XML 149 R22.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 14. INCOME TAXES AFG files a consolidated Federal income tax return with its subsidiaries. Ambac also files separate or combined income tax returns in various states, local and foreign jurisdictions. The following are the major jurisdictions in which Ambac operates and the earliest tax years subject to examination:
Jurisdiction | Tax Year
United States | 2010
New York State | 2013
New York City | 2015
United Kingdom | 2016
Italy | 2015
Consolidated Pretax Income (Loss) U.S. and foreign components of pre-tax income (loss) were as follows:
Year Ended December 31, | 2019 |  | 2018 |  | 2017
U.S. | $ | (174 | ) |  | $ | 264 |  |  | $ | (451 | )
Foreign | (9 | ) |  | 8 |  |  | 167 |
Total | $ | (183 | ) |  | $ | 273 |  |  | $ | (284 | )
Provision (Benefit) for Income Taxes The components of the provision (benefit) for income taxes were as follows:
Year Ended December 31, | 2019 |  | 2018 |  | 2017
Current taxes |  |  |  |  |
U. S. federal | $ | — |  |  | $ | (2 | ) |  | $ | (30 | )
U.S. state and local | (3 | ) |  | 2 |  |  | 2 |
Foreign | 37 |  |  | (1 | ) |  | 41 |
Total current taxes | 34 |  |  | — |  |  | 13 |
Deferred taxes |  |  |  |  |
Foreign | (1 | ) |  | 5 |  |  | 31 |
Total deferred taxes | $ | (1 | ) |  | $ | 5 |  |  | $ | 31 |
Provision for income taxes | $ | 32 |  |  | $ | 5 |  |  | $ | 44 |
The total effect of income taxes on net income and stockholders’ equity for the years ended December 31, 2019, 2018 and 2017 is as follows:
Year Ended December 31, | 2019 |  | 2018 |  | 2017
Total income taxes charged to net income | $ | 32 |  |  | $ | 5 |  |  | $ | 44 |
Income taxes charged (credited) to stockholders’ equity: |  |  |  |  |
Unrealized gains (losses) on investment securities | 14 |  |  | 12 |  |  | (31 | )
Unrealized gains (losses) on foreign currency translations | — |  |  | — |  |  | 26 |
Valuation allowance to equity | (23 | ) |  | (9 | ) |  | 5 |
Total charged to stockholders’ equity: | (8 | ) |  | 3 |  |  | — |
Total effect of income taxes | $ | 24 |  |  | $ | 8 |  |  | $ | 44 |
Reconciliation of U.S. Federal Statutory Income Tax Rate to Actual Income Tax Rate 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:
| 2019 |  | 2018 |  | 2017
Year Ended December 31, | Amount |  | % |  | Amount |  | % |  | Amount |  | %
Tax on income from continuing operations at statutory rate | $ | (38 | ) |  | 21.0 | % |  | $ | 57 |  |  | 21.0 | % |  | $ | (99 | ) |  | 35.0 | %
Changes in expected tax resulting from: |  |  |  |  |  |  |  |  |  |  |
Tax-exempt interest | (3 | ) |  | 1.8 | % |  | (7 | ) |  | (2.5 | )% |  | (6 | ) |  | 2.1 | %
Foreign taxes | 40 |  |  | (22.1 | )% |  | 10 |  |  | 3.9 | % |  | (18 | ) |  | 6.2 | %
Substantiation adjustment | 28 |  |  | (15.3 | )% |  | (60 | ) |  | (22.0 | )% |  | 36 |  |  | (12.7 | )%
Valuation allowance | 8 |  |  | (4.4 | )% |  | 5 |  |  | 1.9 | % |  | 128 |  |  | (44.9 | )%
Change in Tax Law | — |  |  | — | % |  | (2 | ) |  | (0.7 | )% |  | 2 |  |  | (0.7 | )%
Other, net | (2 | ) |  | 1.3 | % |  | 1 |  |  | 0.4 | % |  | 2 |  |  | (0.7 | )%
Tax expense on income from continuing operations | $ | 32 |  |  | (17.7 | )% |  | $ | 5 |  |  | 2.0 | % |  | $ | 44 |  |  | (15.7 | )%
Unrecognized Tax Positions A reconciliation of the beginning and ending amounts of material unrecognized tax benefits for 2019, 2018 and 2017 is as follows:
Year Ended December 31, | 2019 |  | 2018 |  | 2017
Balance, beginning of period | $ | — |  |  | $ | — |  |  | $ | — |
Increases related to prior year tax positions | — |  |  | — |  |  | — |
Decreases related to prior year tax positions | — |  |  | — |  |  | — |
Balance, end of period | $ | — |  |  | $ | — |  |  | $ | — |
Included in these balances at December 31, 2019, 2018 and 2017 are $0, $0 and $0, respectively, of unrecognized tax benefits that, if recognized, would affect the effective tax rate. During the years ended December 31, 2019, 2018 and 2017, Ambac recognized interest of approximately $0, $0 and $0, respectively. Ambac had approximately $0, $0 and $0, for the payment of interest accrued at December 31, 2019, 2018 and 2017, respectively. Deferred Income Taxes The tax effects of temporary differences that give rise to significant portions of the deferred tax liabilities and deferred tax assets at December 31, 2019 and 2018, are presented below:
December 31, | 2019 |  | 2018
Deferred tax liabilities: |  |  |
Insurance intangible | $ | 90 |  |  | $ | 151 |
Variable interest entities | 12 |  |  | 19 |
Investments | 32 |  |  | 26 |
Unearned premiums and credit fees | 42 |  |  | 48 |
Other | 8 |  |  | 8 |
Total deferred tax liabilities | 183 |  |  | 252 |
Deferred tax assets: |  |  |
Net operating loss and capital carryforward | 742 |  |  | 719 |
Loss reserves | 148 |  |  | 227 |
Debentures | 29 |  |  | 23 |
Compensation | 7 |  |  | 10 |
Other | 1 |  |  | 2 |
Subtotal deferred tax assets | 927 |  |  | 980 |
Valuation allowance | 777 |  |  | 768 |
Total deferred tax assets | 151 |  |  | 212 |
Net deferred tax liability | $ | 32 |  |  | $ | 40 |
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. With respect to Ambac's domestic subsidiaries subject to U.S. tax, 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 taxable income to recover the deferred tax asset and therefore maintains a full valuation allowance. The remaining net deferred tax liability of $32 is attributable to Ambac U.K. 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, it is obligated to make payments (“Tolling Payments”), subject to certain credits, to AFG 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 |  | 15%
B | The next | $1,057 | after Tier A | 40%
C | The next | $1,057 | after Tier B | 10%
D | The next | $1,057 | after Tier C | 15%
Any net operating loss carryforwards ("NOLs") generated by Ambac Assurance after September 30, 2011, are utilized prior to any Allocated NOLs for which Tolling Payments will be due. Through December 31, 2018, Ambac Assurance generated cumulative taxable income of $1,508, utilizing all post September 30, 2011, NOLs. For the year ended December 31, 2019, Ambac Assurance generated an NOL of $143, that will need to be utilized before any new Tolling Payments will be generated. Of the credits available to offset the first $5 of payments due under each of the NOL usage Tiers A, B, and C, Ambac Assurance has fully utilized the combined $10 of Tier A and Tier B credits. Through December 31, 2019, Ambac Assurance utilized all of the $479 Tier A NOL and $1,029 of the $1,057 Tier B NOL resulting in Tolling Payments, net of applicable credits, of $147, of which $119 was paid to AFG through December 31, 2019. In May 2018 AFG executed a waiver under the intercompany tax sharing agreement pursuant to which Ambac Assurance was relieved of the requirement to make $28 payment by June 1, 2018. AFG 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 consent to the payment. Ambac's tax positions are subject to review by the OCI, which may lead to the adoption of positions that reduce the amount of Tolling Payments otherwise available to AFG. As of December 31, 2019, Ambac had U.S. federal net operating loss tax carryforwards of approximately $3,535, which, if not utilized, will begin expiring in 2029, and will fully expire in 2040. The remaining balance of the NOL allocated to Ambac Assurance was $2,285 and Ambac was $1,250.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration