prevailing Federal corporate income tax rates. The following is a reconciliation of these differences:
|  | 2012 |  |  | % |  |  | 2011 |  |  | % |
Tax on income from continuing operations at statutory rate |  | ($ | 89,777 | ) |  |  | 35.0 | % |  | ($ | 659,032 | ) |  |  | 35.0 | %
Reductions in expected tax resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Tax-exempt interest |  |  | (17,795 | ) |  |  | 6.9 | % |  |  | (19,872 | ) |  |  | 1.1 | %
Valuation allowance |  |  | 107,502 |  |  |  | (41.9 | )% |  |  | 685,787 |  |  |  | (36.4 | )%
Net addition to (release of) tax reserves |  |  | — |  |  |  | — | % |  |  | 73,850 |  |  |  | (3.9 | )%
Other, net |  |  | 2,919 |  |  |  | (1.1 | )% |  |  | (3,311 | ) |  |  | 0.2 | %
Tax expense on income from continuing operations |  | $ | 2,849 |  |  |  | (1.1 | )% |  | $ | 77,422 |  |  |  | (4.1 | )%
The tax effects of temporary differences that give rise to significant portions of the deferred tax liabilities and deferred tax assets at December 31, 2012 and 2011 are presented below:
|  | 2012 |  |  | 2011 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Variable interest entities |  | $ | 22,015 |  |  | $ | 28,773 |
Deferred acquisition costs |  |  | 57,262 |  |  |  | 65,238 |
Unearned premiums and credit fees |  |  | 54,539 |  |  |  | 41,342 |
Other |  |  | 17,251 |  |  |  | 22,481 |
Total deferred tax liabilities |  |  | 151,067 |  |  |  | 157,834 |
Deferred tax assets: |  |  |  |  |  |  |  |
Unrealized losses & impairments on investments |  |  | 12,605 |  |  |  | 47,919 |
Net operating loss and capital carryforward |  |  | 2,857,926 |  |  |  | 2,751,802 |
Loss reserves |  |  | 522,502 |  |  |  | 514,150 |
Compensation |  |  | 7,184 |  |  |  | 6,693 |
Other |  |  | 5,687 |  |  |  | 6,672 |
Sub-total deferred tax assets |  |  | 3,405,904 |  |  |  | 3,327,236 |
Valuation allowance |  |  | 3,256,423 |  |  |  | 3,169,402 |
Total deferred tax assets |  |  | 149,481 |  |  |  | 157,384 |
Net deferred tax liability |  | $ | (1,586 | ) |  | $ | — |
A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2012 and 2011 is as follows:
|  | 2012 |  |  | 2011 |
Balance at January 1, |  | $ | 96,900 |  |  | $ | 23,050 |
Increases related to prior year tax positions |  |  | — |  |  |  | 73,850 |
Decreases related to prior year tax positions |  |  | — |  |  |  | — |
Balance at December 31, |  | $ | 96,900 |  |  | $ | 96,900 |
Included in these balances at December 31, 2012 and 2011 are $96,900 and $96,900, respectively, of unrecognized tax benefits that, if recognized, would affect the effective tax rate. During 2012 and 2011, Ambac recognized interest of approximately $0 and $0, respectively. Ambac had approximately $0 and $0 for the payment of interest accrued at December 31, 2012 and 2011, respectively. As a result of the development of additional losses and the related impact on the Company’s cash flows, management believes it is more likely than not that the Company will not generate sufficient taxable income to recover the deferred tax operating asset. As of December 31, 2012, the company had a valuation allowance of $3,256,423. As of December 31, 2012 Ambac has an ordinary U. S. federal net operating tax carryforward of approximately $7,287,114 which if not utilized will begin expiring in 2029 and will fully expire in 2034. As disclosed above, to settle the IRS Dispute Ambac has proposed to relinquish its claim to all net operating loss carry-forwards resulting from losses on credit default swap contracts arising on or before December 31, 2010 to the extent such net operating loss carry-forwards exceed $3,400,000. The exact amount of the loss carry-forward relinquishment will be determined upon the execution of a closing agreement.

X
- 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 Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration