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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Text Block [Abstract] |
Income Taxes | Note 11: Income Taxes Income (loss) from operations before provision (benefit) for income taxes consisted of:
|  | Years Ended December 31, |
In millions |  | 2019 |  |  | 2018 |  |  | 2017 |
Domestic |  | $ | (357 | ) |  | $ | (287 | ) |  | $ | (638 | )
Foreign |  |  | — |  |  |  | (9 | ) |  |  | (23 | )
Income (loss) before income taxes |  | $ | (357 | ) |  | $ | (296 | ) |  | $ | (661 | )
The Company files a consolidated tax return that includes all of its U.S. subsidiaries and foreign branches. The Company also files tax returns in Spain, Mexico, and various state and local jurisdictions. Income tax expense (benefit) on income (loss) and shareholders’ equity consisted of:
|  | Years Ended December 31, |
In millions |  | 2019 |  |  | 2018 |  |  | 2017 |
Current taxes: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |  |  | $ | 4 |
State |  |  | 2 |  |  |  | 1 |  |  |  | — |
Deferred taxes: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | — |  |  |  | (1 | ) |  |  | 945 |
Foreign |  |  | — |  |  |  | — |  |  |  | (5 | )
Provision (benefit) for income taxes |  |  | 2 |  |  |  | — |  |  |  | 944 |
Income taxes charged (credited) to shareholders’ equity related to: |  |  |  |  |  |  |  |  |  |  |  |
Change in unrealized gains (losses) on AFS securities |  |  | — |  |  |  | 5 |  |  |  | (1 | )
Change in AFS securities with OTTI |  |  | — |  |  |  | — |  |  |  | 1 |
Change in foreign currency translation |  |  | — |  |  |  | — |  |  |  | 21 |
Total income taxes charged (credited) to shareholders’ equity |  |  | — |  |  |  | 5 |  |  |  | 21 |
Total effect of income taxes |  | $ | 2 |  |  | $ | 5 |  |  | $ | 965 |
A reconciliation of the U.S. federal statutory tax rate to the Company’s effective income tax rate for the years ended December 31, 2019, 2018 and 2017 is presented in the following table:
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Federal income tax computed at the statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 35.0 | %
Increase (reduction) in taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |
Tax Reform/Change in Tax Rate |  |  | 0.0 | % |  |  | 0.0 | % |  |  | (71.4 | )%
Mark-to-market on warrants |  |  | 0.0 | % |  |  | (0.7 | )% |  |  | 1.4 | %
Change in valuation allowance |  |  | (20.7 | )% |  |  | (20.9 | )% |  |  | (116.9 | )%
State income tax, net of federal benefit |  |  | (0.4 | )% |  |  | 0.0 | % |  |  | 0.0 | %
Deferred inventory adjustments |  |  | 0.0 | % |  |  | (1.0 | )% |  |  | 0.8 | %
Foreign Taxes |  |  | 0.0 | % |  |  | 0.0 | % |  |  | 8.2 | %
Other |  |  | (0.5 | )% |  |  | 1.6 | % |  |  | 0.1 | %
Effective tax rate |  |  | (0.6 | )% |  |  | 0.0 | % |  |  | (142.8 | )%
Deferred Tax Asset, Net of Valuation Allowance The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on tax assets and liabilities is recognized in income in the period that includes the enactment date. Valuation allowances are established to reduce deferred tax assets to the amount that more likely than not will be realized. The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2019 and 2018 are presented in the following table:
|  | As of |
In millions |  | December 31, 2019 |  |  | December 31, 2018 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Unearned premium revenue |  | $ | 54 |  |  | $ | 59 |
Deferred acquisition costs |  |  | 13 |  |  |  | 16 |
Partnership basis difference |  |  | — |  |  |  | 3 |
Net deferred taxes on VIEs |  |  | 51 |  |  |  | 55 |
Other |  |  | 4 |  |  |  | — |
Total gross deferred tax liabilities |  |  | 122 |  |  |  | 133 |
Deferred tax assets: |  |  |  |  |  |  |  |
Compensation and employee benefits |  |  | 8 |  |  |  | 7 |
Accrued interest |  |  | 185 |  |  |  | 158 |
Partnership basis difference |  |  | 10 |  |  |  | — |
Loss and loss adjustment expense reserves |  |  | 101 |  |  |  | 135 |
Net operating loss |  |  | 590 |  |  |  | 512 |
Foreign tax credits |  |  | 61 |  |  |  | 62 |
Other-than-temporary impairments |  |  | 2 |  |  |  | 22 |
Net unrealized losses on insured derivatives |  |  | 9 |  |  |  | 8 |
Net losses on financial instruments at fair value and foreign exchange |  |  | 21 |  |  |  | 30 |
Net unrealized losses in accumulated other comprehensive income |  |  | — |  |  |  | 32 |
Other |  |  | 8 |  |  |  | 1 |
Total gross deferred tax assets |  |  | 995 |  |  |  | 967 |
Valuation allowance |  |  | 873 |  |  |  | 834 |
Net deferred tax asset |  | $ | — |  |  | $ | — |
The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of its existing deferred tax assets. A significant piece of objective negative evidence evaluated was the Company having a three-year cumulative loss. Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections of pre-tax income. On the basis of this evaluation, the Company has recorded a full valuation allowance against its net deferred tax asset of $873 million and $834 million as of December 31, 2019 and 2018, respectively. The Company will continue to analyze the valuation allowance on a quarterly basis. Under the Act, NOLs of property and casualty insurance companies retain their current two-year carryback and 20-year carryforward periods and will not be subject to the 80 percent taxable income limitation and indefinite lived carryforward period applicable to general corporate NOLs. Therefore, NOLs generated after 2017 by the Company’s insurance companies and non-insurance companies will be treated differently under the Act. Treatment of Undistributed Earnings of Certain Foreign Subsidiaries—“Accounting for Income Taxes—Special Areas” During 2017, the Company sold MBIA UK and reversed any deferred income taxes with respect to the differences in the book and tax basis in the Company’s carrying value of MBIA UK. The Company’s amount of undistributed earnings of certain foreign subsidiaries was not material as of December 31, 2019. Accounting for Uncertainty in Income Taxes The Company’s policy is to record and disclose any change in UTB and related interest and/or penalties to income tax in the consolidated statements of operations. The Company includes interest as a component of income tax expense. As of December 31, 2019 and 2018, the Company had no UTB. Federal income tax returns through 2011 have been examined or surveyed. As of December 31, 2019, the Company’s NOL is approximately $2.8 billion. NOLs generated prior to tax reform and property and casualty NOLs generated after tax reform will expire between tax years 2032 through 2039. As of December 31, 2019, the Company has a foreign tax credit carryforward of $ 61 million, which will expire between tax years 2020 through 2029. As of December 31, 2019, the Company has an alternative minimum tax (“AMT”) credit of $ 13 million. As a result of tax reform, AMT credits are fully refundable no later than 2022. The AMT credit refundable to the Company is included in “Other assets” of the Company’s consolidated balance sheet. Section 382 of the Internal Revenue Code On May 2, 2018, MBIA Inc.’s shareholders ratified an amendment to the Company’s By-Laws, which had been adopted earlier by MBIA Inc.’s Board of Directors. The amendment places restrictions on certain acquisitions of Company stock that otherwise may have increased the likelihood of an ownership change within the meaning of Section 382 of the Internal Revenue Code. The amendment generally prohibits a person from becoming a “Section 382 five-percent shareholder” by acquiring, directly or by attribution, 5% or more of the outstanding shares of the Company’s common stock and will generally restrict existing “Section 382 five-percent shareholders” from increasing their ownership interest under Section 382 by more than one percentage point over their percentage stock ownership immediately prior to the effective date of the amendment or, if lower, their percentage thereafter. ASU 2019—12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes The Company elected to early adopt ASU 2019-12 as of January 1, 2019 (for the reporting period ending December 31, 2019). ASU 2019-12 removes the intraperiod tax allocation principle that allocates total tax expense or benefit to components of the income statement and other comprehensive income. Refer to “Note 3: Recent Accounting Pronouncements” in the Notes to Consolidated Financial Statements for the impact of this adoption and the revised quarterly financial information and for further information on this update.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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