Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes Income tax expense on continuing operations consists of the following:
Total income tax expense (benefit) was allocated as follows (in millions):
A reconciliation of the federal statutory rate to our effective tax rate is as follows:
The significant components of deferred tax assets and liabilities at December 31, 2015 and 2014 consist of the following:
Our net deferred tax liability was $594 million and $703 million at December 31, 2015, and 2014, respectively. The significant changes in the deferred taxes are as follows: The deferred tax asset related to Other Investments increased by $97 million mainly due to recognition of tax gains recorded on our investment in Ceridian. The deferred tax liability for insurance reserve discounting increased by $54 million largely due to a reclassification of $28 million between other of $(18) million and allowance for uncollected accounts received of $(10) million. The $26 million increase in other related to current year activity in the claims reserves. The deferred tax liability for investment securities decreased by $24 million due to book changes in unrealized gains. The deferred tax liability relating to partnerships decreased by $11 million primarily due Black Knight and ServiceLink activity. The deferred tax liability on amortization increased by $10 million partially due to the Pacific Union acquisition. As of December 31, 2015 and 2014 we had a valuation allowance of $12 million and $11 million, respectively. The increase of $1 million relates to net operating losses associated with the BPG acquisition. At December 31, 2015, we have net operating losses on a pretax basis of $79 million available to carryforward and offset future federal taxable income. The net operating losses are US federal net operating losses arising from LandAmerica, Digital Insurance, NextAce, LPS, BPG and Black Knight Financial Services, Inc. acquisitions made since 2008 and are subject to an annual Internal Revenue Code Section 382 limitation. These losses will begin to expire in year 2023 and we fully anticipate utilizing these losses prior to expiration with the exception of $3 million of gross net operating losses at BPG that are offset by a $1 million valuation allowance. Digital Insurance has a deferred tax asset for state net operating losses; however, it is largely offset by a $1 million valuation allowance. At December 31, 2015 and 2014, we had $43 million and $44 million of tax credits, respectively. The credits primarily consist of general business credits from acquisitions in the Restaurant Group. We anticipate that these credits will be utilized prior to expiration after a valuation allowance of $10 million on the general business credits. Tax benefits of $21 million, $16 million, and $17 million associated with the exercise of employee stock options and the vesting of restricted stock grants were allocated to equity for the years ended December 31, 2015, 2014, and 2013, respectively. As of December 31, 2015 and 2014, we had approximately $3 million (including interest of less than $1 million) and $5 million (including interest of $1 million), respectively, of total gross unrecognized tax benefits that, if recognized, would favorably affect our income tax rate. These amounts are reported on a gross basis and do not reflect a federal tax benefit on state income taxes. We record interest and penalties related to income taxes as a component of income tax expense. The Internal Revenue Service (“IRS”) has selected us to participate in the Compliance Assurance Program that is a real-time audit. We are currently under audit by the Internal Revenue Service for the 2013, 2014, 2015 and 2016 tax years. We file income tax returns in various foreign and US state jurisdictions. |