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Income Taxes | 6 Months Ended
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Jun. 30, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | 11. 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 subsidiaries operate and the earliest tax years subject to examination:
Jurisdiction | Tax Year
United States | 2010
New York State | 2013
New York City | 2013
United Kingdom | 2015
Italy | 2013
As of June 30, 2018 Ambac had U.S. federal ordinary net loss carryforwards totaling approximately $3,451,870, which, if not utilized, will begin expiring in 2029, and will fully expire in 2032. The tax effects of temporary differences that give rise to significant portions of the deferred tax liabilities and deferred tax assets at June 30, 2018 and December 31, 2017 are presented below:
| June 30, 2018 |  | December 31, 2017
Deferred tax liabilities: |  |  |
Insurance intangible | $ | 165,104 |  |  | $ | 177,864 |
Debentures | — |  |  | 28,387 |
Unearned premiums and credit fees | 50,733 |  |  | 51,485 |
Variable interest entities | 20,819 |  |  | 22,817 |
Investments | 34,920 |  |  | 28,798 |
Other | 10,248 |  |  | 9,402 |
Total deferred tax liabilities | 281,824 |  |  | 318,753 |
Deferred tax assets: |  |  |
Net operating loss and capital carryforward | 724,893 |  |  | 775,917 |
Loss reserves | 253,282 |  |  | 264,624 |
Debentures | 29,577 |  |  | — |
Compensation | 7,731 |  |  | 5,585 |
Other | 1,819 |  |  | 2,140 |
Subtotal deferred tax assets | 1,017,302 |  |  | 1,048,266 |
Valuation allowance | 768,259 |  |  | 763,172 |
Total deferred tax assets | 249,043 |  |  | 285,094 |
Net deferred tax (liability) | $ | (32,781 | ) |  | $ | (33,659 | )
In accordance with the Income Tax Topic of the ASC, a valuation allowance is recognized if, based on the weight of available evidence, it is more-likely-than-not that some, or all, of the deferred tax asset will not be realized. As a result of the risks and uncertainties associated with future operating results, management believes it is more likely than not that the Company will not generate sufficient U.S. federal, state and/or local taxable income to recover the deferred tax operating assets and therefore maintains a full valuation allowance. In accordance with SEC issued guidance (SAB 118), which provides a one-year measurement period for companies to finalize the accounting for the impact of the TCJA, Ambac continues to record the income tax effect of provisions related to the TCJA's repatriation of Ambac UK's earnings and profits and limitation's on executive compensation as estimates. U.S. and foreign components of pre-tax income were as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
U.S. | $ | 13,104 |  |  | $ | (25,177 | ) |  | $ | 310,846 |  |  | $ | (217,050 | )
Foreign | (6,796 | ) |  | 39,169 |  |  | 3,771 |  |  | 125,182 |
Total | $ | 6,308 |  |  | $ | 13,992 |  |  | $ | 314,617 |  |  | $ | (91,868 | )
The components of the provision for income taxes were as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
Current taxes |  |  |  |  |  |  |
U. S. federal | $ | — |  |  | $ | 617 |  |  | $ | — |  |  | $ | 617 |
U.S. state and local | 645 |  |  | (320 | ) |  | 1,682 |  |  | — |
Foreign | 2,544 |  |  | 6,585 |  |  | 2,505 |  |  | 25,846 |
Current taxes | 3,189 |  |  | 6,882 |  |  | 4,187 |  |  | 26,463 |
Deferred taxes |  |  |  |  |  |  |
Foreign | (1,194 | ) |  | — |  |  | 413 |  |  | — |
Deferred taxes | (1,194 | ) |  | — |  |  | 413 |  |  | — |
Provision for income taxes | $ | 1,995 |  |  | $ | 6,882 |  |  | $ | 4,600 |  |  | $ | 26,463 |
NOL Usage Pursuant to the intercompany tax sharing agreement, to the extent Ambac Assurance generates taxable income after September 30, 2011, which is offset with "Allocated NOLs" of $3,650,000, it is obligated to make payments (“Tolling Payments”), subject to certain credits, to Ambac in accordance with the following NOL usage table, where the “Applicable Percentage” is applied to the aggregate amount of federal income tax liability that would have been paid if the Allocated NOLs were not available. Pursuant to the Closing Agreement between Ambac and the Internal Revenue Service ("IRS"), the IRS will receive 12.5% of Tier C and 17.5% of Tier D payments, if made. NOL Usage Table
NOL Usage Tier | Allocated NOLs |  | Applicable Percentage
A | The first | $479,000 |  | 15%
B | The next | $1,057,000 | after Tier A | 40%
C | The next | $1,057,000 | after Tier B | 10%
D | The next | $1,057,000 | after Tier C | 15%
As a result of positive taxable income at Ambac Assurance in 2017, Ambac has accrued approximately $30,496 in tax tolling payments. In May 2018, Ambac executed a waiver under the intercompany tax sharing agreement pursuant to which Ambac Assurance was relieved of the requirement to make this payment by June 1, 2018. Ambac has also agreed to continue to defer the tolling payment for the use of net operating losses by Ambac Assurance until such time as OCI consents to the payment. For the six months ended June 30, 2018, Ambac Assurance generated $229,001 of taxable income, utilizing the remaining $168,205 balance of the $1,057,000 allocated Tier B NOL, and resulting in additional accrued Tolling Payments, net of applicable credits, of $14,129, which, assuming Ambac Assurance's cumulative full year 2018 taxable income does not fall below $168,205, will be paid to Ambac in 2019. Ambac Assurance must generate $238,095 of taxable income to offset the $5,000 Tier C credit. As of June 30, 2018, Ambac Assurance will need to generate additional taxable income of $177,299 to offset the remaining balance of the $5,000 Tier C credit, at which point additional cumulative income will begin to accrue additional tolling payments to Ambac until all the of $3,650,000 Allocated Ambac Assurance NOLs have been utilized, expire, or otherwise become unavailable. As of June 30, 2018, the remaining balance of the $3,451,870 NOL allocated to Ambac Assurance was $2,053,204. As of June 30, 2018 Ambac's NOL was $1,398,666.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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