Note D. Income Taxes

The CNA Tax Group is included in the consolidated federal income tax return of Loews and its eligible subsidiaries. Loews and the Company have agreed that for each taxable year, the Company will 1) be paid by Loews the amount, if any, by which the Loews consolidated federal income tax liability is reduced by virtue of the inclusion of the CNA Tax Group in the Loews consolidated federal income tax return, or 2) pay to Loews an amount, if any, equal to the federal income tax that would have been payable by the CNA Tax Group filing a separate consolidated tax return. In the event that Loews should have a net operating loss in the future computed on the basis of filing a separate consolidated tax return without the CNA Tax Group, the Company may be required to repay tax recoveries previously received from Loews. This agreement may be canceled by either party upon 30 days written notice.

For the years ended December 31, 2016, 2015 and 2014, the Company paid $142 million, $256 million and $287 million to Loews related to federal income taxes.

For 2014 through 2016, the Internal Revenue Service (IRS) has accepted Loews and the Company into the Compliance Assurance Process (CAP), which is a voluntary program for large corporations. Under CAP, the IRS conducts a real-time audit and works contemporaneously with the Company to resolve any issues prior to the filing of the tax return. The Company believes that this approach should reduce tax-related uncertainties, if any.

As of December 31, 2016 and 2015, there were no unrecognized tax benefits.

The Company recognizes interest accrued related to: 1) unrecognized tax benefits in Interest expense and 2) tax refund claims in Other revenues on the Consolidated Statements of Operations. The Company recognizes penalties (if any) in Income tax (expense) benefit on the Consolidated Statements of Operations. During 2016, 2015 and 2014 the Company recognized no interest and no penalties. There were no amounts accrued for interest or penalties as of December 31, 2016 or 2015.

The following table presents a reconciliation between the Company's federal income tax expense at statutory rates and the recorded income tax expense, excluding discontinued operations.



Years ended December 31
(In millions)	2016			2015			2014
Income tax expense at statutory rates	$	(398	)	$	(192	)	$	(423	)
Tax benefit from tax exempt income	124			123			119
Foreign taxes and credits	3			9			(6		)
Other tax expense	(7		)	(10		)	(9		)
Income tax expense	$	(278	)	$	(70	)	$	(319	)

Provision has not been made for the Company's investment in certain subsidiaries for which the Company intends to invest the undistributed earnings indefinitely. As of December 31, 2016, the Company has not provided deferred taxes of $1 million on $3 million of undistributed earnings related to a foreign subsidiary.

The following table presents the current and deferred components of the Company's income tax expense, excluding discontinued operations.



Years ended December 31
(In millions)	2016			2015			2014
Current tax expense	$	(142	)	$	(220	)	$	(318	)
Deferred tax benefit (expense)	(136		)	150			(1		)
Total income tax expense	$	(278	)	$	(70	)	$	(319	)

Total income tax presented above includes foreign tax expense of approximately $9 million, $14 million and $24 million related to income from continuing foreign operations of approximately $51 million, $71 million and $66 million for the years ended December 31, 2016, 2015 and 2014.

The deferred tax effects of the significant components of the Company's deferred tax assets and liabilities are presented in the following table.



December 31
(In millions)	2016		2015
Deferred Tax Assets:
Insurance reserves:
Property and casualty claim and claim adjustment expense reserves	$	125	$	178
Unearned premium reserves	206		230
Receivables	27		29
Employee benefits	272		281
Life settlement contracts	56		48
Deferred retroactive reinsurance benefit	117		84
Investment valuation differences	—		29
Other assets	148		142
Gross deferred tax assets	951		1,021
Deferred Tax Liabilities:
Investment valuation differences	57		—
Deferred acquisition costs	120		117
Net unrealized gains	309		202
Other liabilities	86		64
Gross deferred tax liabilities	572		383
Net deferred tax asset	$	379	$	638

As of December 31, 2016, the CNA Tax Group had no loss carryforwards or tax credit carryforwards.

Although realization of deferred tax assets is not assured, management believes it is more likely than not that the recognized net deferred tax asset will be realized through recoupment of ordinary and capital taxes paid in prior carryback years and through future earnings, reversal of existing temporary differences and available tax planning strategies. As a result, no valuation allowance was recorded as of December 31, 2016 or 2015.