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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | 17. INCOME TAXES AFG files a consolidated Federal income tax return with its subsidiaries. AFG 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 | 2018
United Kingdom | 2019
Italy | 2018
Consolidated Pretax Income (Loss) U.S. and foreign components of pre-tax income (loss) were as follows:
Year Ended December 31, | 2022 |  | 2021 |  | 2020
U.S. | $ | 511 |  |  | $ | (32) |  |  | $ | (441) |
Foreign | 13 |  |  | 34 |  |  | 1 |
Total | $ | 525 |  |  | $ | 2 |  |  | $ | (440) |
Provision (Benefit) for Income Taxes The components of the provision (benefit) for income taxes were as follows:
Year Ended December 31, | 2022 |  | 2021 |  | 2020
Current taxes |  |  |  |  |
U.S. state and local | $ | — |  |  | $ | 2 |  |  | $ | — |
Foreign | 7 |  |  | 10 |  |  | 8 |
Total current taxes | 6 |  |  | 12 |  |  | 8 |
Deferred taxes |  |  |  |  |
Foreign | (4) |  |  | 6 |  |  | (10) |
Total deferred taxes | $ | (4) |  |  | $ | 6 |  |  | $ | (10) |
Provision for income taxes | $ | 2 |  |  | $ | 18 |  |  | $ | (3) |
The total effect of income taxes on net income and stockholders’ equity for the years ended December 31, 2022, 2021 and 2020 is as follows:
Year Ended December 31, | 2022 |  | 2021 |  | 2020
Total income taxes charged to net income | $ | 2 |  |  | $ | 18 |  |  | $ | (3) |
Income taxes charged (credited) to stockholders’ equity: |  |  |  |  |
Unrealized gains (losses) on investment securities, including foreign exchange | (47) |  |  | (3) |  |  | 3 |
Change in retirement benefits | — |  |  | — |  |  | — |
Credit Risk Changes to Fair Value Options | — |  |  | — |  |  | — |
Valuation allowance to equity | 41 |  |  | 1 |  |  | (3) |
Total charged to stockholders’ equity: | (6) |  |  | (2) |  |  | 1 |
Total effect of income taxes | $ | (4) |  |  | $ | 16 |  |  | $ | (1) |
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:
Year Ended December 31, | 2022 |  | 2021 |  | 2020
Tax on income (loss) at statutory rate | $ | 110 |  |  | 21 | % |  | $ | — |  |  | 21 | % |  | $ | (92) |  |  | 21 | %
Changes in expected tax resulting from: |  |  |  |  |  |  |  |  |  |  |
Tax-exempt interest | (1) |  |  | — | % |  | (2) |  |  | (114) | % |  | (2) |  |  | — | %
Foreign taxes | 4 |  |  | 1 | % |  | 8 |  |  | 448 | % |  | 6 |  |  | (1) | %
State Income Taxes | (1) |  |  | — | % |  | 14 |  |  | 794 | % |  | — |  |  | — | %
Substantiation adjustment | — |  |  | — | % |  | — |  |  | — | % |  | (29) |  |  | 7 | %
Variable Interest Entities | 25 |  |  | 5 | % |  | — |  |  | — | % |  | — |  |  | — | %
Valuation allowance | (131) |  |  | (25) | % |  | (4) |  |  | (230) | % |  | 113 |  |  | (26) | %
Other, net | (4) |  |  | (1) | % |  | 1 |  |  | 72 | % |  | 2 |  |  | — | %
Tax expense on income (loss) | $ | 2 |  |  | 1 | % |  | $ | 18 |  |  | 991 | % |  | $ | (3) |  |  | 1 | %
Unrecognized Tax Positions The Company had no material unrecognized tax benefits at December 31, 2021 and 2020. 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, 2022 and 2021, are presented below:
December 31, | 2022 |  | 2021
Deferred tax liabilities: |  |  |
Insurance intangible | $ | 56 |  |  | $ | 67 |
Unearned premiums and credit fees | 24 |  |  | 32 |
Investments | — |  |  | 14 |
Variable interest entities | 4 |  |  | 15 |
Other | 1 |  |  | 6 |
Total deferred tax liabilities | 85 |  |  | 134 |
Deferred tax assets: |  |  |
Net operating loss carryforward | 725 |  |  | 736 |
Interest expense carryforward | 66 |  |  | 50 |
Investments | 6 |  |  | — |
Loss reserves | 38 |  |  | 180 |
State capital loss carryforward | 8 |  |  | 7 |
Debentures | 15 |  |  | 7 |
Compensation | 6 |  |  | 8 |
Other | 4 |  |  | 4 |
Subtotal deferred tax assets | 867 |  |  | 993 |
Valuation allowance | 796 |  |  | 886 |
Total deferred tax assets | 70 |  |  | 106 |
Net deferred tax liability | $ | 15 |  |  | $ | 28 |
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. The remaining net deferred tax liability of $15 is attributable to Ambac U.K. and is classified in other liabilities on the Consolidated Balance Sheet. NOL Usage & Investment Interest Carryforward Pursuant to a 2013 Closing Agreement between Ambac and the United States Internal Revenue Service ("IRS"), AAC could have to pay as much as $8 to the IRS in the year utilized should AAC utilize $2,142 of NOLs and Interest Expense Limitation available to it as of December 31, 2022. As of December 31, 2022, the Company has (i) $3,454 of NOLs, which if not utilized will begin expiring in 2030, and will fully expire in 2043, and (ii) $314 of interest expense tax deduction carryover, which has an indefinite carryforward period but is limited in any particular year based on certain provisions. Beginning in 2022, the Company is presenting these items separately in the deferred income tax table above with conforming display in 2021.
Schedule of Net Operating Loss And Tax Credit Carryovers | Pursuant to a 2013 Closing Agreement between Ambac and the United States Internal Revenue Service ("IRS"), AAC could have to pay as much as $8 to the IRS in the year utilized should AAC utilize $2,142 of NOLs and Interest Expense Limitation available to it as of December 31, 2022.As of December 31, 2022, the Company has (i) $3,454 of NOLs, which if not utilized will begin expiring in 2030, and will fully expire in 2043, and (ii) $314 of interest expense tax deduction carryover, which has an indefinite carryforward period but is limited in any particular year based on certain provisions. Beginning in 2022, the Company is presenting these items separately in the deferred income tax table above with conforming display in 2021.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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